Preparing For College But Not Sure How to Pay for It? Here Are the Most Common Ways

For students and their parents who are preparing for college, the thought alone of deciphering the tricky process that is paying for it can be daunting. Keep reading for a comprehensive, clear-cut guide on some of the most popular ways to pay for college.

Using savings and current income

Paying upfront for as much of your education as possible, whether through the money you or your parents have saved, or current income, is the most favorable situation, as it usually equates to having fewer loans to take out and less money to owe other entities later down the line. If you want to pay for some of your college costs upfront, but you can’t afford to put it all out on the table, most schools offer installment plans that allow you to make payments in smaller, more manageable amounts.

Loans

Loans broadly fall into two categories: federal loans and private loans.

Federal loans

Federal loans are loans that students become eligible for when they apply for federal aid through the FAFSA (Free Application for Federal Student Aid). Federal loans, which are funded by the US government, can be broken down further into student loans and parent loans. The two primary benefits of federal loans are that they come with fixed interest rates, and the repayment plan is determined by what you can afford, based on your income.

Private loans

Private loans encompass all loans that are not funded by the government. Because private loans are not provided through the government, the rules, interest rates, and repayment plans tend to be less forgiving. Therefore, private loans are usually recommended as a secondary option, after students have exhausted all of the federal aid and loans at their disposal.

Scholarships and grants

Scholarships are free money that does not need to be repaid. There are many different types of scholarships and grants that exist for students to apply for, but they can broadly be broken down into the following four categories.

Institution scholarships

Most colleges and universities (with the exception of a handful of selective schools, including those in the Ivy League) award potential students with merit scholarships to entice them to attend their institutions. Once a student has committed to a school and is physically on campus, there’s also a plethora of scholarship opportunities that are available for students to apply for. These scholarships are often categorized by department, school, and major, however, there are plenty of scholarships that are awarded through other areas.

State scholarships

Every state education agency offers at least one scholarship or grant for their respective students. Generally, the only requirement that a student needs to fulfill in order to be considered for these scholarships is to fill out the FAFSA. However, some states have their own unique or additional forms that students and parents may have to fill out to be considered.

FAFSA-based grants

When students file the FAFSA, they will be automatically considered for FAFSA-based grants, which are dependent on financial need. The most common FAFSA grant is the Federal Pell Grant, which awards up to $6,495 per year to undergraduate students with the highest levels of financial need.

Private scholarships

Private scholarships, which tend to be a mixture of merit and need-based, vary greatly in terms of eligibility and application criteria as well as value. Some of the most well-known private scholarships include the Bryan Impact Scholarship, Taco Bell’s Live Mas Scholarship, Amazon’s Future Engineer Scholarship Program. For students who are unsure of where to start looking for such scholarships, a few places to begin are Google, your high school’s website, and scholarship search engines.

Income share agreements

Income share agreements (ISA’s) allow students to borrow money to pay for school, contingent on the agreement that they pay the lending entity a percentage of their salary once they have graduated. The eligibility requirements and repayment terms for each ISA can vary depending on your current financials, your major, your school, and how much you borrow. Ultimately, deciding whether an ISA or a private loan is the right choice requires further research into the terms of each to determine which option is most competitive.
 

Author Bio: Ayden Berkey is the Co-Founder of Access Scholarships