Lori Meadows
There are multiple ways college students can pay their bills, including federal or private student loans, scholarships, grants, work-study programs, and part-time jobs. Students can also receive financial aid, which can help pay for living expenses, or they can take advantage of tuition payment plans, which split college bills into equal monthly payments. Additionally, students may receive monetary gifts from family and friends or use their own savings.
| Characteristics | Values |
|---|---|
| Scholarships | Private scholarships are available for all kinds of interests and circumstances. |
| Grants | Federal grants are free financial aid from the U.S. Department of Education that is awarded to students and families based on their financial needs. |
| Work-study | The Federal Work-Study Program (FWS) helps place students with financial aid in jobs to earn money while attending college. |
| Loans | Direct subsidized loans, Direct unsubsidized loans, PLUS loans, and private student loans. |
| Savings | 529 plans, custodial accounts, and college savings plans. |
| Income | Students' earnings and income from part-time jobs. |
| Parents' money | Parental contributions, including from Roth IRAs. |
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What You'll Learn
Scholarships, grants, and financial aid
Scholarships are another option to help with college costs. These can be merit-based or need-based and are often offered by individual colleges, private companies, or other organizations. Some scholarships are renewable, meaning you can receive the funding for all four years of college, while others are one-time awards. There are also specific scholarships for students who excel in a particular area, such as academics or sports.
Grants are typically need-based and may come from the federal government, state government, or individual colleges. They can be used to pay for tuition, fees, room and board, and other college expenses. The amount of money awarded through grants varies, and some grants are specifically for students who plan to pursue a career in a high-need field, such as teaching or nursing.
Federal work-study programs are another option to help pay for college. These provide part-time jobs for undergraduate and graduate students, allowing them to earn money to put towards their education expenses. The availability of work-study programs depends on the college's funding level, the timing of your application, and your financial need. It's worth noting that at most schools, work-study money cannot be used to cover direct costs like tuition, on-campus housing, or meal plans.
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Student loans
Federal student loans include Direct subsidized loans, Direct unsubsidized loans, and PLUS loans. These loans offer more protections for consumers compared to private loans. For example, federal loans may qualify for Public Service Loan Forgiveness (PSLF) if the borrower works full time for a qualifying public service employer and makes 120 qualifying monthly payments. Income-driven repayment plans are also available for federal loans, which offer forgiveness on remaining loan balances after 10, 20, or 25 years of repayment. Teachers can also take advantage of the Teacher Loan Forgiveness Program.
Private student loans, on the other hand, are credit-based. The lender will evaluate the borrower's credit history and ability to repay the loan. Private loans may require a creditworthy cosigner who shares responsibility for repaying the loan. Private lenders may approve borrowers to borrow up to 100% of their school-certified costs for the year, but it is important to borrow only what one can afford to repay. Private loans may have varying rates and terms, and it is recommended to explore federal loan options before considering private loans.
Student loan applications can usually be completed on the lender's website, with no cost to apply. The approval process may take a few business days, and once approved, a certification request is sent to the school. After certification and the right to cancel period, the loan funds are disbursed to the school, usually once per semester. Repayment options may include in-school payments, with monthly payments beginning as soon as funds are disbursed.
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Work-study programs
To be eligible for the Federal Work-Study Program, students must complete the Free Application for Federal Student Aid (FAFSA®) form and meet specific criteria. These criteria include being a US citizen or permanent resident, maintaining satisfactory academic progress, and demonstrating financial need. Students awarded a Federal Work-Study grant are not guaranteed a job and must still apply and compete for available positions.
The pay rate for the Federal Work-Study Program is typically $15.00 per hour, and students are paid bi-weekly, with the option of direct deposit. The number of hours a student can work is indicated on their Federal Work-Study Referral Form, and they are required to take breaks after every five hours of work, with a minimum break time of half an hour.
Work-study funds are intended to cover day-to-day expenses, such as food, transportation, and school supplies. However, some schools may allow students to apply these funds directly to billed expenses, such as tuition, fees, and housing. It is important to note that work-study earnings do not reduce future student aid eligibility.
Students interested in work-study programs should inquire with their school's financial aid office to explore their specific options and understand how the program can help them pay their college bills.
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Part-time jobs
Many college students take on part-time jobs to help pay their bills. In 2020, one-quarter of full-time students worked at least 20 hours a week, and two-thirds of part-time students worked at least 20 hours. 40% of part-time students worked at least 35 hours a week.
The Federal Work-Study Program (FWS) helps place students with financial aid in part-time jobs to earn money while attending college. Students generally earn hourly federal minimum wages and cannot exceed a specific number of work hours per year. In 2017-2018, about 613,000 students received FWS earnings, with an average of $1,650 for the school year. Common work-study jobs include tutoring, assisting a professor, working in various campus offices, or in the fitness centre, computer lab or library.
If a work-study program isn't an option, students can look for other part-time work. Some options include babysitting, dog walking, and food delivery. Students with a specific skill, such as graphic design, could offer their services as a freelancer. Many paid internships are also available to college students. Check with your academic advisor or school career centre for any opportunities. An off-campus job could also help students learn about running a small business or become more involved in the local community.
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Family contributions
There are various ways that families can contribute financially to a student's college education. One common method is through income and savings. Higher-income families may have greater financial flexibility, allowing them to utilise their income or tap into savings to support their child's college expenses. Additionally, parents may choose to take out loans to cover a portion of the costs. During the 2021/2022 school year, 18% of parents utilised borrowed funds for their child's higher education, contributing an additional 8% to the overall cost.
Another way for families to assist is through financial gifts. Grandparents, aunts, uncles, and other relatives may provide monetary gifts to the student as a convenient way to contribute. However, it is important to consider the timing of these gifts. According to FAFSA calculations, financial gifts to parents do not count as income available for college costs. But if the gift is made before the parents file the FAFSA, it must be reported as an asset, which may reduce the student's eligibility for financial aid. Therefore, careful consideration and timing of financial gifts can help maximise the benefits for the student.
Families can also explore federal financial aid options by completing the Free Application for Federal Student Aid (FAFSA). This allows families to report their financial status and qualify for federal aid. It is important to note that not all families take advantage of this opportunity, leaving billions of dollars in federal aid unclaimed each year. Completing the FAFSA can help determine eligibility for various forms of financial assistance, such as grants or scholarships, which can significantly reduce the financial burden on both students and their families.
Lastly, some families may choose to utilise college savings plans, such as 529 accounts, to fund their child's education. These plans offer specific benefits, such as the ability to transfer leftover funds to a Roth IRA for the beneficiary starting in 2024, providing a jump start to their retirement savings. Additionally, helping pay off student loans after graduation can be another way for families to contribute, allowing graduates to shift their focus towards saving and investing for the future.
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Frequently asked questions
College students can pay their tuition fees through scholarships, grants, tuition payment plans, work-study programs, and federal or private student loans.
Scholarships are often awarded based on merit, while grants are usually awarded based on financial need. Examples of grants include Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOG), and Teacher Education Assistance Grants.
Work-study programs are part-time jobs for undergraduate and graduate students to help pay for their education expenses. These jobs are usually on-campus and include roles such as tutoring, assisting professors, or working in campus offices.
