When it comes to college, it’s never too early or too late to explore your options. If you’re thinking about your future college career, one of your biggest questions is probably: How will I finance my education? 

Pursuing high-quality education is a significant expense, so it’s essential to figure out options on paying and saving for college early. Picking the right school, navigating financial aid and scholarships, and negotiating student loans are choices that could have lifelong effects on your future income and credit score. We’ll walk through some options on how you can finance your degree and provide resources that can help you along the way.

Average Cost of One Year of College Tuition

How to Afford College: Minimizing College Expenses

The first step to making college affordable is to minimize the amount you’ll eventually owe. Whether you decide to knock out a few general education requirements while in high school or take a few classes at a community college before transferring to a 4-year college, there are many ways to minimize the amount you may borrow. 

Earning college credits while you’re still in high school is a great way to minimize the credits you’ll need to take to graduate college, and you may be more familiar with ways to get college credits than you think. Advanced Placement (AP) courses in high school are designed as college-level courses and run by the College Board. The classes come with a corresponding test at the end of the school year that can give you a few college credits depending on your score. Even better—AP courses look impressive on college applications, and they boost college preparation, participation, and completion.

Similarly, dual enrollment classes allow high school students to earn high school and college credits concurrently. You can take dual enrollment classes at your high school, a local community college, a four-year university, or online. Eligibility for dual enrollment varies from state to state, so check with your school counselor to determine if you qualify to take these courses. Colleges have different rules about accepting these types of credits, so ask your counselor about which colleges take which types of dual enrollment credits before you sign up.

Both dual enrollment classes and AP courses can lower the number of courses you will have to take in college, reducing students’ time and cost to earn postsecondary degrees. 

Another way to create a less expensive college experience is to start at a community college or trade school before moving on to a 4-year college or university. These institutions have cheaper classes and are a great way to get your general education courses out of the way affordably. This option is excellent for students who aren’t sure what they want to study. Based on the College Board’s average estimated full-time undergraduate budgets, students who attend a community college instead of a public four-year university can save about $8,000. If students opt for a community college instead of a private four-year university, they can save upwards of $30,000.

Tips for Parents: How to Finance Your Child’s College Education 

If you’re a parent looking to put aside money for your child’s college fund, it’s never too early to start. We recommend that you start saving for your child’s college career as soon as possible (even as soon as they’re born). It’s a good idea to set up a savings account to act as a college fund.

Future college students and parents of future college students can set up a 529 plan, a college savings plan that offers tax and financial aid benefits. 529 plans provide significant income tax breaks. While contributions to the account are not deductible on tax returns, earnings in a 529 plan grow free of federal taxes, and you won’t pay taxes when you withdraw money for college expenses.

Additionally, savings in a 529 plan receive favorable treatment on the FAFSA, meaning you’ll likely qualify for more financial aid from colleges if you place your college savings in a 529 as opposed to a regular bank account or mutual fund. The money you pull out of your 529 account to pay for any given year’s college expenses will not be included in the “base-year income” calculation on the FAFSA. That means your 529 savings do not reduce your eligibility for financial aid. Almost every state has at least one 529 plan, and you can invest in any state’s 529 no matter where you live. 

Tips for Students: Start Budgeting 

Budgeting is a crucial skillset for college and life beyond the classroom. It’s a great idea to practice creating a budget before you’re out of the house and living on your own in college. Budgeting is the process of creating a plan to spend your money by balancing what you earn (your income) with what you spend money on (your expenses). Your college income includes financial aid, scholarship awards, allowance from your parents, and earnings if you choose to work while in school. Your expenses include rent, groceries, eating out, school supplies, books, transportation costs, and anything else you want or need. Personal budgeting is typically done every month. 

By keeping track of your income and expenses, you can identify areas where you can save money, whether it’s skipping Starbucks after class or eating out only once a week.

For most students, college is their first time living on their own and is when many students first discover how many expenses they have to take on that they might have never thought of before. I mean, do you know how much groceries cost?

College students have specific expenses too. You’ll quickly realize as a student that you have to buy textbooks and school supplies as well as campus activity fees. It’s important to include these student-specific expenses in your budget. Luckily, as a college student, there are also many ways you can save on these expenses and more.

