College admission season is stressful for many families, especially if they are concerned about how to pay for a high-cost university. According to a 2023 report by Sallie Mae, 78% of families have eliminated colleges from consideration based on cost alone. This article explores five different methods for paying for college and when each option may be appropriate.
One of the most common ways students receive assistance in paying for college is through financial aid. Nearly 84% of college students benefit from some form of financial aid, with the average aid to a full-time undergraduate student in the 2022-2023 school year being $15,480. Filling out the Free Application for Federal Student Aid (FAFSA) is a crucial first step in determining eligibility for aid, as needs are assessed based on income and assets of both the student and parents.
For high-earning families who do not qualify for financial aid, covering college expenses from income may be an option. Some parents have hired their children to work at their business and paid them an income to cover tuition and other expenses, with potential tax benefits. Additionally, there are various investment accounts tailored for college, such as Coverdell education savings accounts and 529 College Savings Plans, but these can impact a student’s ability to qualify for financial aid.
Scholarships are another popular way to pay for college, with 61% of families utilizing them according to Sallie Mae. Scholarships are available to a wide range of students, not just those with exceptional grades or needs-based aid qualification. Loans are also used for college funding, accounting for about 19% of sources. However, it is important to consider future repayment, as high-interest rates can lead to significant debt after graduation.
When it comes to paying for college, families will likely need to combine several strategies, such as financial aid, scholarships, income, investments, and loans. Each option comes with its own set of advantages and considerations, and it is essential to carefully plan and consider the long-term implications of each choice. Ultimately, the goal is to find a balance that works for your family’s unique financial situation and goals to ensure that your child can attend the school of their choice without incurring overwhelming debt.
