How to Pay for College
“How to pay for college?” It’s a tough question with many solutions, but no definitive answer. This question continually factors into major educational decisions. Forming a budget for college means considering attending in-state vs. out-of-state, your living situation, and the number of registered credits you will need to graduate. Students and parents can be eager to mold the most realistic, stress-free “Paying for College” plan, but the task can truly take a bit of patience.
Below, you can find a few ideas about using different routes to take care of educational expenses. In this way, you can build up to the larger goal of affording a great school. You can also check out our new budgeting tool – MerryBudget – to help think through your needs.
Starting with basics, college expenses are covered through three general funds. Any education-related expense you have is covered by money you earn, money you are awarded, or money you borrow. Ideally, you want to focus on “money you earn” and “money you are awarded”. These two options allow you handle the cost of college upfront. Borrowing typically results in longer commitments by adding additional time and money invested in repaying what you borrowed, also known as debt. Balancing these three funds are key to figuring out how you will pay for college.
Money you earn
Earning money is the most direct way to pay for college. In exchange for your labor or service, you make a wage you have the authority to manage.
Examples of traditional labor jobs
- Grocery Store
- Food Server
- Day Care Assistant
- Retail Merchandiser
- Tour Guide
Jobs related to customer service and hospitality tend to need less experience and have more flexible schedules. You can find these jobs on popular local job boards. Wages are typically earned hourly, and your schedule is discussed with your employer. You may need long work days to earn a decent amount of money, as these jobs usually start at minimum wage.
As a college student, you can apply for work-study to earn money towards college expenses. If you’re not familiar with the program, we’ll tell you everything you need to know about work-study.
Examples of specialized jobs
- Graphic Designer
- Video Editor
- Social Media Influencer
- Car Mechanic
- App Developer
Jobs related to a specialized field are based on a specific set of skills. These jobs can be done as employment or freelance to earn a wage. The minimum requirement is proof you can perform the tasks asked. You have a better chance of securing a job if you can prove you are familiar with the skills needed.
Gaining experience with skills in these fields can be done on your own time or in the presence of a mentor. Perhaps you have a family member who owned a car shop, and they taught you a few mechanic skills. You can use that experience to find a part-time job at a car shop. If you love art, maybe you started watching graphic design videos on YouTube. After working on your design skills, you could start freelancing. Jobs in this category are more about learning as you go while you develop your skills. Formal education can be a bonus, but not necessary to begin a career.
In most cases, you will choose your own schedule. A specialized job can give you more freedom. Choosing a specialized field can also help lessen the competition for a job.
Examples of side gig jobs
- Task Runner
- Ride Share Driver
- House sitting
- Survey Taker
- Grocery Shopper
- Event Staff
- Product Tester
This category of jobs requires no formal education, and no experience. Many of the jobs are small or simple labor tasks that anyone can do. You typically find companies dedicated to one form of small labor. For example, getting someone’s groceries or driving someone around. The income for such jobs can be very profitable for jobs like driving people around. On the other hand, jobs like a survey taker gradually build smaller amounts of income.
Companies allow you to create your own schedule. The flexibility can benefit a student’s course schedule.
Jobs listed in each category scratch the surface of the jobs possible. When looking for a job, factors like time commitment and wage are very important, but don’t forget to think about what you are good at. A job exists for everything surrounding you. Assess your skills to determine what services you may be able to provide, or which skills can transfer to what jobs.
Money you are awarded
There are scholarships for everyone – you don’t need to have special talents or be a genius! Some will ask about your community service, for instance, or times you’ve shown compassion or leadership or overcome a personal challenge. There are even some that are just dependent on your location. Awards are given for a variety of reasons, so keep this as an option to explore.
This is probably the first method anyone considers once applying for college. Scholarship money is provided by a school, non-profit organization, private organization, or sometimes, a corporation.
Each scholarship has conditions. First, you must be eligible. Eligibility requirements could include location, GPA, school, or year of study. Along with being eligible, you will be required to show work. Scholarship providers may ask for an essay, project, or request you to send you most current transcript, for example.
You can find scholarships on blogs, in local newspapers, on school websites, or on apps like Going Merry. More resources equal more opportunity for awards.
When you compare the amount of money you can receive to the amount of work needed to apply for a scholarship, the exchange is a pretty good deal. Write an essay and receive $500? That’s more appealing than working a full-time job.
The hard part of scholarships is that they are not guaranteed. You can meet requirements, do the work, and not be chosen. In addition, finding the scholarships can be tricky for some students.
Luckily, scholarships are Going Merry’s favorite topic! We suggest scholarships to you based on your profile. We can help get you started right now!
This award is funding or financial assistance typically given by the government. You do not need to repay this money. Like scholarships, grants have conditions and a selection process.
Government grants are typically offered as part of a school’s financial aid package. Common government grants, also known as federal grants, include Pell Grant, the Federal Supplemental Educational Opportunity Grant (FSEOG), and TEACH Grant.
State and Institution Grants are also common at colleges. Federal grants are considered need-based aid. You can read this informative article, done by U.S. News, for more understanding of federal grants.
In hindsight, you can say grants and scholarships operate in very similar ways. Slight differences exists between the two.
