You really need to talk to a tax professional to get correct answers based on your specific situation. Here are some generic answers, that may or may not apply to your specifics. Although losses really [action made by a vacuum cleaner], assuming you have things setup correctly, losses from one year carry forward to a future year and can be deducted against revenue. So it hurts now, but it can ease other pain later.
An S Corp. is basically a pass-through entity. That means that whatever profit (or loss) the company makes flows through to your personal income tax return. A C Corp is a separate legal and taxable entity. You (as a person) are only taxed on any money taken out from the company (whether it be salary, dividends, etc.). The company is taxed separately on profits. For financial aid, a C corp would be better, as you could retain profits in the company until the next year to make your personal situation look more poverty-stricken. (However, to prevent people from doing exactly that, many financial aid office require disclosure and tax records of any businesses owned.)
Since you're asking the C-corp/S-corp question, I am assuming that you don't already have a corporation or LLC setup? Again, consult with your tax advisor, but it often makes sense to form one- there is a lot more you can "play" with as far as deductions, credits, and write-offs.
