Ways to Pay for College
Quality Verified
Updated: March 16, 2023
Quality Verified
Updated: March 16, 2023
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Once you’ve gotten accepted to the college of your choice, the real work begins. Most students will need to source funding from loans, grants, scholarships, work-study programs, college savings plans or funds from their parents’ savings accounts to help pay for college.
Affording college can be difficult. The National Center for Education Statistics states that the annual costs for tuition, fees, room and board were $17,237 for public schools during the 2016–17 academic year. Costs more than double for a most private, nonprofit institution, with an average cost of $44,551, while a private for-profit school could cost $25,431.
While many students take out loans to help pay for college, there are many options that can help you plan for and minimize the costs of higher education.
Resources for Funding a College Education
Find detailed information on student loans, choosing a school or program and resources for students with different backgrounds and needs.
Student Loan Details
Federal and private loans are a factor for many students, so understanding the key elements of borrowing funds for college can help you reduce and eliminate debt before and after college.
- Student Loan Facts and Statistics: Learn more details about student loans and how they impact people across the country.
- Student Loan Forgiveness and Cancellation: If you have a federal student loan, you may qualify for loan forgiveness by meeting certain career requirements, if you’ve experienced a change in personal circumstances or if your school failed to follow lending or administration procedures.
- Student Loans: An Overview: If you have a federal student loan, you may qualify for loan forgiveness by meeting certain career requirements, if you’ve experienced a change in personal circumstances or if your school failed to follow lending or administration procedures.
- Protecting Yourself From Unfair Student Loan Practices: Many unfair loan practices and scams can leave you vulnerable, including surprise fees, damaged credit, lost loan records and more. Learn what to look out for to protect your finances.
Education Programs
Whether you’re selecting a school for your young child or debating between online college programs, knowing the facts about different types of education can help you make the best decision for yourself or your family.
- Choosing The Right School for Your Child: K-12: Choosing a school for your child is one of the biggest decisions you’ll make as a parent and can impact their college education and career.
- Guide to Online Learning: Considering whether to enroll in an online learning program? Find out how it works and how to decide if it's right for you.
- Finding the Right Online College: Earning a degree from an online college is one of the best ways to get an education to land your dream job. Learn about the quality, pros, cons and costs of an online education.
Student & Parent Resources
If you’re attending college for the first time, you may need additional support or resources. Learn more about filing taxes as a student, funding a semester or entire degree abroad and find additional student resources to help you ease into your academic career.
- Resources for Homeless or Low-Income Students: Navigating college poses unique challenges, especially for low-income or homeless students. Education can be the springboard for a life-changing career.
- Resources for LGBTQ+ Students: What makes a college LGBTQ-friendly? Find out more about what campuses across the nation are doing to foster a sense of community for LGBTQ+ students and allies.
- Resources for College Students With Disabilities: Students of all backgrounds and abilities can prepare for and succeed in college.
- Resources for Women in STEM: Scholarships and expert advice can help support women entering the science, technology, engineering and mathematics fields.
- Personal Finance for College Students: Students can get a head start on lifetime financial planning by taking charge of their finances early on.
- Funding Your Study Abroad: Dreaming of a semester abroad? This guide provides insight into scholarships, grants and loans to help you plan for a semester or entire degree program in another country.
- Student Tax Guide: It’s never too early to start planning for your taxes. Parents and students may need assistance when filing student taxes for the first time.
- College Freshman Financial Checklist: This guide offers advice for parents on how to prepare their new college student for the financial demands that go along with increased independence in college.
Paying for Higher Education With a College Savings Plan
There are six common types of college saving vehicles, each with their own defining features:
Paying for College With Financial Aid
Paying for college with financial aid is a necessity for most students, and comprises scholarships, grants, student loans and work-study programs. Scholarships and grants can be need-based or awarded based on academic merit; they’re ideal because they don't need to be repaid. Student loans are funds for school that must be repaid, and federal work-study programs provide need-based part-time employment to help students pay for college.
Depending on the type of financial aid, the funds can be used to pay housing expenses, renters insurance, transportation, textbooks, supplies and more. The cost of living during college can vary widely depending on where you attend school and could be much higher or lower than your hometown. The FAFSA can help you determine how to access specific types of financial aid and if you qualify for grants and other support.
Filing the FAFSA
The first step to see if you qualify for any type of financial aid is to fill out the Free Application for Federal Student Aid, or (FAFSA). The FAFSA is what assistance program providers review to determine the amount of assistance a student qualifies. These programs also take into account the student's expected family contribution (EFC), which is the amount the student's family can afford to contribute toward college expenses. If you want to receive financial assistance, including student loans and grants from schools, the federal and local government, you have to fill out the Free Application for Federal Student Aid (FAFSA).
