How to Pay for College

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By Mark Kantrowitz

April 22, 2021

Figuring out how to pay for college can be complicated. Despite how difficult or confusing it can get, figuring out how to pay for college is more important than ever with the average private college charging more than $35,000 in tuition.

Most families will rely on several resources for covering college costs. These resources should be compared with the total net price of a complete college education. The net price is the difference between total college costs less gift aid, such as grants, scholarships, and other money that does not need to be repaid. If the total resources exceed the total net price, then the college is affordable. Otherwise, the family may be forced to borrow an unreasonable amount of money to cover college expenses.

Laying out the Landscape of Paying for College

Like any major expense, the cost of paying for college will be spread out over time.

  • Past. Some of the money will come from past income, in the form of savings.
  • Present. Some of the money will come from current income and financial aid, like federal student aid.
  • Future. Some of the money will come from future income, in the form of student loans.

College Savings Plans

Families can save for future college costs using a 529 college savings plan. 529 plans provide several tax and financial aid advantages.

  • Tax Advantages. More than two-thirds of the states provide a state income tax deduction or tax credit based on contributions to the state’s 529 plan. Earnings accumulate in the 529 plan on a tax-deferred basis and are entirely tax-free if used to pay for qualified education expenses.
  • Financial Aid Advantages. If a 529 plan is owned by the student or the student’s parent, the 529 plan is reported as a parent asset on the FAFSA, and qualified distributions are ignored. This has a minimal impact on the student’s eligibility for need-based financial assistance.

529 plans offer several other key benefits, such as a reduction in the need for student loans and increased flexibility in college choice. Every dollar saved is a dollar less borrowed. It is cheaper to save than to borrow. College savings plans also allow a student to enroll in a more expensive college than the student could otherwise afford.

Advanced Placement and Concurrent Enrollment

If you’re still in high school, you may be able to take Advanced Placement classes or sign up for a concurrent enrollment program with a local college.

In Advanced Placement (AP) classes, you’ll take a college-level class in your high school. There are AP classes covering all sorts of different topics, such as environmental science, US history, comparative government, and macroeconomics.

At the end of the school year, you can take an AP test. AP tests are scored on a 5-point scale. At many colleges, if you score a 4 or a 5 on an AP exam, the school will give you credit for an equivalent course.

Taking an AP test costs $95. That’s far less than you would pay for a class.. If you take an AP class or two each year of high school, you may be able to skip a semester or two of higher education, saving you thousands of dollars.

Concurrent enrollment, like AP courses, give you the chance to earn college credit while still in high school. However, instead of taking a college-level course at your high school with a high-stakes final exam, concurrent enrollment usually involves taking classes at a nearby community college. This gives high school students a chance to meet college students and see what a college classroom is like while also earning credits that they can put toward a college degree.

Depending on your future major, there may or may not be AP or concurrent enrollment classes that let you get credit toward your major. However, most schools have core requirements for students in subjects like history, social sciences, science, and math. Taking AP and concurrent enrollment courses in these topics can let you skip some core requirements at your college and dive right into the classes focused on your chosen course of study.

The College-Level Exam Program

If you feel confident in your knowledge about a certain subject but don’t want to take an AP or concurrent enrollment course, you can try the College-Level Exam Program (CLEP).

CLEP is a College Board service, like the AP exam, which lets you get college credit for the things you already know. But not all colleges accept CLEP, so do your research first.

While the list of CLEP exams available is shorter than the list of AP exams, there are still plenty to choose from. 

Choosing a Cheaper College

One of the best ways of cutting college costs is to enroll at a less expensive college. Students should apply to a mix of several colleges based on academic and financial fit. Use a college net price calculator to get a personalized estimate of the net price and evaluate the college’s affordability.

The least expensive options generally include in-state public colleges, colleges that offer “no loans” financial aid policies, and free tuition colleges.

Studying abroad for the student’s entire educational program may be less expensive than U.S. private colleges, even with added travel costs, but just as prestigious. However, the Federal Pell Grant and other government grant programs are not available for study outside the U.S., just U.S. federal student loans.

Although taking a detour through a community college on your way to a Bachelor’s degree may save some money, you may ultimately miss your destination. Only about a fifth of students who intend to obtain a Bachelor’s degree and start off at a 2-year college succeed in getting a Bachelor’s degree within six years. That compares with about two-thirds of students who start off at a 4-year college.

Taking a gap year may give you time to earn money to pay for college. But, the money will count against your eligibility for need-based financial aid. Also, students who take a gap year get out of the habit of studying and are less likely to enroll in and graduate from college.

