It’s college admission season, and many families are facing the challenge of how to pay for their child’s education at a high-cost university. The cost of college can be a deterrent for many families, with 78% of families eliminating a college from consideration based on cost alone. In this article, we will discuss five methods for paying for college and when each option may be appropriate.
Financial aid is a common way for students to get help with paying for college, with almost 84% of college students benefiting from some form of financial aid. The average aid to a full-time undergraduate student in the 2022-2023 school year was $15,480. Filling out the Free Application for Federal Student Aid (FAFSA) is a critical first step in applying for financial aid. Needs are assessed based on a calculation of the Student Aid Index versus the school’s cost of attendance.
For high-earners who may not qualify for financial aid, covering college expenses from income may be an option. Some families have chosen to hire their children to work at the family business and pay them an income to cover tuition and other expenses. Additionally, there are investment accounts specifically tailored for college, such as Coverdell education savings accounts and 529 College Savings Plans, which can be used to fund educational expenses.
Scholarships are another option for paying for college, with 61% of families using scholarships to help finance education. Scholarships are not only awarded based on exceptional grades or abilities, and there are a wide variety of scholarships available to students. Many high schools provide scholarship information, or students can do a quick Google search to find available scholarships and their requirements.
When other sources of funding fall short, families can turn to student loans to pay for college. Borrowing accounts for about 19% of college funding sources. It is important to consider future repayment of loans, as interest rates are not as low as they once were. You must jointly think through repayment and career expectations to set your child up for success after college.
Overall, figuring out how to pay for college can be a challenging task, but there are many opportunities available to help offset the cost of education. By considering options such as financial aid, scholarships, income, investments, and loans, families can create a plan to make college more affordable for their children. It is important to research and consider each option carefully to ensure that the financial burden of college does not become overwhelming in the future.
