How to Pay for College: 9 Expert-Approved Tips

Paying for college can be overwhelming, especially with the rising prices. It’s one of the biggest financial challenges many students face, but it doesn’t have to be a burden. While student loans are the go-to solution, they aren’t the only option. There are other ways to fund your education, from grants and scholarships to creative financial strategies that can ease the pain.

How Much Is College Tuition?

College tuition varies wildly depending on the type of school and if you’re in-state or out-of-state. For the 2024-2025 school year, the average tuition and fees at private colleges are around $43,505. Public universities charge an average of $24,513 for out-of-state students, while in-state residents at public schools pay an average of $11,000. So, attending an in-state public college can be almost 75% cheaper than private schools. According to the College Board’s annual survey, the average tuition and fees at public two-year institutions for in-state, in-district students is $3,990 for the 2023-2024 school year.

 

Paying for College

Once your student is accepted to college, it’s time to plan how to pay the bill before the first one arrives. Student loans are a common option, there are two main types: federal and private. Federal loans have fixed interest rates set by Congress and have fees taken out of the loan amount. Unsubsidized loans accrue interest while the student is in school, while subsidized loans for students with financial needs have the government pay the interest. Private loans are credit-based, with interest rates based on the borrower’s financial profile. They don’t charge origination fees and offer both fixed and variable rates. A co-signer can be added to private loans if needed.

Federal Student Loans vs Private Student Loans

It’s usually best to use up federal student loan options before considering private loans. Federal loans offer more protections, flexible repayment plans, income-driven options, and forgiveness programs that private lenders don’t. If you do need to take out a private loan, it’s important to shop around for the lowest rate. Private loans can have fixed or variable interest rates, fixed rates remain the same throughout the loan term, while variable rates change periodically. Though private loans may have lower rates, federal loans offer better benefits. Only after using up all federal loan options should you consider private loans to cover the remaining costs.

9 College Savings Options Recommended by Experts

Student loans are often the first choice for funding college, but there are other options to ease the financial burden. Exploring different savings strategies can help reduce the amount you need to borrow and make your education more affordable.

1. Choose an Affordable School

The school you choose can make a big difference in how much you pay for your college education. Attending an in-state public school can save you thousands of dollars a year. To keep costs in check, consider starting at a community college or technical school. If you choose a traditional four-year university, focus on the school’s net price -  the cost after grants and scholarships. This will give you a better idea of what you’ll pay out of pocket.

2. Fill out a FAFSA application for Federal Student Aid

The first step in applying for financial aid is to fill out the Free Application for Federal Student Aid (FAFSA) online. FAFSA is required to access federal loans, grants, and scholarships. After you submit the FAFSA, you’ll receive financial aid offers from your chosen schools. Review those offers carefully and only accept what you can afford to repay.

If you’re a parent helping your child, consider the Parent PLUS loan, which has a fixed interest rate and flexible loan limits.

Federal student loans don’t require repayment until after graduation or a change in enrollment status. However, paying early can help prevent interest from building during school or grace periods, as interest can still accrue during deferment or forbearance.

Be thorough when filling out the FAFSA, as it’s used to assess your financial resources, including savings in a 529 plan. Submit the FAFSA early, as some colleges award aid on a first-come, first-served basis. Some schools may also require the CSS Profile for additional aid consideration.

3. Search for Scholarships

Scholarships are a great way to fund your education since unlike student loans, they don’t have to be repaid. Many scholarships are available based on grades, ethnicity, special talents, or financial need. It’s important to start early, as many large scholarships have fall deadlines. Some programs may stop accepting applications once they reach a certain number, so apply for as many as possible.

Don’t wait until your senior year of high school to start your scholarship search. Start early and you’ll have a head start. For example, the Evans Scholars Foundation offers full-ride scholarships to golf caddies, but you must have caddied for at least two years so you should start in your sophomore year to be eligible by senior year.

Use the Department of Labor’s Scholarships Finder to get started. While many scholarships require a FAFSA submission, most also have an additional application process.

4. Apply for Grants

Grants, like scholarships, don’t have to be repaid and can cover tuition and other expenses. They come in two types: need-based and merit-based, and many are awarded on a first-come, first-served basis.

To be eligible for federal and some state grants, fill out the FAFSA. Some states offer their grants, which may require separate applications. Students with good grades, disabilities, or entering specific careers may be eligible. The Pell Grant for example offers up to $6,895 for the 2022-2023 school year.

Don’t miss out. The 2023 high school class left over $4 billion in Pell Grant money by not completing the FAFSA. Submit it early and renew it each year to secure funding. Check your state’s education department for additional grants.

5. Find a Work-Study Job

Your financial aid package may include work-study, a federal program that offers part-time jobs to help students earn money for their education. Schools participating in work-study offer jobs to both full- and part-time students, typically paying at least the federal minimum wage.

To apply, fill out the FAFSA. If eligible, you’ll see “work-study” listed in your financial aid offer. But being eligible doesn’t guarantee a job. You must find a work-study job on campus and work enough hours to earn the full aid amount.

A college job not only provides income but also work experience and the chance to build valuable connections. Balancing work with academics is important, but with careful planning, a work-study job can be a great way to manage both.

6. Work for an Employer that Pays for College

Many employers offer tuition assistance programs to help with college costs. According to a 2022 survey by the Society for Human Resource Management, nearly half of employers provide some form of undergraduate or graduate tuition assistance. These programs can cover a percentage, a flat amount, or even 100% of tuition.

For example, Target offers access to over 250 business-aligned programs from 40+ schools. Tuition assistance can be provided through reimbursement or direct payments to the school, and some employers also offer student loan repayment options.

When job hunting, research the educational benefits available. If already employed, check with HR to learn about tuition assistance options.

7. Take Advantage of Tax Benefits for Education

• American Opportunity Tax Credit (AOTC). The AOTC provides qualifying undergraduate students who are enrolled in a four-year degree program with a maximum annual credit of $2,500 to help offset education expenses.

• Lifetime Learning Credit (LLC). The LLC offers a maximum $2,000 credit per tax return for qualifying tuition and expenses for undergraduate, graduate, and professional degree students, with no limit on the number of years the credit can be claimed.

8. Establish a 529 Savings Plan

A 529 College Savings Plan helps parents save for their child’s education, with tax-free growth and withdrawals for qualified expenses. Fees and returns vary by state, so compare plans. According to Sallie Mae’s 2021 study, parent savings cover about 45% of college costs, and 529 plans cover more than other savings options. But only 37% of parents use these accounts, so many miss out on the tax benefits.

9. Check for Tuition Reimbursement or Loan Forgiveness

After graduation, check if your employer offers tuition reimbursement. Companies like Chipotle, Disney, and Starbucks have this benefit, helping employees pay for their education. Also, various government loan forgiveness programs are available based on your job and financial situation. Visit the Federal Student Aid website to see if you qualify for any loan forgiveness.

Private Loans

• Borrow private loans as a last resort. Private student loans should only be considered after all other options, as they have fewer protections and higher interest rates than federal loans. If you must borrow, compare lenders to find the best terms, including the lowest interest rate and most flexible repayment options.

• Qualify for private loans. Unlike federal loans, private lenders consider your credit score and finances when approving loans. Borrowers with good credit or a co-signer can get lower interest rates and better terms. There are also loans for borrowers with bad or no credit, but these may have higher interest rates.

• Repay after school. Private loans require repayment once you graduate, and they generally accrue interest while you’re in school, so you’ll pay back more than you borrowed. Use a student loan calculator to estimate your future payments based on the amount you borrow.

Conclusion