- Step 1: Get a Federal Student Aid ID.
- Step 2: Gather all required documents, such as W2s, tax returns for the student and parents, bank statements and investment records, Social Security number, driver's license or state ID and alien registration or permanent resident card, if applicable.
- Step 3: Find your FAFSA deadline: College aid deadlines vary from state to state.
- Step 4: Start a FAFSA Application and click the "Start A New FAFSA button."
- Step 5: Select your schools: The FAFSA allows up to 10 schools on the application.
- Step 6: Determine your dependency status: The U.S. Department of Education needs to know if the student is a dependent or independent, which is a determining factor in aid awards.
Paying for College With Student Loans
According to the Federal Reserve, 62% of people aged 18–29 with an undergraduate degree had student debt in 2017. Before you take on a student loan, make sure you understand how they work and explore all your options. Knowing your earning potential after graduation can help you manage your debt-to-income ratio and your credit score, which can help you prepare to secure home loans and other purchases in the years to come.
Student loans come from four types of organizations: the federal government, state governments, private organizations and the schools themselves.
Federal Loans
Federal financial aid eligibility is determined based on student and family information provided on the Free Application for Federal Student Aid (FAFSA) and considered for both subsidized and unsubsidized loans available to students and parents. Loans subsidized by the federal government enable students to use the funds interest-free until they leave school. Unsubsidized loans begin accruing interest as soon as the money is disbursed to the student. Frequently tapped federal financial aid options include Stafford, Perkins and PLUS loans.
State
Many states offer special loan programs administered by the State Department of Education. Each state sets its own rules. If you complete the FAFSA, you might automatically be considered for state loans, under some state plans. You might also have to complete a state form.
Private Loans
Banks and lending institutions lend their own money to students and parents. Private loans are often used to cover financing gaps when other types of financial aid and loans do not cover the amount you need. Because these loans are typically offered at a higher and sometimes fluctuating interest rate, students should try to exhaust other options before turning to private lenders. Private loans typically require a credit check. Few high school graduates have substantial credit histories, so many private loans require an additional promise to repay by an adult with an established credit history. That's why your parents might be asked to co-sign a loan you expect to pay back.
Institutional Loans
Some postsecondary institutions lend their own money to help students cover remaining costs after financial aid and personal funds have been used. Schools manage these loan programs on their own, so students interested in this type of funding should speak directly with the office of financial aid to determine interest rates, repayment options and lending limits.
Refinancing and Consolidation of Student Loans
If you’re juggling multiple federal loans, consolidation might ease the management of loans. Saddled with high-rate loans from private lenders? Refinancing can cut your interest payments. Refinancing replaces old loans with a new one at terms that are more favorable to you. In the case of both consolidation and refinancing, the new loan satisfies the old debt but creates a new obligation for the borrower.
If you have several loans, consolidation lets you replace a variable interest rate with a fixed interest rate. Consolidation does not lower your interest rate; you pay a rate calculated on the weighted average rate of all your loans. However, you can lower your monthly payments by taking longer to pay back the loan, a process called loan extension. You will pay less per month but more overall because you will be paying interest longer.
Because of that trade-off, the U.S. Department of Education urges borrowers to carefully consider loan consolidation that extends the payback period.
Paying for College With Grants and Scholarships
Paying for College as a Veteran
Financial Aid for Graduate Programs
Other Options for Paying for College
Whether you have already graduated, secured a job or remain on the job hunt, check with your employer or potential employer to see if it offers a tuition reimbursement program. A tuition reimbursement program presents an affordable way to further your education while you are working. You also may be able to reduce your student loan debt by securing a federal work-study job organized by your school's financial aid office. Awarded based on need, these part-time positions include both on-campus and off-campus jobs.
About Laura Longero
sources
- U.S. Department of Education. "Federal Student Aid: Work-Study Jobs." Accessed April 4, 2020.
- U.S. Department of Education, National Center for Education Statistics. "2015–16 National Postsecondary Student Aid Study (NPSAS:16)." Accessed April 4, 2020.
- U.S. Department of Veterans Affairs. "Montgomery GI Bill." Accessed April 4, 2020.
- U.S. Department of Veterans Affairs. "Post-9/11 GI Bill." Accessed April 4, 2020.
- Federal Reserve. "Report on the Economic Well-Being of U.S. Households in 2017 - May 2018." Accessed April 6, 2021.