How to Pay For College In 10 Different Ways
It’s no secret anymore that college is becoming more expensive by the day.
According to an article from Forbes, college tuition prices have increased at almost 8 times the rate of wages between 1988 and 2018.
No longer can you work a minimum wage job during the summer, pick up a few hours here and there during the school year, and graduate debt-free.
This skyrocketing of college tuition prices over only 3 decades has left a ton of promising young students wondering how to pay for college.
But there’re more avenues for funding your higher education than you think. We’ve listed them below – also, we recommend pursuing each of these options in the order we’ve listed them.
We’ve put them in order from least to most financially burdensome, starting with the “free money” options first, moving through your own money, and ending with debt.
So without further ado, read on to find out how to pay for college in an age of student debt.
Scholarships and grants (more on grants next) are known as “gift aid” because they don’t need to be repaid.
Some scholarships require you to meet certain requirements (being in a certain major, being a certain race/ethnicity, etc.), but aside from these requirements, they’re merit-based.
Smaller ones usually involve answering a few questions and writing a brief personal statement about your goals/dreams, while larger ones might involve rigorous essay competitions.
Your high school and/or college might give out scholarships, but you can find thousands more scholarships ranging from $100 to tens of thousands with a quick internet search.
Similar to scholarships, grants are free money awarded by different levels of government, your school, or nonprofit organizations.
The difference between grants and scholarships is that grants are needs-based, rather than merit-based, meaning you’re more likely to qualify if you come from a lower-income household.
Even if you think your family earns “too much” for grants, look into them anyways. You might be surprised at what you qualify for.
3. Student Savings
As soon as you’re old enough to work in high school, you should look for any job you can find. Open a savings account and direct your paychecks their.
It’s true that your savings won’t go as far today as they could 30 years ago, but every dollar helps, even if your pay just covers your textbooks.
And picking up a job in high school helps you start building your resume early, which could land you a higher-paying student job to help you cover more of your tuition.
Speaking of student jobs…
4. Student Earnings
Student jobs are everywhere. You’ve got opportunities both on and off campus.
On campus, you could do anything from dining hall employee to research assistant. Ideally, you’ll want something such as a research assistant, because they pay more and might open more doors for you.
But don’t knock the dining hall jobs until you try them. You’ll probably get free meals, which is indirectly reducing your college costs.
We don’t even need to mention the job opportunities off campus, because there are so many out there.
Landing a paid internship might be extremely helpful, though. Another resume build that also pays well.
You could even try starting a little side hustle in college. Maybe you’re an English major who uses their skills to land some freelance writing clients, or perhaps you’re a computer science major who builds an app and create a nifty passive income stream.
5. Parental Savings
Ideally, parents would be saving for their child’s college education the moment they find out they’re pregnant. If that’s not the case, the parents should start saving asap if they want to help fund their child’s education.
Fortunately, there are dedicated college savings accounts parents can open that offer tax and financial aid advantages:
- 529 Plans – Invest after-tax money, then withdraw tax-free to pay qualified education expenses like tuition and books. Much higher contribution limit than IRAs. Available in 30 states
- Coverdell Account – Similar to 529 plans, except these can be used for any educational expenses. However, contribution limits are much lower.
- Roth IRAs – Tax-advantaged retirement account that can also be used for educational expenses. Investment is after-tax, but withdrawals for qualified expenses are tax-free. Contribution limit is in between 529 Plans and Coverdell Accounts.
There are more, but those are generally the most common and accessible.
6. Parental Income
An obvious source of funds for college education is the parent’s current incomes. Asking parents for money isn’t always fun for either party, but it can help cover those gaps that previous funding methods couldn’t cover.
Parents, do your best to secure raises at work or start a side hustle if you want to help pay for more of your child’s schooling.
When you’re awarded a fellowship, you get paid a stipend. Some fellowships also provide housing, healthcare benefits, or even student loan repayment assistance.
As for what they entail…
Fellowships are demanding programs lasting from a few months several years. Fellowship students engage in rigorous research projects and other advanced forms of study with the aim of contributing something to their academic discipline.
In other words, don’t take them lightly. They’re best saved for those who are willing to throw themselves fully into their education.
Fellowships are geared towards grad students with an emphasis on Ph.D. students (as their degrees are the most expensive and rigorous), but some undergraduate fellowships exist too.
Apply for any and all fellowships you qualify for and want to pursue as soon as possible, as the total dollar amount of fellowships available depends heavily on the school’s available funding for them.
8. Work-Study Programs
Work-study programs are a form of financial aid where a student works a job, usually in their field of study, in exchange for reduced tuition. Hours are set based on your work-study award and the pay rate of the job. You can’t work more than your total work-study award.
Most work-study jobs are on-campus roles. However, off-campus work-study positions are available at nonprofit organizations and public agencies.
Some colleges have special arrangements with for-profit enterprises. These jobs do have to be relevant to your major, and they’re less common than on-campus/nonprofit/public agency roles.
So how is work-study better than just working through college?
A few reasons, actually:
- Flexibility – Institutions build these roles to be friendly to student schedules. You won’t work on holidays and will get more flexibility to study for finals.
- Direction – Work-study jobs can help undecided freshmen choose a major, as well as helping those who already know their major easily secure work experience in their field.
- Financial prudence – Work-study is good for students prone to recklessly spending their earnings, as the money goes directly to tuition. In addition, the working hours restriction prevents students from losing out on student loans due to earning too much from a more lucrative job.
9. Federal Student Loans
If you’ve ran through your non-debt options and still need money, it’s time to look at federal loans.
These loans are obtained by filling out the FAFSA, meaning you might be awarded a work-study job and a loan at the same time.
There are several types of federal loans:
- Subsidized – Interest doesn’t accrue on these until 6 months after you graduate. Based on financial need.
- Unsubsidized – Interest begins accruing the moment you take out one of these. Not based on financial need or credit.
- PLUS loans – Credit-based, unsubsidized loans for parents and graduate students.
When you graduate, you can usually work with your loan servicer to make your repayment as stress-less as possible.
10. Private Student Loans
Private loans have higher interest rates that federal student loans.
In addition, as a newly-minted adult, your credit history is still in its infancy. Credit score impacts your potential interest rate; the better the score, the lower the rate.
This is important to note because credit utilization, aka your reliance on credit, is one of the major factors impacting your score.
As you progress through college and take out more private loans, a vicious cycle begins: your credit utilization goes up, dropping your fragile credit score and thus increasing your rates each time you need a new loan.
However, you can get a better rate if you bring on a creditworthy cosigner, such as a parent or relative.
The one advantage private loans have over federal loans is they can be refinanced. Although it’s hardly an advantage since again, the interest rate is higher in the first place.
Now, this is not to say you should avoid private loans if you need them.
Just make them a last resort.
Keep These in Mind
The key to minimizing your college financial burden is to not only follow this list in order, but combine the earlier methods.
You should be applying for scholarships and grants while working and saving before college, then land a job in college.
Unless you like the prospect of paying hundreds per month out of your meager post-grad salary to a loan servicer for several years after graduation, use the loans only after you’ve exhausted every non-debt option.