How to Pay for College?

October 7, 2024 byTrey Edgington

8 min to read

Image of a daughter in a white shirt and mom in a grey sweater working on college applications and finacial aid applications.

If you have a high school student who dreams of going to college, then you know that achieving that dream can be expensive—often very expensive.

The annual cost of tuition and room and board at a 4-year public college in 1963 was $243, which amounts to the same spending power as $2,482 in 2024. The average annual cost for tuition with room and board was $38,270 as of May 2024. Considering that the real median household income in the United States in 2022 was $74,580—a 2.3% decline from 2021—the cost of college may seem out of reach for many families.

College offers many benefits, though. Gaining the knowledge and skills for a lifelong career, meeting new people, and exploring new ideas are just a few of them. College graduates also statistically make more money over their lifetime than people who forego college.

For many, the benefits of going to college make the high cost of tuition a worthwhile investment.  But for many families, one of the first concerns for their children is a big one: How to pay for college?

Navigating Financial Aid

If your student has decided that pursuing higher education is right for them, it’s time to find ways to pay for it. Families will want to find out if their children qualify for financial aid.

There are two types of financial aid:

Needs-based financial aid: Awarded to students whose family income indicates a need for additional support.

Merit-based financial aid: Awarded to students who qualify based on their achievements, which could be academic, civic, or athletic.

Student loans are a common way to help students cover the cost of tuition. Student loan repayment can often be deferred until six months after graduation, but in most cases, the interest still accrues during that period.

There are two types of student loans:

Federal student loans. These loans are funded by the federal government. They have fixed interest rates and income-driven repayment plans, which are not usually offered with private loans. They are also capped. The amount your student qualifies for often depends on if they are still claimed as a dependent and how many college credits they have completed. For federal student loans, families must complete the FAFSA to apply.

Private student loans. These are loans that the student takes out directly from a financial institution such as a bank or credit union. There typically is no cap, and interest rates can fluctuate. Students can apply for private student loans at any time and for any amount.

Families and students should approach student loans—like any loan—with caution. The current student loan crisis, where millions of graduates are unable to pay back their student loans, highlights some of the problems that can occur with this solution for financing college.

Before applying for student loans, families should be sure their student is familiar with financial literacy concepts like compounding interest and should carefully consider the monthly payment amount with the average annual income for their degree they are pursuing.

If you don’t want your child burdened by student loans, you could opt to take out a parent loan. The federal government offers parents loans through the Direct PLUS program. Direct PLUS loans are capped based on the cost of tuition, and payments can be deferred. You must complete the FAFSA to determine eligibility for a Direct PLUS loan. 

Image of a young male Connections Academy student in a white shirt sitting down looking at their laptop.

Filling out the FAFSA

A good place to start paying for college is by completing the Free Application for Federal Student Aid, or FAFSA. The FAFSA collects information on your household income to determine if your student qualifies for financial aid. Filling out the FAFSA is an easy process, and there are plenty of resources to guide you along the way.

Many colleges use the FAFSA information, your student’s college application, and their college entrance exam scores to create a financial aid package. A financial aid package could include both needs- and merit-based grants and scholarships.

Each school typically offers its own unique financial aid package, so it is a good idea to do a cost comparison once you receive the packages from each institution. 

Looking Beyond Financial Aid: 7 Ways to Pay for College

For many families, there is a gap between what the financial aid package covers and the total cost for tuition, fees, and room and board, so they need to find other funds.

There is no single best way to pay for college—every family and situation is different. But if you’re looking to learn more about how to pay for college, here are seven options beyond the financial aid package: 

1. Work-Study Programs

You may be wondering, “What is work-study in college?” Work-study programs are part-time jobs that allow students to work somewhere at their university while attending classes. Jobs could be anything from reshelving books in the library to working as a tutor or office aid. Gaining work experience of any kind—but especially in the student’s field, if possible—while still in college can be very beneficial when looking for a job upon graduation. And of course, the immediate financial benefits can go a long way to ease the anxiety of paying for college.