Here are a few things you might be able to save money on:

• Textbooks. It might surprise you how expensive college textbooks can be. Check your classes’ syllabi to find out exactly what textbooks are required and which ones are optional. You can also get rentals or used books from your college’s bookstore or off-campus bookstores as well. Check your bookstore’s website or call to ask about used book options. Additionally, many colleges have student-run textbook marketplaces (usually on Facebook) for very low-cost books. This is also a great sustainable option for those looking to be environmentally-friendly!
• Food. You might not realize how much food adds up every week until you’re living away from home. Your $5 breakfast sandwich, plus a $9 meal for lunch, followed by a $15 entreée for dinner adds up $29 for one day of food (not including tips)! If you did that every day for a week, you would spend $203 on food. Groceries aren’t that cheap either! The average person spends $165-$345 on groceries per month. Luckily, many student organizations and clubs host events with free pizza, drinks, and snacks that you can enjoy just for attending! If you’re struggling to make ends meet, you can check out local food banks and pantries, as well as co-ops, student gardens, and other organizations that fight food insecurity.
• College student discounts. Many businesses, especially in college towns, offer discounts for college students. Keep your student ID with you when you’re out and about, and you might get 10% off your next meal or a free drink just for being a college student. You can also get discounts on specific subscription services such as Spotify Premium Student, which is only $4.99 a month! You can also access Hulu for free through your Spotify student discount program. Pretty cool, right?
• AAA discount. If you or a parent are currently an AAA member, you can access several discounts and rewards at various places. With a AAA membership, you can save on gasoline at Shell, get low-price subscriptions through GoodRx, and save up to 35% on brands like HP (great for refilling your printer ink). 
• Rent. Many people think that living in a college dorm is a necessary part of the college experience and maybe even a rite of passage. However, while conveniently located on campus, residence halls can be costly. If you have a car, scooter, bike, or don’t mind public transportation, consider living a little further away from campus (make sure your college doesn’t require you to stay on campus first!). Rent prices typically decrease as you move further from campus, which is worth it if you don’t mind a small commute.

Apply for Financial Aid (FAFSA)

Financial aid helps students and the families pay for college by covering educational expenses like tuition and fees, room and board, books, supplies, and transportation. 

The Free Application for Federal Student Aid (FAFSA) is a form used to determine federal student aid eligibility. It’s crucial to fill out FAFSA because the U.S. Department of Education uses this application as a way to assess eligibility not only for federal financial aid but also for state and school aid. 

FAFSA’s general eligibility requirements include that you have financial need, are a U.S. citizen or eligible noncitizen, and are enrolled in an eligible degree or certificate program at your college or post-secondary school. FAFSA has additional eligibility requirements to qualify for aid. It’s crucial to know that the FAFSA form must be filled out every year, not just once when you start school. Universities and independent scholarship organizations frequently use it. 

FAFSA’s application process begins on October 1st, and FASFA reviews these applications on a rolling basis, so make sure you apply early each year. You will need to fill out the FAFSA every year you’re enrolled in school to stay eligible for aid.

Grants and scholarships are both forms of gift aid, meaning that you don’t have to repay them at any point (a win-win). Although many people use the terms interchangeably, government or academic institutions typically give need-based grants, while scholarships are merit-based. Need-based means that eligibility is based solely on the assets and income of the prospective student and their family. Need-based aid does not include factors such as test scores or athletic ability. Merit-based scholarships or awards recognize the student’s achievement, such as high test scores, outstanding athletic performance, etc. Merit-based scholarships do not consider the financial need of the student.

For grants, you will need to meet specific eligibility criteria in addition to financial criteria. 

