Paying for College: Planning Smart for Higher Education

Types of College Funding

Paying for college often involves a combination of resources:

• Parents (40%): Many families help support tuition and living expenses.
• Scholarships and Grants (29%): These don’t need to be repaid and are awarded based on merit or financial need.
• Loans (19%): Borrowed funds that must be repaid with interest.
• Self-Funding (10%): This may include student income from part-time jobs or savings.

Family and Friends (2%): Gifts or informal loans can supplement costs.

What Does College Really Cost?

Beyond tuition and housing, additional expenses can add up. On average, students and families spend $1,700 to $3,300 per semester on things like:

• Books and supplies
• Transportation
• Food outside the meal plan
• Dorm furnishings and essentials

Tech and internet access

Understanding Financial Aid

The Free Application for Federal Student Aid (FAFSA) is your gateway to most financial aid options. Even if you think your family might not qualify, filling out the FAFSA is the only way to access:

• Federal Grants: Based on financial need; no repayment required.
• State and Institutional Grants: Many require the FAFSA and also do not need to be repaid.
• Scholarships: Merit- or need-based awards from schools, nonprofits, or private groups.
• Federal Work-Study: On-campus or community jobs that help fund education expenses.

Federal Student Loans: Often have lower interest rates than private loans.

College Savings Tips

Saving now can help reduce how much you need to borrow later. Remember: you can either earn interest by saving or pay interest by borrowing.

A quick rule of thumb for saving: Multiply your child’s age by $2,500 to estimate how much you’ll need to save each year for one year of public university tuition. For private universities, increase this estimate accordingly.

Student Loans and Repayment

Understanding Your Student Loans

When borrowing, understanding the basics helps you avoid surprises:

• Interest Rate: The percentage charged on the amount borrowed.
• Principal: The original amount of the loan.
• Grace Period: The time after leaving school before payments begin.

Planning for Graduation

Start thinking about post-college finances early. Here are a few goals to set before you walk the stage:

• Budget for loan payments: Make sure your entry-level income can support your monthly payments.
• Build an emergency fund: Aim for 3–6 months of expenses to avoid using credit cards in a pinch.
• Understand repayment options: Income-Driven Repayment (IDR) plans can lower monthly payments based on your income.

Financial Decisions and Career Planning

Your career path influences your ability to repay loans. Consider:

• Earning potential: Compare expected salaries with your estimated monthly loan payments.
• Public Service Loan Forgiveness (PSLF): If you plan to work in public service, see if you qualify for forgiveness after 10 years of qualifying payments.

Stay proactive by monitoring your loan balance, researching options, and paying more than the minimum when you can.

• Calculate your savings goal based on your child’s age and future tuition needs.
• Open a 529 savings plan or other tax-advantaged account to grow your college fund.
• Submit the FAFSA each year to stay eligible for financial aid.
• Compare scholarship and grant opportunities and apply early.
• Review student loan options to understand federal vs. private terms.
• Start building an emergency fund as part of your post-graduation budget.
• Explore career paths aligned with your financial goals and repayment needs.