Janice Lozano
There are various ways to pay for college, including grants, scholarships, part-time income, loans, and savings plans. The cost of college can be stressful and confusing, but with proper research and organization, one can make the best decision for their financial goals. The biggest part of college costs is usually tuition, along with other fees to enroll and attend. There are also other expenses like room and board, books and supplies, transportation, and personal expenses. Financial aid is available to make college accessible to students from diverse financial backgrounds, and it can be awarded based on financial need, academic ability, or athletic ability.
| Characteristics | Values |
|---|---|
| Primary payers | Parents/guardians |
| Average contribution of primary payers | Less than half |
| Other sources of funding | Student's income, scholarships, and loans |
| Ways to reduce college costs | Enrolling at a less expensive college, textbook sharing, minimizing trips home, using public transportation, etc. |
| Types of loans | Subsidized, unsubsidized, and private |
| Factors affecting aid eligibility | Income, assets, dependency status, marital status, number of family members in college, medical expenses, etc. |
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What You'll Learn
Grants, scholarships, and part-time income
Grants, scholarships, and part-time work are all great ways to fund your college education. Grants and scholarships are often used interchangeably, but there is a difference between the two. Most grants tend to be need-based and are awarded based on a student's or their family's financial situation. Scholarships, on the other hand, are usually merit-based and are awarded based on academic or athletic abilities. However, some organisations do offer need-based scholarships, so it is always worth checking the requirements.
Grants
Grants are a fantastic way to fund your college education, as they do not need to be paid back. Federal grants are offered by the U.S. Department of Education and can be used at any postsecondary institution. The main types of federal grants are the Federal Pell Grant, the Federal Supplemental Educational Opportunity Grant (FSEOG), and the Teacher Education Assistance for College and Higher Education (TEACH) Grant. The Pell Grant and the FSEOG are both based on a student's financial need and can range from $4,000 to $7,000 per year. The TEACH Grant provides up to $4,000 per year to students who agree to teach at a school in a low-income area for four years after graduation.
There are also state-specific grants, such as the Cal Grant in California, which provides financial aid to students attending a University of California, California State University, or California Community College. The Texas Tuition Equalization Grant is another example of a state-specific grant, which can only be used to pay for tuition at a college or university in Texas. The Minnesota State Grant is less restrictive and can be used for tuition, fees, books, supplies, housing, and transportation.
Scholarships
Scholarships are another great way to fund your college education. While some scholarships are merit-based, there are also many that are need-based. For example, the Executive Women International Scholarship Program offers the EWISP Scholarship and the ASIST Scholarship, both of which support non-traditional adult students who are women pursuing a certificate, associate's, bachelor's, or master's degree. The Downer-Bennett scholarship is another example of a need-based scholarship for single-parent students attending the University of New Mexico main campus.
Part-time income
Part-time work can also help fund your college education. Many colleges and universities offer work-study programs as part of their financial aid packages. These programs provide students with part-time jobs that fit around their study schedules. Additionally, some grants and scholarships may require students to work for the providing organisation after graduation, which can provide a valuable source of income.
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529 savings plans
A 529 plan is a state-sponsored investment plan that enables you to save money for a beneficiary and pay for education expenses. The plan is named after section 529 of the Internal Revenue Code, where "Qualified Tuition Program" is the legal name. Anyone can use a 529 plan to save for education and there can be one account owner per account, but others – family members and even friends – can contribute.
There are two major types of 529 plans: 529 tax advantage and 529 prepaid plans. The 529 tax advantage is the most popular 529 plan and has strong tax advantages. Your investments grow tax-free, and you can also withdraw funds tax-free for education expenses, such as tuition, room and board, and assigned textbooks. You can use withdrawals from education savings plan accounts at any college or university, and some trade schools. The 529 prepaid plan is less popular but can still be useful depending on your financial goals and needs.
The UNIQUE College Investing Plan, U.Fund College Investing Plan, DE529 Education Savings Plan, AZ529, and the Connecticut Higher Education Trust (CHET) 529 College Savings Plan are offered by the states of New Hampshire, Massachusetts, Delaware, Arizona, and Connecticut, respectively. These plans are managed by Fidelity Investments. If you are not a resident of these states, you may want to consider whether your state or the beneficiary's home state offers its residents a plan with alternate state tax advantages or other state benefits such as financial aid, scholarship funds, and protection from creditors.