• Federal Pell Grants. The U.S. Government awards Pell Grants to undergraduate students who display exceptional financial need and have not yet earned a four-year degree. To apply for a Pell Grant, start by submitting your FAFSA form. Pell Grant amounts change yearly. For the 2020-2021 award year, the maximum was $6,345. Still, the amount you receive depends on your cost of attendance (tuition), family contribution (household income), whether you’re a full- or part-time student, and your plans to attend school for a full academic year or less.
• State grant programs. Individual states often have extensive grant-giving programs similar to the Federal Pell Grant Program. If you’re eligible for a Pell Grant, you might also qualify for state grant money. For example, California has its Cal Grant Program, which you can use at any University of California, California State University, or California Community College. In addition to need-based grants, state issue merit-based grants, grants for minorities, grants for students pursuing high-need fields (such as teaching, nursing, and STEM), and veterans and National Guard members. You can find more information about grants in your state here.
• University grants. Individual universities offer grants on a sliding scale based on your family and personal income. Awards and eligibility requirements vary by institution. Universities base the grant amount on financial need, cost of attendance, and enrollment status. Eligibility requirements may include being enrolled in an eligible degree, maintaining satisfactory school performance, and meeting credit requirements for aid, but be sure to check exact requirements because they vary from university to university.

While the FAFSA plays an essential role in helping students finance their college education, on average only 61-percent of high school seniors complete it. According to a 2018 report by NerdWallet, students who were eligible but didn’t finish the FAFSA resulted in $2.6 billion in Pell Grants going unclaimed. And Pell Grants are not required to be paid back. So do not leave any money on the table. Fill out the application.

If you have questions about financial aid or want to explore all of your options, speak with your high school or future college’s financial assistance office. Don’t be afraid to ask for additional resources if you’re having trouble affording tuition or need help creating a personalized financial plan. Your financial aid office has a vested interest in your financial stability and keeping you on track to graduate. 

How to Pay for College with Scholarships

Another question you might have is, “How do I find scholarships?” The answer is research, research, research. There are scholarships for almost anything you can imagine. There are scholarships for dancers, athletes, feminists, filmmakers, students with one-of-a-kind names, students who speak Klingon—the list goes on. There are so many scholarships out there. You just have to find them. 

A good place to start your quest for scholarships is with your school counselor and with local organizations. Local organizations such as volunteer groups, religious organizations, and PTOs (parent-teacher organizations) frequently offer community-based scholarship opportunities. You can typically get these scholarships based on academic ability, community service, and personal development goals. 

When searching for scholarships, consider your background and unique qualities. Scholarships are available for students with diverse identities and interests. Some types of scholarships include:

• Academic scholarships: Academic scholarships are based on factors such as GPA and test scores. Your ACT and SAT scores help with college admissions, but they can also help with college finances by helping you score a scholarship. An example of an academic-based scholarship is the National Merit Scholarship Program, which students enter by taking the Preliminary SAT/National Merit Scholarship Qualifying Test (PSAT/NMSQT®).
• Sports scholarships: Although university recruitment is typical for competitive sports, being an all-star athlete isn’t the only way to pay for college through sports. There are also scholarships available for all-around sportsmanship and athleticism. An example of this type of scholarship is TrophyCentral’s Sportsmanship Scholarship, which is awarded to students who demonstrate a unique or special form of sportsmanship, kindness, or compassion.
• First-generation scholarships: First-generation and underrepresented groups scholarships are aimed to increase diversity in higher education by removing the financial barriers first-generation college students or underrepresented groups often face. Examples of these scholarships include QuestBridge, a scholarship for low-income, first-gen students, and the Gates Scholarship for low-income, minority students.

Unfortunately, winning scholarships is not quite as simple as learning about them.

Most scholarships will require additional material and information from you. Most scholarships have a minimum GPA requirement, which will require you to submit your transcript when applying. If you’re unsure how to obtain your transcript, just reach out to a teacher or your high school counselor. 

Many scholarships will also require you to submit an essay or a creative project. Scholarship essays can be personal statements, or creative writing prompts, depending on which scholarship you’re applying. If you need a little help writing a scholarship essay, you can look at the work past winners to understand what the judges want. Creative projects can include PowerPoint presentations, videos, painting, drawing, or DIY projects. With so many scholarships out there, you’ll likely be able to find one where your talents lie. 

On top of transcripts, essays, and creative projects, many scholarships also require references. References can either be academic or personal, depending on the scholarship’s requirements. If you need an academic reference, try reaching out to a teacher you connected with or felt like you excelled in their class. If you’re applying to a subject-specific scholarship, such as a science scholarship, make sure your reference is from a teacher who teaches that subject. If you need a personal reference, try reaching out to a coach you had, a neighbor you’ve helped out, or a former boss or manager. Don’t be afraid to ask someone for a reference. The people in your life would love to help you receive a well-deserved scholarship. Besides, the worst that could happen is that they say no.

