With research, early preparation, and discussion with family members, planning to pay for college doesn’t have to be confusing. One key is to be realistic about how much:
- your family has saved,
- current income can be contributed from work,
- is available through private scholarships
- needs to come from financial aid, and
- must be borrowed to fill the gap.
Minimizing the amount students and parents borrow for college should be the goal. To help you assess each of these areas, here are a few things to consider.
Family Contributions
Family contributions may come from a college savings account or current income while a student is in college. Either way, it is never too early or too late to begin saving for college. Saving even small amounts for high school juniors and seniors will reduce the amount that may need to be borrowed later in college.
Most colleges offer a payment plan instead of requiring all tuition be paid at the start of the semester. Selecting a payment plan can allow parents and students who are working during college, to contribute, reducing the amount that needs to be borrowed.
Private Scholarships
Scholarships are just not for high school seniors. Underclassmen, even elementary school students, may find scholarships or money for college by entering contests that award students money for talents, crafts – just about anything you can imagine.
If your student is not yet a senior, think about what steps they can take now to finance their college education later. In addition to entering contests, early high school students should consider how to best position themselves for scholarships and other monetary awards granted during senior year. For some scholarships, they may need to file an application or obtain letters of recommendation. Planning this in advance reduces the stress later in the process.
In addition to local scholarships or academic awards from the school, students can use this online scholarship search tool and apply right online!
Financial Aid
In the fall of senior year, college-bound students need to begin applying for financial aid. The first step in the process is to complete the FAFSA (Free Application for Student Aid), which becomes available on October 1. The FAFSA is necessary to get any form of federal student aid including loans and work-study grants. Filing for financial aid early is a great idea as it will allow more time to compare funding options later. Even those who think they won’t qualify for financial aid, should still file the FAFSA. Financial situations may suddenly change, or a student may unexpectedly need to take a federal student loan to fill a funding gap. More information about the FAFSA process can be found here.
Private Credit Loans
If there is still a balance due after all scholarships, grants, work study and federal student loan options have been applied, families may choose to consider a private student loan to help fund the difference. Private student loans are available through credit unions, banks and other financial companies. Parents can consider cosigning the loan for their student borrower to help them qualify.
When borrowing money for college, it’s important to plan ahead, only borrow what you need and know exactly how much you will owe after graduation. Consider the type of degree and post-graduation job you will get when thinking about student loans. One rule of thumb is to keep your total student loan debt less than the student’s projected starting salary. For example, if the average salary for a given field is $40,000 the student should try to borrow less than that while they are in school.
Don’t let the college planning process overwhelm you. Review options and make a plan that includes a combination of; savings, scholarships, current income, payment plans, financial aid and student loans.