The best 529 plans offer several other key benefits, such as reducing the need for student loans and increased flexibility in college choice. Every dollar saved is a dollar less borrowed, but where you save matters. A 529 plan has a minimal impact on financial aid compared to savings in a checking account. If your state of residence offers a state tax deduction or credit for 529 contributions, it will help reduce your taxes each year, providing you with a little extra to put back into your 529 college savings account.
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Loans
There are several options available for students to take out loans to fund their college education. These include federal loans, private loans, and loans from other sources.
Federal Loans
Federal loans are offered by the federal government and can be subsidised or unsubsidized. Subsidized loans are awarded based on financial need, as outlined in the FAFSA (Free Application for Federal Student Aid). With subsidized loans, the federal government pays the interest accrued on the loan while the student is in school and during deferment, which is typically the six months after graduation. Unsubsidized loans, on the other hand, require the borrower to pay all accrued interest. Most students who are US citizens or permanent residents may qualify for unsubsidized federal student loans and federal parent loans by filing the FAFSA if they are enrolled at least half-time.
Private Loans
Private student loans are offered by banks or other financial institutions. These loans are credit-based, meaning the lender will evaluate the borrower's credit history and ability to repay the loan. Private loans can cover up to 100% of college expenses, including tuition, housing, books, supplies, and even a laptop. However, it is important to remember that private loans typically come with interest rates, and the full amount borrowed plus interest must be repaid.
Other Sources
In addition to federal and private loans, students can explore other options such as grants, scholarships, and part-time income. Grants and scholarships are forms of financial aid that do not need to be repaid. Part-time income refers to students using their earnings from working part-time jobs to contribute to their college expenses. Another option is to open a 529 savings plan, which offers benefits such as reducing the need for student loans and increased flexibility in college choice.
It is important to carefully consider one's financial situation and goals when deciding to take out loans for college. Researching and comparing different loan options, interest rates, and repayment plans can help individuals make informed decisions that align with their financial needs and capabilities.
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Textbook costs
Textbooks can be very expensive, with a single textbook often costing more than $100. In 2024-2025, the average cost of books and supplies for a full-time college student was about $1,370 for the year. In 2022-2023, the average student spent $700 on tech devices and products for class, with the average first-year student spending $809 on technology. The average cost of course materials, including textbooks, in 2022-2023 was $285 for the year. This is a slight increase from the previous year, where students spent an average of $339 on course materials.
There are several ways to save money on textbook costs. Students can buy textbooks second-hand, or rent them. They can also share textbooks with friends or borrow them from the library. Students can also ask the professor for their evaluation copy of the textbook. In 2022, Congress committed $11 million to the Open Textbooks Pilot program, which provides free open educational resources (OER) for students. These are course materials in the public domain, which are free to use, edit and distribute.
The high cost of textbooks can have a serious impact on students. Some students have reported working extra hours, skipping meals, or dropping courses to afford textbooks. Others have reported spending entire paychecks on textbook costs, leaving them little money for food, gas, or rent.
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Transportation
When it comes to transportation, there are a few ways in which you may end up paying for other students to get to college. Depending on the state and local policies, transportation fees may be included in your taxes. These fees go towards funding public transportation systems, such as buses or subways, which students may use to get to their colleges or universities. If you own a car and live in an area with toll roads, your toll payments could also be subsidizing the travel costs of students who use the same roads to get to their educational institutions. Additionally, certain government initiatives or local programs may use your tax contributions to provide subsidized or free transportation options specifically for students. For example, some cities offer discounted public transit passes for students, which makes transportation more affordable for them. In some cases, you may also choose to directly support a student's transportation costs through a scholarship or donation. This could be in the form of a monetary gift that the student can use for transportation expenses, or it could involve providing a vehicle or gas cards specifically for their commute to and from college. It is important to remember that your contribution to another student's transportation needs can have a significant impact on their ability to access education. Reliable and affordable transportation can remove barriers and increase attendance rates, particularly for those from low-income backgrounds or with limited mobility options. Your support in this area can make a tangible difference in their pursuit of higher education.
Frequently asked questions
There are several ways to pay for college, including grants, scholarships, part-time income, loans, and savings plans such as 529 plans.
A 529 plan is a savings plan that can be used to save for college. The impact of a 529 plan on financial aid is minimal compared to savings in a checking account.
Financial aid is money given or lent to students to help them pay for college. It may be awarded based on financial need or other factors such as academic or athletic ability. Most full-time college students receive some form of financial aid.
There are several ways to reduce college expenses, including enrolling at a less expensive college, renting textbooks, using public transportation, and minimizing trips home.
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