Paying for College
Many people take on a huge amount of debt during the years they are enrolled in a higher education or post high school program. However, there are ways to pay for this that can help ease the enormous financial burden. The gigantic increase in tuition over the past decade or two, understandably, has put higher education out of reach for many and made it literally impossible to pay for without going into extreme debt. But with careful planning, completing a process of due diligence and making wise decision, it's still possible to pay for college without incurring life-altering debt.
Tuition and school fees, along with room and board, are usually the most significant expenses. However, other college expenses still add up to thousands of dollars each year, so you’ll need to factor these other costs into your college payment plans.
What Are My Options to Pay for College?
- Federal Student Loans
- Private Student Loans
A quick note about Loans
Loans should be your last resort, but they're often inevitable if scholarships, grants and savings don't cover the entire cost of higher education. There are basically two types of loans for higher education: Federal and Private.
Federal Student Loans – Federal student loans are funded and backed by the federal government with terms and conditions that are set by law, and include many benefits (such as fixed interest rates and income-driven repayment plans).
You'll want to borrow money from the federal government before turning to a private lender because federal loans offer lower interest rates and more borrower protections.
You should be able to borrow regardless of your family's income. Some students who demonstrate more financial need will be allowed to borrow subsidized loans, which won't accrue interest until after they graduate.
To apply for a federal student loan, you must first complete and submit a Free Application for Federal Student Aid (FAFSA) form. Based on the results of your FAFSA form, your college or career school will send you a financial aid offer, which may include federal student loans. You won't be able to get a federal student loan if you don’t submit this form.
At any point after receiving a federal student loan, during your higher education experience, and after your college years are complete, you can view your federal student loan and grant history online by logging into StudentAid.gov with your FSA ID. StudentAid.gov displays information from the National Student Loan Data System (NSLDS), a database containing information about federal student aid received by students and parents.
Private Student Loans - Private student loans are offered by private lenders, such as your local bank, a national bank, an online lender or a credit union. Private student loans can be used to cover your higher education costs, whether you're in an undergraduate or graduate program.
When you get a private student loan, you're telling the bank that if you don't pay it back, they can garnish your wages and income to get their money. That's why it's like a car loan. Also, unlike most federal student loans, most private student loans require a cosigner. This is good for banks, but bad for students.
Generally, you can apply for private student loans directly from a lender's website. You should apply after you've made your school decision and once you know how much you need to borrow, so you won't have to submit separate student loan applications for schools you're considering.
Current predominant private student loan entities include:
Credible - Choose between fixed and variable rate loans, as well as deferred and interest-only repayment options for your school loans.
Ascent Student Loan Options - Ascent's private student loan gives students more opportunities to qualify for a loan. Eligible juniors, seniors and graduate students can also apply for a loan without a cosigner.
Citizens Bank - Offers loan options for undergrad, grad students and parents with competitive rates, flexible terms and interest rate discounts.
College Ave Student Loans - College Ave Student Loans offers loan options for undergrads, grad students and parents.
Discover Student Loans - This lending entity Discover Student Loans helps to cover college costs, including tuition, housing, books and more. No charge or fees.
LendKey - Lendkey works with over 300 credit union and community lending partners to get the best rates and benefits for higher education loan servicing.
Sallie Mae - For undergraduate students attending degree-granting institutions only.
There are thousands of private scholarships out there from companies, nonprofits and community groups. If you are still in high school, ask your guidance counselor or use a free online service that suggests scholarships you might be eligible for. Listed here are just a few of the more prevalent online scholarship search resources.
Colleges, states, and the federal government give out grants, which don't need to be repaid. Most are awarded based on your financial need, and determined by the income you reported on the Free Application for Federal Student Aid, or FAFSA.
If you've received a grant, it should be listed on the financial aid award letter sent by the school. This might have arrived with your acceptance letter, but sometimes it's sent later.
Colleges will take into consideration how much they think your family can afford to pay for college and try to fill in the gap with a grant. Some pledge to fill in more of the gap than others.
Eligibility for state grants vary by state but the more prevalent grant programs include Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), Teacher Education Assistance for College and Higher Education (TEACH) Grants, and Iraq and Afghanistan Service Grants.
These are part-time jobs on or nearby campus for eligible students, depending on their finances and the funding available at the school. You need to have submitted the FAFSA in order to qualify.
Unlike other types of financial aid, work-study earnings are not applied directly to your tuition and fees. Students who are awarded work-study receive the funds in a paycheck as they earn them, based on hours worked, just like a normal job.
Undergrads earn hourly wages, but the amount earned can't exceed the work-study allocated award for the academic year. The amount should also be included in your financial aid award letter sent by the school.
Are There Other Options to Pay for College?
There are alternative methods to help pay for college. Some of them may be payment plans through your college, reimbursement through your employer or your parent’s employer, home equity loans and lines of credit through private lenders and other state or federal government tax credit programs.
- Employer Tuition Assistance
- Request more money from the college/university
- Claim a tax credit
- Live at home
- Go to community school first
- Parent Loans
Employer Tuition Assistance
Also known as employer tuition reimbursement, these programs are a type of employee benefit in which an employer reimburses employees for the costs associated with continuing education. Very often the amount of continuing education credits or college coursework is pre-determined by the employer. It does allow employers to improve the quality of their workforce while reducing their overall tax burden. The IRS allows employers to deduct funds spent on tuition reimbursement from their taxable income.
Request more money from the college/university
Yes, you can haggle over financial aid. Experts suggest having the student write a formal appeal letter and then follow up with a phone call.
It's worth reemphasizing why you're a good fit for the school, and whether or not you received more aid from a comparable college.
Maybe you can do a better job explaining your financial situation. Sometimes your family might have other expenses, like medical bills, that aren't already taken into consideration. It's also a good idea to mention if your family's financial circumstances have changed in the past year because the FAFSA is based on your income from the prior year.
Claim a tax credit
The American Opportunity Tax Credit allows you to reduce your taxes after paying for tuition, fees, books, and room and board - up to $2,500 a year per child.
Parents can claim the tax credit if their modified adjusted gross income is no more than $90,000, or $180,000 if filing jointly.
Live at home
If commuting to school and living at home is an option, it can save a lot of money. The average cost for room and board is $10,440 at public colleges and $11,890 a year at a private institution. That can be just as much as the cost of tuition at some schools.
College Students Live at Home - On-campus housing adds thousands of dollars each year to an already extreme high cost for completing a higher education degree program. No wonder it may seem more attractive for many students to avoid those costs by staying with their families a few more years. Take a look at some pros and cons.
Go to a community college first
If your finances are really stretched thin, it might be worth exploring enrolling in a community college before transferring to a four-year school later. Tuition and fees at the average community college cost $3,520 last year.
American Association of Community Colleges - The American Association of Community Colleges (AACC) is the primary advocacy organization for the nation’s community colleges. The association represents nearly 1,200 2-year, associate degree-granting institutions and more than 12 million students.
Parents can take out a private loan in their own name to pay for college for their son or daughter. In terms of federal student loans, parents can take out a Direct PLUS loan in their name to pay for their children’s education.
Direct PLUS Loans - Direct PLUS Loans are federal loans that parents of dependent undergraduate students can use to help pay for college or career school. PLUS loans can help pay for education expenses not covered by other financial aid.