While federal grants are only provided by the government, scholarships are provided by non-profits, corporations or individuals. Also, scholarships have a wider variety of eligibility compared to federal grants. You can find a scholarship matching your interests or characteristics, which can revolve around more laid-back, informal topics. For example, did you see the Create-A-Greeting-Card Scholarship on our post for No Essay Scholarships (2019 edition)?
Your school can award you with need-based aid or merit-based aid. Need-based aid is determined by evaluating you and/or your family’s income and assets. Your school will use this information in comparison with the expenses of your education to decide the amount you are eligible to receive.
Merit-based aid relies on achievement and talent. Students can exhibit academic, athletic, music, artistic, or another exceptional skill to receive merit-based aid. Common types of merit-based aid include scholarships, awards, and tuition waivers.
Money you borrow
Borrowing should be your last resort. This money needs repayment. You can expect to pay more than the amount you borrow, but the total you repay comes down to details in your contract. Contracts for borrowing money include timeframes and percentages for paying back borrowed funds.
Colleges can offer you loans in your financial aid package. The loans offered in your package are called Stafford loans or Direct Stafford loans. Once you fill out your FAFSA, your college can determine the amount of money the school can offer you. There are two main Stafford loan types: Subsidized and Unsubsidized.
Subsidized loans are available to undergraduate students with financial need. The government pays the interest accrued on a subsidized loan. This benefit can save you and your family money later. However, the government only pays the interest:
-While you’re in school at least half-time
-For the first six months after graduation (your “grace period”)
-During a period of deferment (postponement of loan payments)
For subsidized loans, the maximum eligibility period is 150% of the time it should take to graduate your major’s program. To illustrate, imagine you are enrolled in a four-year program. Your maximum eligibility period to receive unsubsidized loans is 6 years. (150% of 4 years= 6 years)
Unsubsidized loans are available to undergraduate and graduate students, and are not based on financial need. The interest is completely the responsibility of the student. You may choose not to pay interest while in school, during you grace period, or during deferment. At those times, the interest will still accrue and capitalized (be added to your loan amount). For unsubsidized loans, there is no maximum eligibility period.
You may also consider the Parent PLUS loan, or Direct PLUS loan, for dependent undergraduate students. Parents can apply for the loan if the parent(s) do not have adverse credit history, and if the student meets the general eligibility requirements for federal student aid.
Federal loans can be cancelled before disbursement to your school. Under certain circumstances, all or part of your loan can be discharged or forgiven.
For private loans providers, you will apply and sign an agreement about repayment if you are approved. Being approved for loans can prove difficult for a college student. Most times private loan providers recommend having your parent(s) or guardian(s) act as a co-signer. Companies providing the loans consider the applicant’s credit history, which is why having a co-signer is suggested.
Interest rates for private student loans are higher than federal student loans. Federal loans tend to have 5-8% interest rates, while private loans average around 8-13%. However, rates can soar above 15%.
In fact, private loans interest rates can be variable or fixed. Fixed remains the same rate throughout repayment. Variable will vary depending on state of the economy. This interest may be eligible as a tax deduction.
Private loans do not offer forgiveness or a chance of cancellation. You must pay the full amount, including interest.
The time of repayment depends on the loan contract and the rate you can afford to repay. There is no penalty for paying more than the monthly amount you owe to your provider. Before signing a contract, an expected time is usually given as an example while you are comparing which loan contract you would like. Loan providers may give you more than one option to choose from after determining your eligibility.
Income Share Agreement
Another method of borrowing money is an income share agreement (ISA). Students will pay a percentage of their income after graduating to the college in exchange for funding during college. Depending on the ISA with your school, you will pay 3-6% of your future monthly earnings between 3-10 years. The lower your future income, the lower the amount you are paying.
Additionally, a standard agreement sets a minimum salary for payback. If a student is not making the set minimum salary, the student does not pay any funds back. For example, a set minimum salary of $20,000 means a student making less than $20,000 after graduating will not pay back the school until earning more. The ISA does not have interest, and typically has a payment cap of up to 2.5 times the ISA amount borrowed.
As the trend of graduates not securing jobs related to their major continues, this option allows students who become underemployed to worry less about being weighed down by disproportionate debt.
Income Share Agreements are not common among US colleges at this time. Here is a list of schools with an ISA option:
Colorado Mountain College
University of Utah
Purdue University (Indiana)
Allan Hancock College (California)
Lackawanna College (Pennsylvania)
Clarkson University (New York)
Norwich University (Vermont)
Messiah College (Pennsylvania)
Companies like Vemo Education and 13th Avenue Funding manage ISAs for colleges offering this option. Other companies, like Lumni, partner with a college or work directly with students to manage ISAs.
Balancing your Funds
Sallie Mae, a student loan provider, completed a report about how students pay for college. On average, students covered 47% of the cost of attending college with family income and savings, 28% with scholarships and grants, and 24% through borrowing during the 2017-2018 school year.
Creating a plan for how you will fund your college expenses will help ease the stress of your college experience. Whether you work part-time, receive scholarships, or secure a loan, each part requires a form of effort. Weigh each method carefully, and don’t be afraid to change the way you balance your funds.