Choosing the right way to pay for college
April 03, 2018
Not all college funding sources are created equal.
As you prepare to pay for your college education, you should look at all the possible sources of funding. Specifically, you should look at all sources of free funding first. Free funding includes scholarships, grants, employer contributions and gift aid.
So how should you prioritize funding as your plan to pay for college and decide which financial aid should you accept first on an award letter? The answer is as follows:
- Scholarships - Look at all the sources of scholarships, including the school you plan to attend, private foundations, community organizations, companies, and religious organizations. In addition, some schools may offer more grants and scholarships to initial students versus returning students. Students should review awards carefully and determine if the grants or scholarships are renewable or a one-time offer.
- Grants - The federal government, and likely your state, offers grants if you meet income eligibility requirements. There may be other requirements, such as an agreement to work in a specified field if you receive the grant.
- Savings - Once you've determined whether you will receive any scholarships or grant aid, you should look to your savings or your family’s savings to help pay for your education.
- Current income - If you don't have a lot of savings, many students rely on current income to pay for their education – either their own income and/or their parents' income. Some colleges and universities offer payment plans so you aren't paying a large sum at once, but there may be processing fees. Paying from current income can be a challenge, but it's much better to pay as much as you can now so you don't have to rely on loans.
- Federal or state loans - State and federal loans are good option if you've exhausted all other sources of college funding. They offer many benefits and repayment options. It is important to make sure you are only using the loans to fund your education and not to fund a lifestyle while you are in college.
- Private loans – Private loans can help if you still don't have enough money to pay for your education after considering all the other sources. There are many competitive private loan programs available and your school financial aid office may have a preferred lender list. Remember, however, any type of borrowing should be the last option when considering how to pay for college.
Looking at this list of college funding options, you can see there are a lot of ways to pay for college. Just remember how to rank those funding options when making your plan to pay for your education.