Find the Right Order for You

Many families grapple with how to pay for college especially since college costs have skyrocketed in the past two decades.  Families use a range of resources to pay for college costs from their own family’s unique financial resources, federal, state, and institutional aid programs, and even community based resources from companies and other organizations who award scholarships.  Not each funding source is the same.  Check out our ranking order of funding resources to pay for college.

Optimize Gift Aid

Always use someone else’s money before your own.  Apply for need-based grants and merit scholarships from every resource possible.  Each college will have their own recommended deadline to ensure you get the most gift aid (free money) from their institutional aid program.  Many of the priority deadlines for gift aid are typically between October and March. 

Be aware that many states have their own deadlines for their state scholarships and grants.  States are spending big dollars, to the tune of just shy of $11 billion in 2017.  In fact, California, Wyoming, and New Jersey award more gift aid to low-income students than the federal government according to a study by University of California, Berkeley’s Center for Studies in Higher Education.  To learn more about your state’s gift aid, find your state on this map from NASFAA to connect with your state agency.

Don’t forget that many companies, church groups, charitable foundations and civic organizations offer scholarships.  Amounts typically range from hundreds to thousands of dollars.  Eligibility criteria range from academic focus, athletic prowess, artistic abilities and even may just be given randomly to one of the applications.  Consider using a free scholarship search websites like CollegeBoard’s scholarship search, Fastweb, or Scholarships.com. There are paid scholarship search engines as well, but why pay when you can do it for free. 

Tap Your College Savings

Some families have some funds saved for college, others do not (and that is okay!). If you do have it, consider spreading your college savings out over degree.  Why you might ask?  Life happens.  You may come down with a case of mono. You may decide to transfer to another college.  You may change majors and extend your enrollment beyond 4 years.  By spreading your spend of your college savings over your entire time to degree, you can have money for emergencies and changes in enrollment patterns.  Plus, if there are one-year funding opportunities like work-study or annual loan limits for Federal Direct Subsidized Student Loans, you don’t miss out on these opportunities.

Also, if you have your money saved in college savings accounts like 529 plans, you’ll want to ensure that you can document that the use of your funds were used for qualified education-related expenses. The 529 rules stipulate that required tuition, fees, books, and some housing, meal and computer expenses qualify.

Work judiciously 

Working while you are enrolled in college can be a great way to pay for college costs as you go. In fact, almost 70% of all college students work.  Studies show typically college students who work 15 hours a week or less maintain good grades. Working more than 15 hours often contributes to lower grades and taking more time to get your degree.  Find the right balance of work and academics for you.

What college students use their pays for matters. If you choose to work, remember to use your wages to pay for college costs (needs) first and then foot the bill for social expenses (wants) second. If you need a textbook for class, this is a good way to use your wages.  Of course, paying for lattes, tickets to the football game and other fun expenses is a part of the college experience.  Just be sensible about how you use your wages.

Borrow Only What You Need

Borrowing is a reality for many college students and their families.  Start by assessing how much student loans you need. To do this, consider if you can spend less on college costs.  Some colleges costs are hard coded into the cost of attendance.  Whereas others may have opportunities for you to pay less.   By renting textbooks, living in a triple dorm room, overloading on college credits to get done faster or other college cost saving measures, you may be able to pay less for your college education.

Also, consider what you think you can afford to repay after graduation based on your career goal.  The College Scorecard offers a free way to check out the average earnings that graduates from specific colleges make after graduation by college and many programs. Also, Georgetown University Center on Education and the Workforce College ROI Tool helps you look at the net present value of potential earnings data up to 40 years from now by college for over 4,500 colleges. 

Next, take out the right student loan for you. Often borrowers need to consider more than one option due to annual loan limits. Consider this pecking order of student loans.

1. Federal Subsidized Direct Student Loan. The feds pick up the interest bill while you are enrolled at least half-time college and during a 6-month grace period after graduation. 

2. College Loans. Some colleges (often private ones) offer low or no interest rate and fee loans.  In some sense, this is like just deferred college cost payments until after graduation.  If your college offers one, check the terms because it may be as good or better than the federal subsidized loan.



3. Federal Unsubsidized Direct Student Loan. Although borrowers are responsible for the interest on these loans from disbursement, interest payments can be deferred during enrollment and 6 month grace period. Plus, borrowers have the option to pay the accrued interest up to 5 months after graduation to never have this interest capitalized - aka adding to the principal.

4. Parent Loans and Other Student Loans. Families need to discuss who is willing to borrow and how much. It's really hard for undergraduates to borrow Private Student Loans by themselves, so most often they need a creditworthy co-signer. Parents can borrow through the Federal Parent PLUS Loan or Private Parent Loans. Interest rates, fees, repayment plans, repayment postponement options and borrower benefits vary. Ensure whichever option is chosen, you feel comfortable with the monthly repayment when it comes due.

Decide on Your Own Funding Plan

Developing your own college finance plan based on your family’s unique financial situation and other resources will set the stage for the rest of your life. To make it easy, Quatromoney created a college finance planner that helps to make this easy and quick.  By choosing the college’s average net price or income-based net price, you are estimating your college costs after the average gift aid (all merit scholarships and need-based grants) are applied.  Then you can see how far your college savings will stretch and see how cash contributions from wages can reduce your need to borrow.  Finally, to borrow wisely, Quatromoney asks a few questions about credit strength and who is borrowing so you can know your eligible financing options, including the estimated financing costs and monthly repayment while in-school (because I few loans require payments while you are enrolled) and after graduation.  Learn more about how Quatromoney can help you be your own college finance planner.