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How to Pay for College
By Jamela Adam MONEY RESEARCH COLLECTIVE
College tuition costs have been steadily rising for decades in the United States. In fact, the Education Data Initiative found that over the past 20 years, the cost of higher education has grown over 130% after adjusting for inflation — equating to an annual increase of over 6%. If you’re an incoming college freshman, chances are you’re feeling quite overwhelmed by how expensive pursuing a degree has become.
But don’t despair! Even though the increasing cost of college has made higher education seemingly unattainable, there are plenty of ways to pay for college. In this post, we’ll explore methods to fund your college experience and combat the skyrocketing tuition costs.
Ways to lower tuition and expenses
Pursuing a college degree in the U.S. can be costly. Thankfully, there are ways to reduce your financial burden so that you can pursue a college education without piling up a mountain of debt.
Consider different college options
Based on data provided by the College Board, the average annual cost of tuition and fees at a public four-year college is now over $10,000 for in-state students and more than $27,000 for out-of-state students. Private non-profit colleges are even more expensive — with an average annual price tag of over $38,000. To prevent overextending yourself financially to pay for steep tuition costs, consider different college options before making the final decision.
Community colleges typically charge much less than traditional colleges, and many offer two-year programs that can lead to an associate’s degree or transfer to a four-year school. Some states even provide programs that allow residents to attend community college for free or at a reduced rate, such as the California College Promise Program.
Another way to lower tuition is to attend a public college in your hometown. Students who are residents in the state they attend college typically pay much less than out-of-state students. But this doesn’t mean you should rule out all private universities. Even though the sticker price may seem high initially, some private schools offer generous scholarships and financial aid packages that can significantly reduce the cost of attendance.
Use the net price calculator on each college’s website to estimate how much financial aid you can receive and the net tuition price you’re expected to pay.
Consider living off-campus
According to the Education Data Initiative, the average cost of room and board for students living on campus at a public university is around $11,303. On the other hand, students who live off-campus pay slightly less, averaging $10,631 per year. Of course, the cost of renting an apartment off campus can vary quite a bit depending on the housing market around the college. For example, finding a budget-friendly off-campus apartment might require some effort and luck if your college is located in an upscale or expensive area like Silicon Valley or New York City.
Be sure to take the time to research both the on-campus and off-campus housing options available to you. And before you make a decision, don’t forget to consider extra living costs such as internet fees, water, electricity, and parking.
Reduce the number of classes
This may seem like a no-brainer, but it’s worth mentioning: To reduce your college tuition, cut down on the number of classes you take. Here are some ways to do so:
AP and CLEP tests
Advanced Placement (AP) and College Level Examination Program (CLEP) exams are tests that allow you to earn college credit for classes you’ve taken in high school. This means you can complete prerequisite courses before setting foot on your college campus.
To get credit for those classes, you must request the College Board (the organization that administers the tests) to send a copy of your official test scores to your college. Keep in mind that the CLEP program isn’t as widely accepted as the AP program. So check with the colleges you want to attend before signing up for the test.
Earn college credits in high school
Dual enrollment, also known as concurrent enrollment, is a program that allows students to take college-level courses and earn credit while they’re still in high school. Some programs require that you take those classes at a nearby community college, while some are available online. The ASU Prep Digital, for example, is a virtual school offered by Arizona State University that allows students to earn credit for college from their laptops.
The cost of dual enrollment can vary depending on the university you’re dually enrolled in. But generally speaking, it’s much cheaper than taking courses on a per-credit-hour basis in a traditional college.
Apply for student research positions
Student research positions are a great way to reduce the cost of college while also gaining valuable experience in your career field. These positions are often flexible so you can work around your class schedule.
To get into a research lab as an undergraduate, check out your college’s website for available positions on the Undergraduate Research page. If you can’t find any, don’t worry. You can also head to your school’s faculty page and email the professors you’d like to work with. If all else fails, directly ask your professor about undergraduate research assistant opportunities during office hours.
Apply for an internship
If you’re looking to reduce the cost of your college tuition, don’t forget to consider paid internships as an option. The BOLD paid summer internship program at Google, for example, offers students the opportunity to gain valuable work experience while earning some extra income. Not to mention, these paid internships can give you a leg up when it comes time to enter the job market. And if you’ve performed well as an intern at the company, you could even be considered for a full-time role upon graduation.
