7 tips on how to pay for college

Scholarships, grants, and student loans can help pay for college, but loans should always be your last option.

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Wondering how to pay for college? Consider these ways to cover college costs and reduce education expenses. (iStock)

It cost, on average, nearly $21,000 to attend a public four-year college during the 2019-20 academic year, according to the National Center for Education Statistics. And it cost even more to attend private institutions — $30,497 at for-profit schools and just over $44,000 at nonprofit institutions.

Yet there’s no question college can be a good investment. The earnings gap between people with college degrees and those without is well-documented.

If you’re getting ready to send a child off to college, or go yourself, here are some tips to help you plan for college costs. And if you already know you’ll need private student loans, Credible lets you see and compare private student loan rates from multiple lenders.

  1. Choose an affordable school
  2. Save for college with a 529 plan
  3. Complete the FAFSA
  4. Apply for scholarships and grants
  5. Get a work-study position
  6. Consider federal student loans
  7. Take out private student loans

1. Choose an affordable school

Tuition and other expenses vary widely by school, so your choice of learning institution will heavily affect your college costs. In general, attending an in-state, public college will be more affordable than private and out-of-state ones, and community colleges are even more budget-friendly. 

One option is to start off at a local community college, complete your basic courses, and then transfer to a four-year university a year or two down the road. This can help minimize the long-term cost of attendance and could make it easier to afford the school of your choice. And as a bonus, you could leave community college with an associate’s degree in your field of choice.

If you’re set on attending a four-year college from the get-go, you can use the Department of Education’s Net Price Calculator to determine the average costs of schools you’re interested in. Websites like College Board and Scholarships.com can also help, making it easier to find colleges that align with your GPA, test scores, and budget, or scholarships and grant programs that could offset your costs.

2. Save for college with a 529 plan

A 529 plan is a type of investment account that can be used to save money for educational purposes. Americans with a 529 account currently average just over $30,287 in savings, according to the College Savings Plans Network.

The big benefit of these plans is that they allow you to grow your savings through low-risk investments. They also come with tax benefits: The earnings don’t count as taxable income (yes, they're tax-free), and you’re not taxed upon withdrawal, as long as the funds are used for education costs. And if you end up with money left over in a 529 when your child is done with college, you can put the funds toward education expenses for another child or yourself. 

There is a downside to this strategy, though: If your student decides not to attend college and wants to withdraw the money, they’ll have to pay taxes and a 10% penalty on part or even all of the amount.  

If a 529 isn’t right for your goals or you’re quickly approaching that graduation date, a high-yield savings account, Roth IRA, or a brokerage account may be an option as well. These can help you not just stow away cash, but grow it over time.


3. Complete the FAFSA

The Free Application for Federal Student Aid (FAFSA) is the federal government’s application for financial aid. Colleges use it to determine your eligibility for various federal grant programs, work-study opportunities, student loans, and more — all of which can help reduce or even cover your costs of attending college. 

To fill out the form, you’ll need the most recent tax returns and W-2s for your household, statements for any bank accounts and investments, and your Social Security number. The FAFSA opens each year on Oct. 1 for the next academic year, and students have until the end of June to fill it out. 

All students, regardless of financial status, should fill out the FAFSA annually — and as soon as possible. In addition to influencing your federal aid options, individual colleges also use the FAFSA when making financial aid decisions, as well as in determining who gets scholarships and grants (and how much).

While the FAFSA helps determine what federal aid, including federal student loans, you can get, it’s not a factor in obtaining a private student loan. If you need to compare rates for private student loans, start with Credible.

4. Apply for scholarships and grants

Scholarships and grants are great options for covering school costs because you don’t have to repay them. Some are based on financial need, while others are merit-based or chosen based on essays or other submissions.

You can look for scholarships in a variety of places, including a scholarship search tool like Scholarships.com or Fastweb, or your employer or preferred college may offer proprietary ones as well. If you have your heart set on a school that’s slightly out of your budget, consider contacting their financial aid office to ask about any merit-based grant or scholarship programs they may have. Sometimes, these aren’t as widely publicized as other options.

For grants, you might also consider:

You can use this tool to search for grant and scholarship resources in your state.


5. Get a work-study position

Work-study programs offer students part-time jobs to help cover the costs of education. These can be on- or off-campus jobs, but they usually involve some sort of community service or are related to the student’s chosen course of study.

Both federal work-study programs and private ones are available, though private opportunities will vary by school. Eligibility for the federal work-study program is based on financial need. To learn about possible work-study programs you might be eligible for, contact your school’s on-campus financial aid office.

If you don’t qualify for work-study, you might consider taking a part-time job elsewhere to offset the costs of college. You can look for on- and off-campus jobs, paid internships, or even take on gig work, like driving for a rideshare company or grocery shopping service.

6. Consider federal student loans

Student loans can help you pay for school, too. Just make sure you exhaust all grants, scholarships, and savings first, as student loans need to be repaid — with interest — down the line.

If you do opt to use a loan, always choose federal ones first. These have lower interest rates than private loans and come with other benefits, too — like income-driven repayment plans and potential forgiveness if you enter a career of public service (teaching, for example).

Federal student loan options include:

  • Subsidized Loans — These are need-based and are available for undergraduate students.
  • Unsubsidized Loans — These are not based on financial need and are available for undergraduate, graduate, and professional students.
  • Parent PLUS Loans — Parents take out these loans for a student. These can be refinanced after graduation and put in the student’s name. 

The federal government also offers Direct Consolidation Loans, which you can use to roll several federal student loans into one. This can make repayment easier and, in some cases, reduce your payments and interest costs. Keep in mind, though, that taking out a Direct Consolidation Loan doesn’t guarantee you’ll get a lower interest rate.

Filling out the FAFSA is the first step to applying for all federal loans listed above. Keep in mind: Federal student loans do have limits, so if you need a particularly high loan amount, you may need to look to private loans (see below). 


7. Take out private student loans

Private student loans can also aid in covering your educational costs, but you should only turn to private loans if your federal aid and student loans fall short of your needs.  These loans typically come with higher interest rates than federal student loans, and eligibility is based on your credit and other financial factors. In many cases, you may need a cosigner in order to qualify. Private student loans also don’t offer income-driven repayment plans like federal loans do.

Despite these drawbacks, private student loans have some advantages. For one, you may be able to get a much larger loan. This might be helpful if you’re attending a particularly expensive school or entering a high-cost program (like medical school, for example). Another benefit: If you have good to excellent credit (or your cosigner does), a private lender may also offer you a lower interest rate, which could save you money in the long run.

If you do end up needing private student loans, make sure you shop around for your loan and lender. Interest rates, loan limits, eligibility requirements, and other terms can all vary from one company to the next. Comparison shopping can help ensure you get the best possible loan for your needs and budget. 

You should aim to compare at least three to five lenders, comparing your loan estimates line by line before moving forward. You’ll also want to leverage a student loan calculator to make sure you’re prepared for the payment and interest costs your loan will come with. 

Credible makes it easy to compare private student loan rates from multiple lenders.