How to Pay For a College Education?
By Farmers State Bank • Updated: August 6, 2026 • 7 min read
Paying for college usually means combining more than one funding source. Grants, scholarships, work-study, and 529 savings don't need to be repaid. Federal and private student loans do. Knowing what you qualify for, and in what order to use it, helps you borrow less and pay it off faster.
Table of Contents FSB's Student Loans
Key Takeaways
1
Grants, scholarships, work-study, and 529 savings don't need to be repaid, so use them before you borrow.
2
The FAFSA determines your eligibility for grants, work-study, and federal student loans.
3
Subsidized federal loans don't accrue interest in school, unsubsidized loans do.
4
Private loans often require a co-signer and typically carry higher interest rates.
5
Using funding sources in the right order helps you borrow only what you actually need.
Table of Contents
Financial Aid That Doesn't Need to Be Repaid
Free Application for Federal Student Aid (FAFSA)
Financial Aid That Doesn't Need to Be Repaid
Before you consider any loan, it's worth knowing which types of college funding you never have to pay back.
No Repayment Required
- Grants: need-based aid awarded through the FAFSA.
- Scholarships: merit or need-based awards from schools, employers, or outside organizations.
- Work-study: a part-time job on campus tied to your financial aid package.
- 529 savings: funds you or a family member contributed and grew over time.
Federal Student Loans
Must be repaid starting six months after graduation. Subsidized loans don't accrue interest while you're in school.
Private Student Loans
Also must be repaid, and nearly all accrue interest while you're still in school.
Getting Started with Paying for College
Every student's situation is different, and the right mix of funding depends on your circumstances. The sections below walk through each option, starting with the ones that don't need to be repaid.
Free Application for Federal Student Aid (FAFSA)
The FAFSA is the best starting point. It's a free application, not a loan itself, and it determines what grants, work-study, and federal student loans you may qualify for. Some states and individual schools also use it to award additional aid.
Grant and work-study awards generally don't need to be repaid as long as you maintain your enrollment requirements. Federal student loans do, starting six months after graduation, so it's worth exploring other options first.
Scholarship Options
Grants and work-study opportunities often only cover part of your tuition, so it's worth exploring scholarships before turning to loans.
Scholarship amounts range from $100 to full rides, and the best part is that scholarships don't have to be repaid. Most require an application, and many ask for an essay describing why you're a deserving recipient.
School guidance counselors are a great resource for finding scholarships, and the Department of Labor offers a comprehensive scholarship finder on its website.
College Savings Account (529 Plan)
Some students 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, letting their contributions grow through compound interest. The longer the money stays invested, the more it can accumulate before college.
Every state offers at least one 529 plan, but you don't have to choose your own state's plan, though you typically get a state tax deduction for doing so. If another state's plan suits you better, you can choose that one instead. A 529 account is your own savings, so it doesn't reduce your eligibility for grants or federal aid the way outside untaxed income might.
Federal Student Loans
Completing the FAFSA determines your eligibility for federal student loans. Many borrowers are offered both subsidized and unsubsidized loan options.
Subsidized Loans
Don't accrue interest while you're in school, during your grace period, or during deferment. The government covers interest during these times.
Unsubsidized Loans
Begin accruing interest immediately upon disbursement, which increases your total cost of borrowing over time.
You're not required to take the entire amount you qualify for, and should only accept what you need to cover tuition, textbooks, housing, and other school-related expenses.
Federal loans also offer benefits private loans don't, including loan forgiveness for certain public service or education professions, and income-driven repayment plans that cap your monthly payment as a percentage of your income once repayment begins six months after graduation.
Private Student Loans
Private loans must be paid back monthly, starting six months after graduation, and nearly all accrue interest while you're still in school.
These loans can be harder to qualify for, and students often need a co-signer for approval. Options exist for those with limited or less-than-perfect credit, but interest rates on these loans are typically higher.
If you need a private loan, explore all your options. Some lenders offer more flexibility for borrowers who struggle to make payments later, so it's worth comparing more than one.
Looking for Student Loan Options?
Discover flexible funding solutions to help cover your education expenses.
How to Combine Your Funding Sources
No matter how you pay for college, the same general order applies: use funds you don't have to repay first, then move to loans only for what's left.
1
Apply grants, scholarships, and work-study first. These come from your FAFSA results and outside scholarship applications, and none of it needs to be repaid.
2
Use 529 savings next. If you or your family have a 529 plan, apply those funds toward remaining tuition and qualified expenses.
3
Borrow federal loans for what's left, subsidized first if you're offered both, since it's the lower-cost option.
4
Consider a private loan last, only for any gap that remains after grants, savings, and federal loans.
Taking out only what you need in federal or private loans means less time spent paying them off after graduation.
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Paying for College: FAQ
Is FAFSA free money or a loan?
Neither. FAFSA is a free application, not money itself. It's how you find out what grants, scholarships, work-study, and federal loans you qualify for. Grants and work-study don't need to be repaid; any federal loans you accept do, starting six months after graduation.
How do you realistically pay for college?
Paying for college usually means combining sources. Start with grants, scholarships, and work-study, add any 529 savings, then apply for federal student loans through the FAFSA. Use private loans only if other options aren't enough.
What's the best way to pay for college without loans?
Maximize funding that doesn't need to be repaid first. Apply for grants, work-study programs, and scholarships, then use any 529 college savings you have. The more of these you use, the less you'll need to borrow.
What's the difference between subsidized and unsubsidized federal student loans?
Subsidized loans don't accrue interest while you're in school, during your grace period, or during deferment. Unsubsidized loans begin accruing interest immediately upon disbursement, which increases the total cost of borrowing.
Does a 529 savings account affect financial aid eligibility?
A 529 plan owned by you or your parents typically has a smaller impact on federal aid eligibility than other assets, since it's assessed at a lower rate on the FAFSA. It's still reported as an asset, so talk with a financial aid office if you have questions about your specific situation.
How can I pay for college if I don't qualify for federal aid?
Look first at merit-based scholarships, which don't depend on financial need, and employer or community organization awards. A 529 plan, if you have one, can also help. A private student loan, often with a co-signer, typically fills whatever gap remains.
What is FAFSA and why is it important?
The Free Application for Federal Student Aid (FAFSA) determines your eligibility for grants, scholarships, work-study programs, and federal student loans. Many states and schools also use FAFSA data to award additional aid, so submitting it early increases your chances of receiving the most assistance.
What is a 529 college savings plan and how does it work?
A 529 plan is a tax-advantaged savings account for education expenses. Contributions grow tax-free, and withdrawals aren't taxed if used for qualified costs like tuition, books, or housing. Each state offers at least one plan, and some provide state tax deductions for contributions.
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