Cutting College Costs

About half the cost of a college education involves living expenses, such as room and board, books, supplies and equipment, transportation to and from college, and miscellaneous/personal expenses. Each of these presents an opportunity to save on college costs.

  • Cut the cost of room and board by living at home with your parents, if they are nearby. Or live off-campus and split the rent with a roommate.
  • Learn to cook for yourself. Often, college meal plans cost far more than it would cost to make your own meals. Learning to cook can be fun, saves you a lot of money, and is a valuable life skill that you’ll use after you graduate.
  • Improve your academic performance. Getting good grades and admissions test scores can affect eligibility for academic scholarships. Some private scholarships also depend on your grades and test scores. Maintaining good grades is often required to renew your scholarships in subsequent years.
  • Buy used textbooks and/or sell your textbooks back to the bookstore at the end of the semester. Ask the professor for their evaluation copy of the textbook. Or borrow the textbook from the college library. Rent the textbooks. Share textbooks with your roommate and other friends. Buy only the required textbooks. These tips can save about half of textbook costs.
  • Minimize the number of trips home from college. Don’t bring a car to campus, as parking costs can be expensive. Use public transportation and ride-sharing instead. If you do bring a car to campus, driving for Uber and Lyft can earn you extra money when you have free time on your schedule.

In general, your goal should be to live like a student while you’re at college, so you don’t have to live like a student after you graduate.

Working Through School

While you’re in college, your primary responsibility is to learn, get good grades, and earn your degree. However, that doesn’t mean that you won’t have time for other things. If you can manage it, finding a job is a popular way to help pay for college.

Working part-time while you’re in school can help you earn some money. You can use that income to help pay for some of the costs of schooling or to pay down some of the balance of your student loans. However, keep in mind that students who work full-time while attending college are half as likely to graduate within six years as compared with students who work 12 hours or less per week.

Finding a job while you’re studying is also a good way to gain work experience. Some schools make this part of their educational program, requiring students to spend six months or more working in their industry. This experiential learning lets students get a different perspective on the things they’ve learned in class.

Working through college also helps you network. You may find that a company you worked for during school is hiring when you graduate, which can make it easier for you to get a job. At a minimum, it should provide you with useful references that you can use in your job search.

If your classes are intense and you don’t have time to work a normal part-time job during the school year, you still have a few options.

Many students choose to work a summer job. Many companies have programs for college students that want to get work experience during the summer and many communities have seasonal jobs during the summer that you can take advantage of.

Depending on what you’re studying, you could also try to find some freelance work. For example, a writer or a graphic designer may be able to find freelance projects online. Freelancing is more flexible than a job with a set schedule, which may make it easier to fit into your busy college schedule. It can also help you build a portfolio of work that you can use to find additional clients or to get a job after you graduate.

Financial Aid

There are two main types of financial aid: need-based aid and merit-based aid. Generally, grants are based on financial need, the difference between college costs, and the student’s ability to pay. Scholarships are based on merit, such as academic, athletic, or artistic talent, or strange skills, such as making a prom costume out of duct tape.

To apply for need-based aid, file the Free Application for Federal Student Aid (FAFSA). The FAFSA is your gateway to grants from the federal government, state government, and most colleges and universities. Less than 200 mostly private colleges use a supplemental form called the CSS Profile for their own financial aid funds, but these colleges must still use the FAFSA for federal and state aid.

Families should file the FAFSA every year, even if they only got student loans the previous year. Subtle changes in the family’s circumstances can have a big impact on the amount and types of financial aid. For example, increasing the number of children in college from one to two can be like dividing the parent income in half. 

Other factors that can affect aid eligibility include changes in income and assets, dependency status, and marital status. Families also have a tendency to overestimate eligibility for merit-based aid and underestimate eligibility for need-based aid.

Free help completing the FAFSA is available from the U.S. Department of Education’s Federal Student Aid Information Center (FSAIC) at 1-800-4-FED-AID (1-800-433-3243). The FSAIC also runs Twitter chats via @FAFSA and #AskFAFSA. The National College Access Network (NCAN) sponsors free College Goal Sunday programs in many states that provide one-on-one help completing the FAFSA.

How to appeal for more financial aid

Be sure to appeal to your financial aid office for a large financial aid package if your family is affected by special circumstances. Special circumstances include anything that changed since the base year and anything that distinguishes the family’s ability to pay from that of the typical family. This can include job loss, salary reductions, high unreimbursed medical and dental expenses, high dependent care costs for a special needs child or elderly parent, casualty losses, private K-12 tuition, parents enrolled at least half-time in college, homelessness, and disability-related expenses.

To find scholarships, use a free scholarship search site, such as Fastweb or the College Board’s Big Future. Never invest more than a postage stamp to find out information about scholarships or to apply for a scholarship. If you have to pay money to get money, it’s probably a scam.


