Going to college might be expensive, but it’s still one of the best ways to get a leg up on your financial future. College graduates earn nearly 50% higher wages than workers with only a high school diploma, according to the Economic Policy Institute.
But figuring out how to pay for college can be difficult. After all, 70% of colleges in the U.S. are unaffordable to most students.
If you want to pay for a higher education but aren’t sure how to make it work, we’ve got your back. Here are several strategies you can use to pay for college:
1. Save money ahead of time in a 529 plan
Saving up is one of the best ways to pay for college. While you can save money using a regular savings account or taxable investment account, a 529 plan can help you gain a tax benefit as you set money aside for school.
“Many families use 529s to pay for school,” said Ryan Boggs, an investment adviser representative with FourStar Wealth Advisors. “The monies in a 529 can be used tax-free if they’re for qualified education expenses.”
The longer you have to save up, the better off you’ll be. I started putting money into a 529 for my son almost 10 years ago. Today, there’s almost enough money in his account to pay for two years of college. And he won’t graduate high school for another three years.
Boggs pointed out that not everyone starts this early, so it’s important to look for multiple savings strategies. He also warned that, because 529s rely heavily on stock market returns, it’s important to have backup savings in case of a downturn before college.
There are times when withdrawals from a 529 count as part of a student’s income when filling out the annual Free Application for Federal Student Aid (FAFSA). That said, it can make sense to put off using money from a 529 account until later in the student’s college career.
Withdrawals during freshman and sophomore years can affect financial aid awards. Run the numbers to see if it makes sense to use funding from other sources during the first two years of college.
2. Apply for scholarships
“Scholarships are great ways to pay for college because they don’t require the money to be paid back,” said Boggs. “You do have to qualify for scholarships, but there are many websites, including one called Scholly, that help students find scholarships that fit their specific qualifications.”
Depending on your situation, you might be able to qualify for scholarships aimed at women, people of color, and even the LGBTQ community. Check with local companies, banks, and service organizations for scholarships as well.
No scholarship is too small. I applied for several scholarships as I prepared to attend school. Even if you get $2,500 from your local credit union or $1,000 from the rotary club, that’s money you don’t have to worry about later.
Don’t forget to apply for scholarships at your choice schools. I attended a scholarship weekend for Southern Utah University and came away with a four-year full-tuition offer.
Keep applying for scholarships even while you’re in college. You can get funding to help cover books, housing, and other costs even as a sophomore or junior.
3. Concurrent enrollment
Some states allow students to earn college credit for classes taken during high school. These classes are usually taught to a higher standard and credit is issued through a public university. Depending on where you live, the credits earned in this manner can be transferred to state schools.
For example, my son is taking a high school Spanish class that qualifies for concurrent enrollment through the University of Idaho. However, he plans to attend the College of Eastern Idaho. Because of the transfer agreements among Idaho schools, my son’s Spanish credits can be transferred from the University of Idaho to the College of Eastern Idaho.
In states like Idaho, it’s possible to complete dual enrollment credits free of charge. Other states, though, charge for credits. However, you might be able to get a discount on credits — as much as 50% off or more — if you’re a high school student working on your college degree.
4. Test out of some of your classes
Consider testing out of some of your classes. I was able to reduce the number of classes I took in college by using my Advanced Placement (AP) test scores.
AP classes are taken during high school. When you pass the test associated with the class, some schools will allow you to skip some general education courses, allowing you to get through college faster.
In addition to AP tests, you can also take advantage of the College Level Examination Program (CLEP).
“More than 2,900 public colleges and universities in the United States will give students credit for what they already know if they pass a CLEP test,” said Steve Klinsky, the founder of Modern States Education Alliance, a philanthropic organization dedicated to making a college degree more affordable.
Klinsky said that Modern States offers tuition-free courses that can help you pass a CLEP test. The organization’s first initiative is to help students earn a full year of college credits without the cost of tuition or books.
5. Consider a less-expensive school
Even though I was accepted into private universities, I ended up choosing a four-year state school for my undergraduate degree. My scholarship money went further at the public college than it would have at a private school.
This chart from the College Board illustrates how costs vary among different institutions:
If I’d started at a community college, I might’ve saved even more money while completing my education.
“Community colleges are the Rodney Dangerfield of higher education. They don’t get any respect,” said Brian Meiggs, the founder of financial education website My Millennial Guide. “This is unfortunate because attending one of these schools is an incredible way to knock out your first two years of college for cheap — and possibly for free.”
Meiggs pointed out that community college savings on tuition and fees aren’t the only perk. “There are many other benefits you should check out, such as … living at home, flexible classes, personalized attention, and transfer agreements,” he said.
He recommended starting at a community college and then transferring to a four-year school as a junior. In the end, an expensive big-name college might not help anyway.
“Most employers today aren’t as focused on which university you graduate from,” said Adrian Ridner, the CEO and co-founder of Study.com, a website aimed at helping students navigate their education choices. “Employers care more about your actual degree and ability to learn.”
Ridner recommended refining skills marketable in your future career, rather than worrying about paying for an expensive university.
6. Federal student aid
In many cases, it’s difficult to cover all of your college expenses with savings and scholarships, even if you choose a low-cost school. This is where federal student aid comes in.
When you fill out the FAFSA, your information is used to determine what types of government aid you qualify for when paying for college. You might even be able to receive a grant to help you pay for school.
