Twenty-One Ways to Pay for College

Money for College If your kids are heading off to college, you want to know how to pay for college. Whether they’re going this fall, next year or further down the road, you can stay calm by having a plan. In this series of posts , I’ll outline twenty-one ways to pay for college that you can include in your plan.

You don’t have to stress about having 100% of the “sticker price” cost of college because most people don’t pay the full sticker price. But you should aim for saving something. I generally recommend parents consider 30% of total costs being covered by the student and the balance from them. This will include both savings, cash flow and loans. And if you’re going to borrow, you should borrow in a smart way.

So, here are some ways to help you pay for college.

Twenty-One Ways to Pay for College: Part One of a Series

1. Grants

These are awarded through the school’s financial aid office. You’ll need to complete a financial aid form. Most schools require the Free Application for Federal Student Aid or FAFSA (go to  This will help determine if you are eligible for federal aid like Pell Grants. For some select schools, you’ll need the CSS Profile form. School-based aid is often determined using the same forms.

According to SCF Research, historically Pell Grants provide about 14% of all money for college. Other state grants provide up to another 5%. Institutional grants have been a source for about 17% while private sources and employers typically add another 5%.

2. Scholarships

You’re never too early or too late to start seeking out scholarship aid. You can start your search as early as middle school and some scholarships are available for those already in college. Private sector scholarships (WalMart, Target, etc., etc.) are a very attractive form of college funding for one simple reason – the money is given to the student and most-often does not have to be repaid. There are literally thousands of scholarships from all across the country that are available to students. And the funds are portable which means that they may be used at any school.While this source typically provides less than 5% of all college funds each year, it’s still worth the effort.

However, locating applicable scholarship sponsors is a very competitive and often time-consuming project. Students can reach out to their school’s guidance counselor, the desired university’s financial aid office or website, and websites like Sallie Mae, Cappex,, Fastweb, Chegg or To find links to these and more sources, go here.

3. Direct Subsidized Federal Student Loans

Whether you’ve fully saved for college or not, loans are a great source since they can help you with managing cash flow during the college years. I recommend to all clients to complete the FAFSA forms and take as much of these loans as you can. The rates are typically the lowest available, require no credit checks and provide for a range of repayment options. Additional benefits include loan forgiveness in the event of a borrower or co-signor’s death or disability providing essentially a free “life or disability insurance” feature.

4. Direct Unsubsidized Federal Student Loans

Similar to direct subsidized federal loans except that these are not need-based and interest begins accruing as soon as the money is borrowed.

The maximum amount that a student may borrow is capped at $27,000 over four years of undergraduate study or $31,000 over five years to finish a degree. This is the combined maximum amount for direct subsidized and unsubsidized loans. The proportion of each type a student receives will depend on the results from the FAFSA you file.

5. 529 Savings Plans

These offer a great way to save and withdraw funds to pay for qualified education expenses tax free. In some ways, these are like Roth IRAs since the money can compound over time but be distributed without having to pay income taxes on gains. And in some cases, you’ll even get a tax credit on your state income tax return for making contributions to the plan. These are a great tool and can be used by aunts, uncles, friends and relatives as a way to gift money to the student. Imagine all those birthdays and holidays. And these don’t require batteries.

Anyone can open an account for a student. The assets and distributions from parent-owned 529 accounts have the same impact as other parent assets when it comes to calculating needs-based financial aid: 5.64%. This generally isn’t a material impact as most 529 Plans have the equivalent of one-year’s worth of tuition and fees.

Grandparents and others may open a 529 plan for a student. This is a great estate and tax planning tool for families. And the assets are not required to be listed on financial aid forms. But distributions from a non-parent-owned 529 can be counted as a student income source the following year. So, I recommend to families to NOT tap these funds until the student’s last year in college after the last financial aid form has been filed.

Up Next

In the next part of this series, we’ll cover other sources and strategies that you may use including tax credits, loans and retirement accounts.

And one of the top twenty-one ways to pay for college without huge debts begins with the help of a qualified financial planner trained in college funding issues. The more you plan, the less you’ll likely pay for college.