Like loans, the Federal Work-Study Program begins with the FAFSA. Simply check the box to signify your interest in the work-study program if your student’s intended university participates in the program.

2. Scholarships and Grants

College grants are a very good place to start when looking for ways to fund your child’s higher education. Your family doesn’t need to pay back grants unless the student fails to complete their degree program. Often a needs-based option, college grants may also have other requirements. Like student loans, the process begins with the FAFSA. Federal grants include:

Pell grants
Teacher Education Assistance for College and Higher Education (TEACH)
Iraq and Afghanistan Service Grant
Federal Supplemental Educational Grants (FSEOG)

Scholarships are another great option. Graduates don’t have to pay back these funds either, and there are plenty to choose from. In fact, it’s estimated that a regular high school student meets the qualifications for 50-100 scholarships; they just don’t know it.

Many scholarships appear on the student’s financial aid package after filling out the FAFSA, but not all. There are many private scholarships offered by businesses, non-profit organizations, civic groups, and school districts that are easy to apply for and often overlooked.

The Department of Education offers guidance on finding legitimate private scholarships to help pay for college. Your student’s high school counselor can also guide you toward private scholarships your student may qualify for.

3. Tuition Reimbursement

Unlike some of the other options here, tuition reimbursement usually takes place after the student has joined the workforce. Some employers offer tuition assistance to pay for some or all of an employee’s education. Remember to check with potential employers to make sure they are one of the companies that pay for college, because not all of them do.

There are a few things to consider before accepting tuition reimbursement:

Some organizations require the employee to take courses relevant to their current job.
The employee often pays for tuition upfront.
Some reimbursement programs are grade dependent.
There is often a required commitment to stay with the employer for a certain amount of time after tuition reimbursement.

4. Savings

Almost every state offers 529 plans to help families pay for college. 529 plans are investment plans that allow families to invest money and make tax-free withdrawals for qualified education expenses like tuition and room and board. Anyone can open a 529 plan for students, though some states have residency requirements. If you start early and invest even a little bit every month, you will have a nice savings account to finance college when the time comes.  

Beyond 529 plans, students and families could dip into traditional savings to cover the cost of college. For high school students, working a summer job is a smart way to grow savings to help cover college costs. 

5. ROTC

The Army Reserve Officers’ Training Corps (ROTC) offers students scholarships of up to 100% of the cost of tuition plus money to offset room and board and books in exchange for serving in the Army as an officer after graduation. There are more than 1,000 colleges and universities that partner with the ROTC. While this path may not be for everyone, ROTC students are generally free of college debt and have a career waiting for them upon graduation. 

6. Attend Community College

Another smart way for students to save money on college tuition is to take general education classes at a community college, where tuition is generally way less. Students can then transfer to a four-year college or university to complete their degree program. However, not all credits transfer to every university program, so find out if your credits will transfer before making the investment.

7. Take AP Classes in High School

Taking Advanced Placement® (AP)* classes in high school is a way to help with college expenses that saves time and money. Many colleges accept AP courses for college credit, meaning that students may not have to take some of the required college classes if they score high enough on their exams. Taking AP courses can help save your student money on college tuition and boost their GPA. While there is a fee to take the AP exam, it is much lower than taking an equivalent college course, and some high schools even cover the costs of AP exams.

Image of a young female Connections Academy student in ayellow shirt sitting down smiling looking at their laptop.

Get Support from School Counselors

High school counselors are an excellent resource to help you and your student navigate the college application process. They can answer questions about the FAFSA, steer students toward scholarship opportunities, and help families weigh different college options based on a number of criteria.

Have your student connect with their school counselor early in their junior year to prepare for that next big step and select a college that meets their education needs—at a price your family can afford.  

Though preparing for college can be stressful—after all, there is a lot to think about—paying for it shouldn’t be your primary concern. With all the financial resources available, there’s a good chance that you’ll find the right solution for your family.

*AP® and Advanced Placement® are registered trademarks of the College Board. Used with permission.