Federal work-study is another program that can help you with expenses. With this program, you’re guaranteed access to a job — usually on campus — that helps you keep up with college costs.
Even if you aren’t eligible for government grants or federal work-study, you can still get help in the form of loans. With federal student loans, you don’t have to worry about a credit check or getting a cosigner. For those with greater need, the government might even pay your interest while you attend college.
Federal student loans also come with repayment options that can cap your monthly bill at a percentage of your discretionary income.
When you’re trying to decide how to pay for college, federal student aid can be a big help. Your school will send you a letter with information about what’s available to you after getting a copy of your FAFSA.
7. Private student loans
Sometimes private student loans can bridge a college funding gap left after other options have been exhausted. Not only that, but some private education loans come with lower interest rates than federal student loans. There are times it makes sense to get private funding instead of using government loans.
However, it’s important to realize that you’ll have to meet credit requirements set by the private lender. You might even need a cosigner to qualify.
Carefully consider whether private loans should be part of your plan to pay for college. These loans don’t come with the same protections as federal loans, so you could end up missing out on benefits like income-driven repayment.
8. Parent PLUS Loans
Another option is to see if your parents will borrow for your education. Parent PLUS Loans are offered by the federal government and can be a way for you to get a little extra money for your education.
With these loans, your parents are responsible for repaying the debt. Parents need to go through a credit check with the government to qualify. After you finish school, you might be able to refinance the Parent PLUS Loans in your name to take over the responsibility.
9. Income-share agreements
One of the more recent trends in paying for college is the income-share agreement (ISA).
“With an ISA, a student receives funds to pay for college and in return agrees to pay a percentage of future income for a fixed period of time,” said Kristen Moon, an independent college counselor and founder of Moon Prep, a service that helps students apply for school. “Unlike a traditional loan, there’s zero interest and zero balance.”
Some schools, such as Purdue University, help students set up ISAs as a form of student aid. However, there are also websites, such as Paytronage, that match students with investors willing to front them the money to complete a degree.
Depending on the situation, ISAs can be beneficial. Moon pointed out that ISAs eliminate the chance of default and that many agreements are capped at 10% or 15% of income, ensuring affordable payments.
The downside, though, is that students could end up paying more, especially if they start a career with a high-paying job.
For example, say you sign an ISA for eight years and 15% of your income. If you graduate and earn $50,000 a year, you’ll repay your investor $60,000.
Compare that to a situation where you might have only borrowed $30,000 in school loans. Even with 4.45% interest, repaying $30,000 over the course of 10 years results in a total repayment of $37,223, according to our student loan payment calculator.
Be sure to do the math before signing an ISA. And research your options. “Terms vary for each ISA, so it’s important to be well-informed before agreeing to sign away a portion of your income for a few years,” Moon said.
10. Get a job
A part-time job can be a great way to help pay for expenses related to attending college. I worked part time in the university cafeteria for two years. It provided me with money to pay for some of my living expenses. Plus, after my shift, I was given a free meal, which saved me about $50 a week.
Whether you work on or off campus, having that income can help you pay for your education and potentially reduce what you need to borrow.
Additionally, you can work extra hours over the summer to earn money to put toward the coming semester. Start a side hustle if you want more flexibility in your work schedule but still want to earn money to help pay for college.
11. Tuition reimbursement
Instead of paying for your education on your own, get a little help from your employer. According to CNBC, several companies, such as Chipotle, Disney, Starbucks, and Wells Fargo, are willing to help you pay for your education.
You don’t have to pay for college all on your own. You can earn money and get reimbursed for some of your tuition bills. Check with your human resources department to find out how to apply. Although you likely won’t have the entire cost covered, any help is worth having.
12. Student research positions
Neel Somani, a junior at UC Berkeley, works as an undergraduate researcher to help cover his college expenses. He’s worked on several projects and been paid for them. Not only does research pay some of the bills, but it also provides real-world experience that can help students land jobs after graduation.
“My school has an undergraduate research apprentice program, which often specifies if positions are paid,” Somani said.
He recommended looking for research positions in an area you have experience. Somani also approached one of his professors and asked about other teachers looking for undergraduate researchers.
Like research positions, internships can be a way to build some real-world cred while in school. Some internships are paid, helping you cover your costs. However, paid internships can be hard to get, depending on your field.
Visit your school’s career center for information about available paid internships. It’s also possible to find a paid internship by networking with family and friends.
How to pay for college using multiple strategies
Chances are, with the cost of college, you’ll need to use more than one tactic to pay for school. I funded my undergraduate education by attending a low-cost school and finding scholarships, student loans, and part-time work.
Carefully research the cost of attendance at the school of your choice and put together a plan that allows you to meet those costs as efficiently as possible.
Need a student loan?Here are our top student loan lenders of 2018!
|1 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or Nationwide Bank, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 11/1/2018. Variable interest rates may increase after consummation.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.94% – 12.78%1||Undergraduate, Graduate, and Parents|
|4.04% – 13.04%3||Undergraduate and Graduate|
|4.34% – 12.99%2||Undergraduate and Graduate|
|4.12% – 10.98%*,4||Undergraduate and Graduate|
|5.03% – 11.23%5||Undergraduate and Graduate|
|4.12% – 13.13%6||Undergraduate and Graduate|
|4.92% – 10.01%7||Undergraduate and Graduate|
|3.72% – 9.68%8||Undergraduate, Graduate, and Parents|
|4.26% – 12.13%9||Undergraduate, Graduate, and Parents|