How to Pay For a College Education?
When deciding how to fund your college education, you may be scratching your head at all the options. What is a grant? How can I get a scholarship? Do I need a private student loan?
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Getting Started with Student Loans
Truthfully, every student’s situation is different. To determine what financial aid option works best, it’s essential to understand your options. Consider some of the options below to help determine how you can fund your education!
Free Application For Student Aid (FAFSA)
The FAFSA is the best starting point, as it will notify you of any grants or work-study options you may qualify for and federal student loan options.
Some states and individual schools also provide additional aid to eligible students. Most of the time, grant and work-study options do not need to be paid so long as you maintain the enrollment requirements.
Federal student loans, however, must be paid back starting six months after graduation. So, be sure to consider alternative methods before accepting any federal loans!
Scholarships Options
Grants and work-study opportunities will often only cover part of your tuition. Before turning to student loans, explore scholarship options.
Many scholarships are available in varying amounts, from $100 to full rides, and the best part is that scholarships do not have to be repaid. Most scholarships require an application, and many ask for an essay describing why you’re a deserving recipient.
School guidance counselors are an excellent resource for finding scholarships, and the Department of Labor offers a comprehensive scholarship finder on its website.
College Savings Account
Some students can use a 529 plan to pay for school. A 529 plan is a tax-free, state-sponsored college investment account for qualifying education expenses only.
Many parents open these accounts early and deposit money over time, allowing the investments to grow before college.
Every state offers at least one 529 plan, but you don’t have to choose your state’s plan (though you typically get a state tax deduction). If another state’s plan suits you better, you may opt for that one instead.
Federal Loans
As mentioned above, completing the FAFSA determines your eligibility for federal student loans. Many borrowers are offered both subsidized and unsubsidized loan options.
Subsidized loans do not accrue interest while you are in school, but unsubsidized do.
You are not required to take the entire amount you qualify for and should only accept what you need to cover your tuition, textbooks, housing, and other school-related expenses.
In addition, federal loans offer many benefits that are not available with private loans. For instance, federal loans offer loan forgiveness for certain professions within public service or education.
They also offer income-driven repayment plans, which ensure that you spend only a certain percentage of your income on monthly payments once repayment begins six months after graduation.
Private Loans
These loans must be paid back monthly, starting six months after graduation. Additionally, nearly all private loans accrue interest while you are in school.
Private loans can be harder to qualify for, and students often need a co-signer for approval. While options exist for those with limited or less-than-perfect credit, the interest rates on these loans are typically higher.
If you need to take out a private loan, explore all your options. Some lenders offer more perks than others and may offer flexibility for those who struggle to make payments later.
Looking for Student Loan Options?
Discover flexible funding solutions to help cover your education expenses.
Maximize Funding Before Taking Out Loans
No matter how you pay for college, use funds you don’t need to repay first (assuming you maintain your enrollment status), followed by funds from your 529 plan.
This approach allows you to take out only the amount you need in federal or private loans. The fewer loans you need, the less time you’ll spend paying them off after graduation.
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