Funding programs, scholarships, and grants
College costs are constantly increasing, and it seems like there’s no end in sight. But there are many programs out there that can help relieve your financial burden.
Fill out the FAFSA to apply for financial aid
FAFSA (Free Application for Federal Student Aid) is a form that collects information about your family’s finances and determines your eligibility for need-based aid. While it may seem like a lot of work, filling out the FAFSA can pay off in the form of grants, student loans, and work-study opportunities.
The FAFSA submission deadline for the 2022-2023 academic year is 11:59 pm (CT) on June 30th. However, you shouldn’t wait until the last minute to submit your form. Each state has its own deadlines, and some schools award financial aid on a first-come, first-served basis until funds are depleted. So be sure to complete your FAFSA as soon as it opens on October 1st. To get started, visit FAFSA.gov.
Look for grants and scholarships
Scholarships and grants are probably the best ways to pay for college because unlike student loans, they don’t need to be repaid. In other words, they’re free money. Grants are generally based on financial need, whereas scholarships are based on merit or ability.
By and large, grants are offered by the federal government, your college, or the state. One of the most popular types of grants is the federal government’s Pell Grant Program for students from low-income families. For the 2022-2023 award year, eligible students can receive up to $6,895 in rewards. This makes college much less costly for those who might otherwise not be able to afford it.
Apart from federal, institutional, and state grants, make sure to also apply for outside scholarships. Many online scholarship search databases, such as Fastweb, can help you narrow your options. Start by searching for scholarships that match your interests and qualifications. Once you’ve found a few promising scholarships, it’s time to start filling out applications.
High school scholarships
Another way to offset the cost of higher education is by applying for scholarships through the National Society for High School Scholars (NSHSS). The NSHSS and its partners offer more than $2 million in scholarships annually to help students fund their college experience. Plus, there are no fees for the application. But since this program is national, it can be quite competitive. Check with your school counselor to see if local high school scholarships are available in your area.
Sports, music, STEM field scholarships
If you excel in sports, music, or a STEM-related field, you should look for related scholarships. Typically, the more specific your area of interest is, the less competition you’ll have. And while the amount of money you earn from these scholarships can vary, it can still go a long way toward paying for your tuition.
Local clubs and organizations
Organizations like the Rotary Clubs, the Chamber of Commerce, and the Women’s Century Clubs all provide scholarship support for deserving students in local colleges. These community-based scholarship opportunities are often much easier to qualify for since you’re not competing with students nationwide.
State grants
Almost every state has at least one grant or scholarship program that assists residents with their college education expenses. If you’re curious about what kinds of state-sponsored aid are available in your area, check out the Education Department’s Database.
Ask about tuition reimbursement from your or your parents’ employers
Many companies have programs that help employees and their family members pay for college; some even offer assistance with books and other expenses. Examples of employers offering tuition reimbursement include Chick-fil-A, UPS, FedEx, AT&T, and Starbucks. To qualify for tuition reimbursement, you typically have to meet specific requirements. At Starbucks, for example, you’ll need to have at least worked there for six months and be enrolled at an accredited college.
Ways to save or earn additional money
Affording college tuition doesn’t have to be a distant dream. It can become a reality if you learn to create new sources of income, improve your financial literacy skills, and take advantage of financial aid resources.
Consider work-study
Work-study is a form of financial aid offered by the federal government that allows you to earn money to pay for college expenses. The salary earned through work-study is usually deposited directly into your bank account and can be used to cover tuition, books, and other educational costs.
To be eligible for work-study, you must fill out the Federal Student Aid (FAFSA) application. In the application, you can choose whether you’d like to be considered for the federal work-study (FWS) program. If you select ‘yes,’ you’ll be notified if you’re eligible for the program once your FAFSA is processed.
Maximize current income
According to National Center for Education Statistics data, in 2018, 43% of full-time undergraduate students worked a job to support themselves financially. Without a doubt, paying for college can be tough. But by actively expanding your sources of income, you won’t have to worry about Sallie Mae knocking at your door after graduation.
