How To Pay For College: 9 Ways According to Experts

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Take one look at the cost of a college education and you might ask, “How do parents afford college?” In-state tuition at a public school averages $9,377 per year. You can expect to spend more than $37,000 on average at a private school.

How Do Parents Afford College?

Families use savings, scholarships, grants and loans to pay for college, according to Sallie Mae’s “How America Pays for College 2022” report. More than half of relied on savings and income. Less than one-fifth borrowed money to cover the costs. There are many ways to pay tuition. A little creativity goes a long way toward finding funding sources. The list below highlights some of the more popular options.

1. College Savings Plans

College savings plans, such as 529 plans, and Coverdell education savings accounts, are the most common tools parents use to save for college. A 529 plan is also called a qualified tuition program. This tax-advantaged account may function as a pre-paid college fund where the money in the account grows tax-deferred. Withdrawals for qualified education expenses are tax-free.

Coverdell ESAs provide parents with more options, but they limit contributions to $2,000 per year, per beneficiary. Like with a 529 plan, withdrawals from Coverdell ESAs are tax-free as long the money is used on qualified education expenses. These accounts also have added flexibility. Parents can use the funds for certain expenses like private school tuition, tutoring or special needs services before students enter college.

Make Your Money Work for You

2. Dual Enrollment

Dual enrollment is a program offered to high school students that lets them take college-level courses. For each course they complete, they earn both high school and college credits. In some cases, these students graduate from high school with an associate’s degree that they can apply toward a bachelor’s degree. Not only does this save them time, but it also can save money. Some states offer dual enrollment through school districts as a perk, which means students are earning the degree without paying for it.

3. Employer Tuition Assistance

Employers sometimes offer tuition assistance programs for workers and their families. They use them as a recruiting tool–part of a benefits package–and as a way to bridge skills gaps in the workforce. This package can vary since the company decides who qualifies, how much it’s willing to pay and any other requirements.

Colleges and universities sometimes offer tuition assistance for employees and their family members who want to attend that school. These programs typically only cover the cost of tuition and fees, and don’t usually include room and board and books. Some programs may pay all or a percentage of the tuition.

4. Federal Financial Aid

The federal government offers three types of financial aid: grants, work-study and loans. To qualify for aid, students must complete the Free Application for Federal Student Aid, or FAFSA, and meet the requirements for the aid.

One of the more popular federal aid programs is the Pell Grant. More than one-third of students qualify for and receive one of these grants. Pell Grants are available to undergraduate students who have not yet earned a degree and demonstrate an exceptional financial need.

Make Your Money Work for You

College students who are willing to teach in a public school for a period of time after graduation may qualify for a Teacher Education Assistance for College and Higher Education, also known as a TEACH grant. Some schools also participate in the Federal Supplemental Educational Opportunity, or FSEOG, grant program.

Other options include the Federal Work-Study program, in which qualifying students work part-time and earn federal minimum wage. Loans are also available in amounts between $5,500 to $12,500 per year for undergraduates and up to $20,500 for graduate students.

5. Grants

In addition to federal grants, students can apply for state and local grants to help pay for college. The qualifications and award amounts can vary, depending on the organization offering the grant. ‘For example, Florida offers a need-based grant for all students that starts at $200. In Illinois and Washington, students may qualify for a grant that pays their tuition costs. Some grants have strict requirements and are available only to students who attend a specific school, belong to a particular group or complete qualifying activities.

6. Part-Time Job

Going to school full-time is a full-time job. A student taking a full course load typically spends about 12 hours per week attending class. The time spent studying is two to three times that amount. This adds up to between 36 and 48 hours each week. That leaves plenty of time for a part-time job.

Popular jobs for college students include waiting tables and tutoring. Many work in retail as well. A side hustle like rideshare driving or making deliveries also can go toward a college education.

7. Personal Savings

Parents and students use personal savings or investments to fund a college education. In fact, 37% of parents and 39% of students turned to their own savings in 2021 for all or part of their college expenses. These numbers do not include 529 plans and Coverdell ESAs.

Make Your Money Work for You

One advantage of setting aside money in a savings account is liquidity. The money can be used for any college-related expense and does not have to meet eligibility requirements required by tax-advantaged accounts. Keeping the money in a high-yield savings account also encourages the children to take part in savings by contributing some of the money they earn from work or receive as gifts.

8. Private Loans

Banks, credit unions and other agencies offer private student loans for students who have already borrowed the maximum allowed by the federal student loan program or do not qualify for it.

These loans tend to be more costly than federal student loans, with rates ranging from around 4.50% to more than 16% APY, compared to a fixed rate of 4.99% to 7.54% for federal loans. Also, private student loans do not qualify for federal and state-sponsored loan forgiveness programs. For these reasons, they tend to be a last-resort option.

9. Scholarships

A majority of college students–60%–rely on scholarships to pay for their college education. Scholarships are often known as free money since they don’t have to be paid back. However. students typically have to meet certain requirements to qualify for them. In some cases, the student must maintain a specific grade point average or participate in a club. Others look at athletic or artistic performance.

The organization sponsoring the scholarship determines the eligibility requirements. Some individuals funding the award may participate in the selection process. These organizations can include colleges, membership organizations and friends and families honoring someone’s legacy.

What Are 3 Ways to Pay for College with Free Money?

It’s possible to earn a college degree without borrowing money–and plenty of students do just that. Students who qualify for scholarships and grants usually don’t have to pay back the money they receive as long as they meet the criteria for the award.

Make Your Money Work for You

For example, TEACH grant recipients who do not meet their obligation to teach for a specified period of time will have to pay back the award amount, as it converts to a loan. Students who live in a state that offers a dual enrollment program at no cost to the student also have an opportunity to earn a degree for free.

College Is an Investment

For many people, the cost of a college degree is an investment in a more stable financial future. The median pay for someone with a bachelor’s degree was $1,334 per week in 2021, compared to $809 per week for a high school graduate. Over a lifetime, this difference adds up to more than $1 million.

Having a college degree also may hedge against job loss. Individuals with a bachelor’s degree tend to have lower rates of unemployment than high school graduates.

Final Take

Students have plenty of options for funding a college education. Tthe most common way to pay for college is through a combination of sources, including savings, scholarships and loans. The key is to start saving as early as possible, make use of tax-advantaged accounts and apply for a variety of scholarships and grants to form a complete financial aid package. Income from a job and student loans can fill in the gaps as needed.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.


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