How to Pay for College with Loans

We’re sure you’ve heard some horror stories about student loans. If you’re nervous about taking out student loans, you’re not alone. After all, student loan debt is a national crisis, affecting 45 million students and their families. Here’s what you need to know about student loans:  

According to Forbes, about 70% of American students today end up taking out loans to attend college with an average debt of almost $30,000. The loan crisis has also affected the economy. When combined, the student loan debt exceeds $1.5 trillion.

Before you take out a loan for college, consider the true cost of the loan. Get an understanding of the time and interest involved in paying them back. It’s also important to have conversations about the career prospects of your field of study. Be sure to discuss these things with people you trust, whether that’s parents, grandparents, guardians, extended family, close friends, coaches, or mentors. Talk with those who know you best and will give you honest feedback.

Federal student loans are considered safer than private loans because they are offered by the federal government, while banks and financial institutions offer private loans. Federal loans’ interest rates are lower than private loans, and federal student loans offer borrowers a generous six-month period after graduation until their first payment is due. There are four types of student loans:

• Direct Subsidized Loans: These loans are available for undergrad and grad students. Students must have a financial need for these loans—defined as the cost of attendance minus the expected family contribution. Students who have a more considerable financial need are eligible for direct subsidized loans. This number is calculated by FAFSA when you fill out the application and is used to determine your eligibility for federal, state, and need-based institutional aid. Direct subsidized loans have slightly better terms to help out students—the U.S. Department of Education pays the interest on the loan while you’re in school and for the first six months after graduation. 
• Direct Unsubsidized Loans: These loans are available for undergrad and grad students. Students do not need to prove a financial need for these loans. While these loans are still low-interest, you are responsible for paying the loan’s interest during all periods.
• Direct PLUS Loans: These loans are for grad and professional degree students and parents of undergrad students. This type of loan has a fixed interest rate and is not subsidized, so you are responsible for the interest during all periods.
• Direct Consolidation Loans: This type of loan allows you to combine all federal student loans into a single one. There is no cost to consolidate your loans. This allows you to pay down all of your loans in one monthly payment instead of multiple payments. This makes late or missed payments less likely as well. Your monthly payment may be lower as well because consolidating your loans gives you up to 30 years to pay it off. Additionally, you’ll be able to switch any variable-rate loans (where your interest rate changes with the market interest rates) to a fixed interest rate. This means that your payment will be the same each month and, most likely, lower than it was with a variable interest rate. Loan consolidation can also grant you access to additional income-driven repayment plan options and Public Service Loan Forgiveness (PSLF).

Private loans are another option to finance your college career. We recommend that you only use private loans to fill in the gaps after federal aid is applied. That’s because private loans have less favorable terms for the borrower, such as higher, compounding interest. Compounding interest is interest on interest or the addition of interest to the principal sum of a loan or deposit. For example, if you take out a loan for $10,000 with a 10% annual interest rate, the interest in the first year is calculated from the $10,000 principal ($10,000 x .10 = $1,000). This means that after the first year, the total outstanding balance would be $11,000. However, during the second year, the interest rate of 10% is calculated with the $11,000, the $10,000 principal plus accumulated interest. This continues after every year and can dangerously increase student loan debt over time. 

If you choose to take out a private loan, make sure you read all of the terms carefully and do thorough research into the lending organization. Here are are some tips:

• Look for a low-interest rate. “Low” interest rates are between 3% and 4%.
• See what kind of repayment options they offer (see below for common repayment options). Make sure the repayment terms are ones you can afford after graduation.
• See if the institution has any bonus offers such as interest rate reductions for setting up automatic payments and forbearance and deferment.
• Before you sign on any loan, always make sure you carefully read and fully understand the loan terms. Don’t be afraid to ask questions to your financial aid office, parents or other adults, and your loan officer!