Scholarships are free money to help you pay for college. You do not need to repay a scholarship. Scholarship can be based on your academic achievement or a specific talent, such as an athletic or music ability. You can find scholarships based on ethnicity, gender, religion, where your parents work, what your chosen major is, and even for specific characteristics, such as being left-handed.

There are many local scholarship opportunities, too. Depending on where you live, you may be able to find local companies and organizations that offer small scholarships. In many cases, these scholarships are not well-advertised online or are so small that large scholarship search sites will miss them.

Keep an eye out in your community and ask your local high school and other organizations if they have a list of these types of scholarships.

For example, Big Y is a supermarket chain local to Massachusetts and Connecticut. Every year, it offers scholarships of a few hundred or thousand dollars to local students. Applying takes just a few minutes and you could get a sizable amount of money for your efforts.

Every little bit helps, so if you learn about local or smaller scholarship programs, take the minute to fill out an application. Your work might pay off.

Read our complete guide to finding scholarships for college.

Education Tax Benefits

There are several education tax benefits that can be claimed when you file your federal income tax returns. These include the American Opportunity Tax Credit (AOTC), Lifetime Learning Tax Credit (LLTC), and the Tuition and Fees Deduction, which are based on amounts paid for tuition and textbooks. There’s also the Student Loan Interest Deduction, which provides an above-the-line exclusion from income for up to $2,500 in interest paid on federal and private student loans.

Employment-based Aid

There are several types of financial aid that are based on employment.

When you file the FAFSA, you may qualify for Federal Work-Study (FWS) and other forms of student employment. Even if you don’t qualify, there are plenty of part-time jobs, summer jobs, and paid internships on or near college campuses. 

Some employers provide employer-paid tuition assistance. As much as $5,250 a year in employer-paid tuition assistance is excluded from income. Most employers require you to get at least a B for your tuition to be eligible for reimbursement.

Employers may also offer student loan repayment assistance programs (LRAP) as a recruiting and retention tool. LRAPs typically provide $100 or $200 a month in student loan payments.

If you’re interested in graduate school, you might consider looking for a job at a college or university. Most offer discounted classes to people who work at the school. For example, union employees of Harvard University can take classes at the Harvard Extension School for $40 per class.

College and universities also frequently offer good benefits in other areas, like insurance and paid-time-off, making them good employers even if you aren’t considering another degree.

Military student aid can provide money for college in exchange for enlisting in the U.S. Armed Forces. You can receive ROTC scholarships for one year before committing to military service.

Student Loans

Most students who are U.S. citizens and permanent residents may qualify for unsubsidized federal student loans and federal parent loans by filing the FAFSA if they are enrolled at least half-time. 

Students with financial need may also qualify for subsidized federal student loans, where the federal government pays the interest while the student is in school and during the 6-month grace period after the student graduates or drops below half-time enrollment.

Use our Student Loan Calculator to determine the monthly loan payment and total payments on your student loans.

In general, students should exhaust their federal student loan limit first, as federal loans are less expensive and have better repayment terms than private student loans and parent loans. If a student needs to borrow from the Federal Parent PLUS loan program or private student loans, it may be a sign that the student is borrowing more money than they can afford to repay. If total student loan debt at graduation is less than the student’s annual starting salary, the borrower should be able to repay their student loans in 10 years or less.

Tuition payment plans

A reasonable alternative to long-term student debt, however, is a college tuition payment plan. Tuition payment plans break up the college bills into 4-12 equal monthly installments. No interest is charged, but there may be an up-front fee of $100 or less. Tuition installment plans are a good option for families who can afford to pay the college bills, but want the flexibility of a monthly payment plan.

Student loan forgiveness

There are several loan forgiveness programs that depend on the borrower’s occupation. These include Teacher Loan Forgiveness and Public Service Loan Forgiveness. However, borrowers have reported difficulty qualifying for these loan forgiveness programs.

Income Share Agreements (ISA) have been promoted as a solution to the student loan “problem.” But, ISAs are just another form of debt. ISAs require borrowers to repay a fixed percentage of their income for a specified period of time, as opposed to a fixed dollar amount for a specified period of time. 

If you do borrow private student loans, you may be able to refinance at some point. Refinancing can potentially save you thousands of dollars in interest over the life of your loan.


Getting a degree while avoiding future debt can be a challenge. Get a head start by exploring all of the resources available to help you pay for the cost of college. Understanding the tools available to you and how to use them will help you get out of school with as little debt as possible and help you manage the debt you do graduate with.

A good place to start:

See the best 529 plans, personalized for you