If you have strong academic skills, you can maximize your income by offering private tutoring services. And if you have a unique talent or product you’d like to monetize, you can use e-commerce platforms and social media to generate revenue. Common side hustles for college students include delivering food, walking dogs, reselling clothes, driving for a rideshare company, and babysitting.
Tap into savings
If your parents have helped you set up a 529 college savings plan — a state-sponsored investment plan — use the money in the account to pay for your tuition. You can withdraw the money tax-free as long as you use it to pay for qualified education expenses.
Note that any United States citizen who’s at least 18 years old can open a 529 college savings plan. So if you plan on taking a couple of gap years after high school graduation, consider setting up a 529 plan if your parents haven’t already done so for you. This way, you’ll be financially secure when you’re ready to apply to the best colleges in your area.
But if you don’t think a 529 plan is right for you, don’t worry. There are many other options for funding your college experience, such as the Coverdell education savings account. Ultimately, the best savings accounts are the ones that meet your unique needs. So take some time to research your options.
Student loans
According to the Education Data Initiative, in 2020, a single borrower’s average federal student loan debt was $36,510. And those who took out private student loans owe lenders an average of $54,921. To avoid crushing debt, only resort to loans after you’ve exhausted all other options.
Federal student loans
As their name suggests, federal student loans are a type of financial aid offered by the government to help students pay for college. These loans tend to have lower interest rates than private loans and are available to students who demonstrate financial need.
There are three popular types of Federal student loans:
- Direct subsidized loans
- Direct unsubsidized loans
- Direct PLUS loans for parents
Direct subsidized loans are need-based loans, meaning that the government will cover the interest payments while you’re still in school and up to six months after graduation. On the other hand, direct unsubsidized loans are not need-based, so you’re responsible for the interest that begins accruing on the date of disbursement.
Direct PLUS loans are another viable option that many take advantage of, and we’ll explain more about what they are below.
Private student loans
Private student loans can be one way to pay for college, but it’s important to remember a few key things before taking out this type of loan.
First, always apply for federal student loans before turning to private loans. Federal student loans offer more flexible repayment plans and don’t come with the high-interest rates that private lenders often charge. Also, private student loans aren’t eligible for the same benefits as federal loans — including payment pauses (also known as administrative forbearance) and any future federal student loan forgiveness.
Lastly, don’t forget to do your due diligence when searching for the best student loans. Shop around and compare rates across lenders. Doing so will save you a considerable chunk of change in the long run.
Parent PLUS loans
A parent PLUS loan is an unsubsidized financing method available to parents of dependent undergraduate students. To receive a parent PLUS loan, applicants must be a biological or adoptive parent of the student. They must also meet the eligibility requirements for federal student aid and not have an adverse credit history.
How to pay for college FAQ
How to save money in college
As a college student, staying on top of your finances can be hard. Between tuition, textbooks, and rent, it's easy to let your spending get out of control. Here are a few tips to help you stretch your budget and save money:
- Use a budgeting app like Mint or Personal Capital to keep track of your spending.
- Take advantage of student discounts offered by retail stores, streaming services, etc.
- Cook at home instead of eating out.
- Rent or buy used textbooks instead of purchasing brand new ones.
- Live below your means and cut back on unnecessary expenses.
How to pay for college without loans
College is a big investment that can seem out of reach if you don't have the savings to cover it. But as we mentioned earlier in this article, there are plenty of ways to pay for college without loans. You could apply for scholarships and grants or take advantage of tuition reimbursement programs offered by employers. You could also look into community colleges which tend to be less expensive than traditional four-year colleges. With some research and planning, you can find a way to pay for college that works for you.
What is a 529 college fund?
The 529 college savings plan is a tax-advantaged investment plan designed to encourage saving for higher education expenses. 529 plans, authorized by Section 529 of the Internal Revenue Code, are sponsored by states. Many states offer tax breaks for contributors, and some even offer dollar-for-dollar matching contributions for low-income families. Earnings in a 529 plan grow tax-deferred and are typically not subject to federal or state taxes when used for qualified education expenses such as room and board, tuition, and books.
Bottom line to how to pay for college
There are many ways to make your college dream come true without burdening yourself with crippling debt. Apply for work-study, internships, scholarships, and work an extra part-time job if you need to. And don’t forget to fill out your FASFA! By being proactive and planning ahead, you can stretch your dollars and get the most out of your college experience.