Repayment options for private loans include:

• Deferred repayment: Deferred payments start after you graduate from college or dropped below half-time enrollment and after the six-month grace period (like federal loans). Interest will still accrue during the time you are in school and during the grace period, so your payments and overall debt will be higher.
• Interest-only repayment: You will make payments on just the interest while in school and then start making principal payments once you’ve graduated or dropped below half-time enrollment. Some lenders might offer lower interest rates if you accept interest-only repayment terms. 
• Immediate repayment: This option means you start making principal and interest payments while still in college. This can help you save money in the long term because the total interest will be lower, and you can pay off the loan faster. Additionally, lenders might offer lower interest rates if you agree to immediate repayment terms. However, making these payments while you’re in college can be challenging if you don’t have an income. 
• Fixed repayment:  Fixed repayment is somewhere in between an interest-only and immediate repayment, where the lender determines a fixed payment amount (such as $25) that you will pay every month while in school. Once you graduate or drop below half-enrollment, the monthly payment gets adjusted and includes paying back the principal and interest.

How to Make Money While Enrolled in College

Working in college is a great way to gain work experience, make some friends, and of course, make some cash. 

One way you can make some cash while in college is through work-study programs. Work-study programs provide jobs to students who qualify based on financial needs. These programs are managed by your university, which sets the number of hours you can work per week based on your school workload. Work-study programs have positions in a variety of campus departments or public interest agencies, so you’ll have the opportunity to find something that interests you. For example, if you’re majoring in education, you might find a work-study job in your college’s tutoring center on campus. Other work-study jobs could include: library assistant, campus tour guide, marketer for one of your college’s departments, computer lab assistant or tech, fitness or recreation center attendant, or research positions in labs. 

Another option is to find a part-time job. Whether you want something on-campus or off-campus, many places that hire part-time employees have flexible schedules, especially students. Part-time jobs can range from paid internships in high school to serving at a local restaurant. If you choose to get a part-time job in college, be sure to maintain a healthy work-school balance (and give yourself some time for fun too). Here’s a guide on how you can find internships in high school in case you want to get started.

There are ways to find support in paying off your tuition even after you’ve graduated. Did you know that some employers will offer to pay off their employees’ student loans? Yep, student loan repayment plans let employers make monthly payments toward your student loans. These types of programs help employers attract and retain talent by offering competitive job offers. And, most importantly, they take some of your student loans off of your plate. Employers who choose employer-assisted student loan repayment make regular, monthly payments to the employee’s student loans. Your employer will decide how much they wish to contribute each month and will pay it directly to the student loan lender through a third-party vendor such as BenefitED. The contribution is applied directly to the principal.  

Additionally, the federal government has options to forgive some student loans. Loan forgiveness means that you are no longer required to repay some or all of your loans for people working for specific organizations or institutions. These include:

• Public service: Working for the PeaceCorps, AmeriCorps, or other government agencies can provide you with the opportunity for loan deferment or forgiveness. Eligibility for these programs is complicated, so always consult with a student loan debt expert. 
• Non-Profit: Working for a non-profit can make you eligible to receive complete Federal Student Loan Forgiveness Benefits via the Public Service Loan Forgiveness Program (PSLF). PSLF allows borrowers who work full-time for nonprofits to have their outstanding debt forgiven tax-free on Federal Direct Loans after making 120 qualifying months payments (10 years worth of payments) under a qualifying repayment plan.
• Military: Military service, committing to join active duty or the reserves, or participating in ROTC can reduce your student loans.
• Teaching: The Teacher Loan Forgiveness programs will cancel over $17,000 in student loans for people who teach for five consecutive years at an underprivileged school. Eligibility for this program is also complicated, so make sure you consult with a student loan debt expert to ensure you get the student loan forgiveness you deserve!

Good Luck! 

We know that was a lot to unpack. How you decide to pay for college will profoundly impact your future, so you must have all of the information you need. Be thorough with your research and talk over all of your options with people you trust. It’s never too early to start financial planning for your college career! 

Deciding whether to go to college is a personal choice. You have to consider many factors aside from cost. For many students, the joy and discovery of higher learning is worth the money. For others, it’s the connections and social experiences. 

College is becoming increasingly important in the job market. According to Georgetown University, “by 2020, 65% of all jobs in the economy will require postsecondary education and training beyond high school.” 

If you’d like more information on college and finances, head over to our College and Career Resources to learn more. 

Team XQ

Stories and insights from the changemakers rethinking high school—in XQ schools and beyond.