Who should apply for college aid? Every student

— -- Most people won't bother to pick up a penny on the sidewalk. If they're in a hurry, they may not even stop for a dime. Most will, however, stop to pick up a $5 bill, even if they're late for lunch.

Many parents of college-bound students take the same approach to financial aid.

Those who expect to receive a lot of money take the time to fill out the forms. Families who believe they'll receive only a small amount of aid — or none at all — don't bother. Last year, 25% didn't complete the federal application for financial aid, according to student lender Sallie Mae.

But unless you're reading this from the deck of your yacht, you should apply for financial aid. The recession has made it more difficult for many families to pay for college. At the same time, though, economic setbacks could increase your eligibility for federal and institutional assistance.

For the 2007-08 academic year, undergraduate students received an average of $4,656 in grants and $3,650 in federal student loans, according to the College Board.

The two primary documents you'll need:

• Free Application for Federal Student Aid, or FAFSA. This document is used to determine your eligibility for federal aid, state aid and scholarships. The Department of Education uses your FAFSA to determine how much your family can afford to contribute to a child's college expenses.

You can apply online at www.fafsa.ed.gov. You can also obtain an estimate of how much federal aid you'll receive at www.fafsa4caster.ed.gov.

Even families who are convinced they're ineligible for need-based financial aid should fill out the FAFSA. Otherwise, you'll be ineligible for federal student loans, which are available to all students.

• CSS/Financial Aid Profile. This document is used by many private colleges and universities to determine eligibility for institutional aid. Find this form at the College Board's website, profileonline.collegeboard.com.

How to increase your chance of receiving aid: