The price of college has increased steadily for years. In 1976, students at public, four-year institutions paid $2,275 for tuition plus room and board. In 1987, they paid $5,494 for the same education. Currently, the annual cost of attending a public, four-year college plus room and board is $20,770.
College is an investment that presumably pays dividends; however, for many graduates, it can also be a financial burden. When students do not have college savings funds, they turn to federal loans, the largest source of financial aid available to undergraduates and graduates. After that, students may take on private loans with high interest rates and inflexible repayment plans.
"On average, Americans in 2017 graduated with $32,731 in student debt."
As a result of these decisions, many students graduate with thousands of dollars in debt, which they often struggle to pay off after graduation. On average, Americans in 2017 graduated with $32,731 in student debt.
If this sounds bleak, take solace in this good news: If you are wise, you can get through college without borrowing or taking out loans, and without going into extreme debt. For example, scholarships and grant money can offset the cost of tuition. This guide offers tips on how to get money for your college education.
Where to Go First
To help you learn how to get money for college, consult with your high school counselors and/or your university’s financial aid office. Schedule an appointment, and they will help you find programs, scholarships, and grants to suit your needs. Also, file a Free Application for Federal Student Aid (FAFSA). At the very least, FAFSA enables you to receive federal loans or grants, should you be eligible for aid.
Financial aid is a broad term used to describe options available to help you find ways to pay for college. Under financial aid is the category “free money.” Before you take out loans to cover tuition or housing costs, find scholarships and grants — or free money — given to students based on merit or financial need.
What is the difference between scholarships and grants?
The federal government gives grants like the Federal Pell Grant and the Federal Supplemental Education Opportunity Grant based on financial need. There are also grants specifically available for African-Americans, single mothers, and women. Other grants are offered through your specific state. Students can find out if they are eligible for various grants after filling out a FAFSA.
Scholarships are given mostly on a merit basis, but award money is also dispersed to students in financial need. Scholarship money goes directly to the student or school to offset tuition costs and other college expenses. There are thousands of scholarships available for everything from left-handed students to online students. Reward money is sometimes given to students who demonstrate the financial need or to minority groups.
Nonprofits, individuals, and associations also give out scholarship money throughout the year. On average students attending public, four-year colleges, at all income levels, received $9,740 for the 2011-2012 school year in grant and scholarship aid, according to the Department of Education.
- Scholarships and Fellowships
There are thousands of merit-based scholarships and fellowships given to students engaged in the arts, humanities, sports, or a variety of other fields. Scholarships are generally given without students having to earn them. Fellowships are given for research projects and study abroad programs. Students can receive thousands of dollars each semester in scholarship and fellowship aid for tuition or other college-related expenses such as books and housing.
- Federal Pell Grant
As of 2018, students are eligible to receive up to $6,095 a year in Federal Pell Grant aid. The Federal Pell Grant is a need-based grant given to low-income students. After filling out a FAFSA, students will find out if they are eligible for Pell Grant funds. Undergraduates can receive up six years or 12 semesters worth of Pell Grant funding.
- Federal Supplemental Educational Opportunity Grant (FSEOG)
The Federal Supplemental Education Opportunity Grant is given to undergraduate students who have “exceptional financial need.” The FSEOG is distributed to each college’s financial aid office, which determines how much aid each student receives. The amount a student can receive falls between $100 to $4,000 annually. You must first complete a FAFSA to qualify to receive FSEOG aid.
- Teacher Education Assistance for College and Higher Education (TEACH) Grant
TEACH grants are given to students who commit to work in low-income areas as teachers for up to four years. Students can get up to $4,000 in TEACH grant aid every year. Note: if students default on their commitment, they must repay the money as it will revert to an unsubsidized loan.
- Iraq and Afghanistan Service Grants
Children of servicemen and women who died as a result of post-9/11 military service performed in Iraq or Afghanistan can receive service grants if they are not eligible for the Pell Grant. The grant is available for to students for up to 12 semesters or about six years. Students can get up to $6,095 for 2018-2019, which is equivalent to what they would get for a Pell Grant.
- Institutional Grants
Institutional Grants are award monies given by colleges, private organizations, and states — not the federal government. To find out about college grants, speak with your financial aid adviser. Private and state grants are also often listed on community foundation websites. Gift monies range from hundreds to thousands of dollars and can used for tuition or other college-related expenses.
There’s seemingly no end to the amount of scholarships and free grants available to students. With scholarships based on financial need, academic achievement, heritage, or special talents, chances are, there’s a scholarship out there for you. Investigate your options. Here are some of the most popular scholarships available today.
- NCAA Scholarships
NCAA scholarships are given out to student-athletes attending Division I and Division II colleges. The regulating body for intercollegiate sports, the NCAA gives out annually $2.9 billion in scholarships to some 150,000 students. Students receive full or partial scholarships at the discretion of their coaches.
- Google Scholarships
Google offers scholarships to high school and college students studying computer science and tech. Some scholarships are specifically opened to “underrepresented groups” and women who are studying technology, while others offer complimentary attendance to Google’s Computer Science Summer Institute. Students can apply via the online application, which requires transcripts and letters of recommendation. Scholarships are available up to $10,000.
- United Negro College Fund
UNCF was established in 1944 and provides more than $100 million in scholarships to African American and other minority students every year. UNCF is the largest private organization to give out scholarships to minorities. There are also fellowships and internships listed on the organization’s scholarship page. Full-time students can receive up to $5,000 each school year. Each scholarship has different requirements (e.g., an essay, a minimum GPA, transcripts, and references).
- IEEE Computer Society
The IEEE Computer Society is a professional organization for individuals employed in computer science and engineering. The society also provides scholarships and awards to undergraduate and graduate students studying in the field. Each scholarship has specific requirements, but all are open to IEEE Computer Society members. More than 12 scholarships are available of up to $1,000.
- Coca-Cola Scholars Foundation
The Coca-Cola Scholars Foundation gives out $3.55 million in scholarship money every year to high school seniors. Every year, 150 students are chosen to receive $20,000 each. The scholarship application is available online and requires students to submit academic information, employment and volunteerism history, extracurricular and club activities, and their parent’s financial information.
- Microsoft Scholarships
The Microsoft Scholarship program was created to encourage students studying computer science or STEM-related subjects at a four-year college or university. This conference scholarship provides student with an all-expense paid trip to attend one of five diversity STEM conferences. Students from historically underrepresented backgrounds are given preference. The program is open to undergraduate and graduate students in the United States, Canada, and Mexico.
If you are a first-year college student, you likely have questions about the loan application process. What kind of loan should I take out? How much money will I need? How long do I have to repay the loans?
Your first step is to fill out the FAFSA. You will have to fill out a new form every year to determine how much aid you will receive. The FAFSA opens every year on Oct. 1 and closes on June 30. The financial aid office at your college will determine how much aid you receive and will notify you. How much you receive is determined by your cost of attendance (COA) and your expected family contribution (EFC). The cost of living is calculated by totaling up your projected length in school and estimated tuition and expenses per semester. If you are a parent, this also includes additional costs for childcare. As for the EFC, that is calculated using income data you submitted on your FAFSA. To be clear, you may receive offers for more loan money than you actually need. It is your responsibility to do your own COA and EFC calculations.
Remember, loans are one of the ways to pay for college, but most loans come with strings attached. That means you will have to pay interest on loans and abide by repayment rules. Typically, repayment plans are flexible for federal loans and less flexible on private loans. It takes roughly 10 years for students to pay off their debt. For more information on how financial aid awards are determined, visit the Federal Student Aid portal.
- Federal Perkins Loan
Federal Perkins Loans are available to part- and full-time undergraduate and graduate students who demonstrate financial need. Loans are subsidized and carry 5% interest rates that begin accruing after you graduate. To be eligible, your college must participate in the Federal Perkins Loan. Undergraduates can receive up to $5,500 a year and $27,500 in total. Graduate students can receive $8,000 per year and up to $60,000 in total. Generally you have up to nine months after you graduate to begin repaying the loan. The loan is typically repaid over a 10-year period.
- Federal Parent Loan for Undergraduate Students (PLUS)
Federal Parent Loan for Undergraduate Students, or PLUS loans, are loans parents and legal guardians can take out on behalf of their dependent kids to help them pay for their undergraduate studies. Acceptance is based on the parent’s credit history. Loans carry a fixed 7.6% interest rate. There’s also a 4.264% origination fee. Parents may borrow up to the cost of the attendance, subtracting any other financial aid. The repayment term is typically 10 years, although that can be extended if needed.
- Direct Subsidized and Direct Unsubsidized Loans
Federal subsidized loans are only available to undergraduate students. The government covers the interest on subsidized loans while an undergraduate student is in college. Students can borrow a total of $31,000 in subsidized loans. However, interest begins accruing when they graduate.
The federal government will not pay the interest rates on unsubsidized loans, which are offered to undergraduate and graduate students. Interest begins adding up for these loans right away. The total amount a student can borrow is determined by their college. Graduate students will pay 6.6% interest rates and undergraduates will pay 5.05% interest as of 2018.
- Direct Consolidation Loan
If you borrow multiple loans you will have multiple payments every month. If that sounds confusing, you can consider consolidating those loans. You can do that by getting a Direct Consolidation Loan to combine all of your federal loans so that you make one payment per month. On the plus side, consolidation can make your payments lower and give you more time to pay off the loan. You can also switch to an income-driven repayment plan, where your payment is determined by your income. On the downside, by consolidating and stretching out your repayment timeline, you may pay more interest in the long run. Additionally, you may lose some borrower benefits like principal rebates if you consolidate.
- Private Student Loans
Private student loans should be your last option for financial aid after you have exhausted all of your “free money” and taken the maximum amount of subsidized and unsubsidized loans allowed. Interest rates on private loans vary depending on your or your co-signer’s credit history. You can borrow what you need and directly repay the bank or credit union. With a private loan, you do not have the same borrower’s benefits available through federal loans such as forbearance and income-driven repayment plans.
Which Type of Loan Should You Take Out?
If you learn anything about financial aid for college, let it be this: There is a significant difference between federal and private loans. Before you apply for a private loan from a bank or credit union, use all possible federal aid available to you, including subsidized and unsubsidized loans.
Federal loans, which are provided through the federal government, have certain protections for student borrowers. First, they offer fixed and low interest rates that private loans typically do not. Second, federal loans include income-driven repayment plans, which set your monthly repayment fees to match your income. That means if you lose work, you can adjust your repayment plan to reduce your monthly fees. Third, with federal loans, you generally do not have to start making payments until you graduate; and with subsidized loans, the federal government pays the interest on the loan while you are in school. An added bonus, when you file taxes, the interest on your federal loan may be tax deductible. Federal loans, include Perkins Loans, Direct Plus Loans, Direct Subsidized Loans, and Direct Unsubsidized Loans.
Private loans, available through banks and credit unions (or sometimes schools), have higher interest rates than federal loans. The interest on your loan is dependent on your or your co-signer’s credit score. That interest rate is often variable, with rates that can increase up to 19% or more over a period of time. Generally, you have to start making payments toward that loan while you are in school. And to make matters worse, if you lose your job or have a hard time making payments, private loans may not let you file for deferment or forbearance. The bottom line is, if you must take out a private loan make sure you are aware of the interest rates and repayment options.
“Out of sight, out of mind” is bad philosophy to live by when it comes to student loans. While you may not have to worry about repaying your loans while in school, it is important to have a clear understanding of future obligations. How will you pay off your loans? What are your options?
In an ideal world, you will graduate and immediately land your dream job with a high-paying salary. Hope for the best, but perhaps plan for the worst. The Department of Education’s Repayment Estimator can help you get a clear picture of your loans, the interest rates, and your repayment options.
With federal loans, you have a variety of options available to repay your loan, depending on your financial circumstances. If you do not choose a specific repayment plan, you will be on the standard one, which runs on a 10-year timeline. Graduates having difficulty paying their debt can opt for a repayment plan that suits their situation. One option is the income-driven repayment plan, where your monthly fee may be reduced depending on your income. Another option is to consolidate your loans to make one, reduced monthly payment. Again, you can do this by applying for the Direct Consolidation Loan.
If you cannot afford to make a payment, contact the loan service and find out about your options. You may be eligible to defer your loan or request forbearance to delay your payments.
Certain occupations will “forgive” student loans. If you take on a certain job after graduation, you will not have to repay some, or any portion, of your loan. Graduates who go into public service or teaching may be eligible for forgiveness of their Direct Loans, Federal Family Education Loans, and Perkins Loans. Also included are jobs in the nonprofit sector and federal, state, and local government. And those who serve full-time in the Peace Corps or AmeriCorps qualify for student loan forgiveness. To apply for student loan forgiveness, complete the Employment Certification form.
In other cases, your loan may be cancelled or discharged. For instance, if your college should shut down or if it is determined that your school was in violation of any state laws, you may be eligible to become discharged from your student loan. If your loan is discharged, then you will not have to repay anything. Bankruptcy in rare cases is grounds for discharge. Also, if you should become permanently disabled, you could be discharged from your student loans.
Remember that loan forgiveness is only applicable to federal loans, not private loans. To be considered for loan forgiveness, or to see if your loan is eligible to be cancelled or discharged, contact your loan servicer. Remember, during the process of review, you will still have to make loan payments.
Other Sources of Money
Special programs, odd jobs, and even crowdsourcing can add up to impressive college funding sources.
- Federal Work-Study Program
The FWS Program provides jobs to undergraduate and graduate students with financial need, giving them a way to pay for college and to help them pay for education-related expenses.
- Military Service
The United States Armed Forces offers several programs, some of which pay 100% tuition assistance for college courses taken during off-duty hours. See the TA Program Overview for more information. Or, you could earn your degree first by serving in the Air Force, Army, or Navy Reserve Officers Training Corps (ROTC).
- Student Sponsorships
Let a private investor put you through school. These programs are more popular in Europe but are beginning to catch on in the U.S. A sponsorship is an investment for benefactors, as they typically are entitled to a certain percentage of your post-college income for a fixed number of years.
- Community Service
Make the planet a better place and earn tuition money. What could be better? AmeriCorps pays out equivalent to the maximum value of the Pell Grant for the award year (currently $5,550); Learn and Serve America and the Peace Corps also pay out tuition assistance awards to students who have completed service. Other programs such as Teach for America and the National Health Service Corps offer loan forgiveness programs for college graduates.
- Tuition Payment Plan
Sallie Mae can help you find ways to pay for college tuition. Visit SallieMae for more information.
For risk-averse investors who want to avoid the stock market but still make a little return, the 529 College Savings Plan is the way to go. This plan isn’t taxed, and the money in it is not used to calculate a student’s financial aid eligibility.
- Domestic Exchange or Study Abroad Programs
Studying in a different state or country can be your ticket to winning another scholarship. Visit FinAid’s page on domestic and study abroad programs for more information.
- Your State
Contact your state’s higher education agency to see if you’re eligible for any programs they may offer as a way to pay for college. See the U.S. Department of Education’s Educational Resource Organizations Directory to find your state.
- Your Employer
The company you work for, or even your parents’ employers, may offer some tuition assistance. Don’t be afraid to ask.
- Your Grandparents/Relatives
Have your grandparents open and contribute to a 529 plan. While your parents will be scrutinized by the federal government when determining a financial aid package, any money your grandparents provide to you will not be counted.
- Organizations and Professional Associations
Once you choose a field of study, find a professional association that serves that area of interest; then, contact it to see if it offers anything in the way of educational assistance or scholarship contests.
- Your Expertise
Try selling your expertise. Whether it be tutoring a certain subject, giving music lessons, helping with resume writing, or fixing other people’s computers, post fliers and turn your expertise into a little campus business to make a few extra bucks a month.
Sites like GoFundMe allow students to collect donations for educational goals, like studying abroad, or even attending college as a general goal.
Knowing where to find financial aid is only half the game. Following these helpful tips will help you maximize your aid package.
- Save in Your Parents’ Names: The federal government will expect students to contribute a higher percentage of their income to college expenses than their parents, so keep that 529 plan and any other investments in your parents’ names to maximize your federal aid opportunities.
- Pay Off Debt: When it determines your financial aid award, the federal government considers what you have, not what you owe. Liquidate some of your assets to pay off debt, and you may see a boost in aid and other ways to pay for college.
- Maximize Your 401(k) and IRA: Funds in accounts set aside for retirement will not be counted by the federal government when it determines your aid package. Move any extra funds into these accounts at least two years prior to filling out the FAFSA.