Finding ways to pay for college can feel overwhelming, but it doesn’t have to be. Whether you’re the parent of a middle school student just beginning to save for college or a high school student approaching graduation, there’s something for everyone in this handy guide.
Everything You Need To Know to Pay for College
College Savings Plans (529)
A 529 plan is an investment account with tax benefits used to pay for qualified education expenses for your student while they’re in college. Ideally, you would start a 529 when your child is very young, but parents of high school students can still open a plan and help reduce their college costs later.
There are two types of 529 college savings plans:
- Investment plans allow families to save for college with tax savings. These 529 plans are subject to changes in the stock and bond markets, similar to a 401(k).
- Prepaid tuition plans guarantee future tuition for what you paid today without the risk of potential market changes in the future. That means if you’re guaranteed $500 worth of tuition at today’s prices and use it in five years when tuition for that same portion is worth $700, you save $200 in tuition costs.
The account doesn’t expire. If your student doesn’t use the funds, you can change the beneficiary to a family member to use on qualified education expenses.
The first step for families of seniors is to submit the Free Application for Federal Student Aid (FAFSA). By submitting the FAFSA, your student will be eligible to borrow federal loans, which offer better interest rates and repayment options than private loans.
Most schools also use the FAFSAThe FAFSA is also used by most schools to determine how much financial aid they will offer your student. Some even require your student to submit the FAFSA to receive merit aid, so make sure to complete it.
There are two main types of scholarships for college students—merit scholarships (also called merit aid) and private scholarships. Individual colleges offer merit aid, while private scholarships are typically awarded from outside organizations and can be used at any school.
Merit-based scholarships are some of the best sources of free money for college. Most merit scholarships are awarded by colleges based on admissions data, including GPA and test scores (SAT/ACT). They can help reduce a school’s sticker price and are the sticker price of a school, and they’re often renewable for all four years.
You can use Road2College’s College Insights Tool to find schools offering the best merit scholarships for your student.
Private scholarships are another great way of paying for college. Look for private scholarships using search websites, local organizations, school guidance counselors, and sometimes through the college’s financial aid office. Requirements and application materials will differ with each scholarship.
Some families may still need additional money to cover the cost of college after federal student aid, savings, and scholarships. Private student loans can help bridge the gap. If you’re considering borrowing a private student loan, ensure you understand how the loan works and always borrow responsibly.
Private student loans typically have higher interest rates and less flexible repayment plans than federal student loans. They will also require the student to have a cosigner because of stricter income and credit requirements.
Other Ways to Pay for College
Here are some additional ways families can get help paying for college:
- Paying in installments through a payment plan offered by the school
- Getting a part-time job or side gig (this applies to students and parents)
- Using a credit card with interest offers or rewards programs
- Home refinancing
- Help from grandparents
It’s no secret that college is an expensive investment for students and their families. The best practice is to apply for federal aid and as many scholarships as possible. Once you have the final price, you can look into other options to pay.
By Rebecca Blauch – Content Marketing Associate, Road2College
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