It used to be that college was paid for using a combination of savings, scholarships, grants, and current income.
Unfortunately, the rising costs of a college education has become a way of life with tuition, fees, and room and board rising well over 30% in the last ten years.
With no end in sight, parents and students are having to be creative in securing alternative funding like federal or private student loans or Parent PLUS loans from the federal direct program.
How to pay for your child’s college tuition
As a parent, you want to support your aspiring college student who is looking to start school in the future. Before you and your child have even started to fill out applications and plan physical on-campus tours, make sure your child’s financial situation is set up including a plan to secure the necessary financing.
During the planning phase, it’s crucial to remember that honest communication between parent and child is extremely important. It’s critical that you and your child understand desired outcomes and financial limitations up front to avoid any disagreements or dashed expectations.
When deciding how to save for your child’s college education, it’s also important to understand how geography plays a crucial role. Where your child chooses to go to school will impact costs, including in-state vs. out-of-state tuition costs, the expense of living in a dorm vs. off campus, and travel to and from home for holidays and breaks.
How to pay for your child’s college tuition: The ultimate checklist
If your child is heading to school, these are the steps to take to ensure you’re both financially ready to navigate college:
Open a personal checking and interest-bearing savings account in your child’s name
By this point, your child should be able to manage a checking and savings account, including balancing it monthly and ensuring that there are funds to cover all expenses. This straightforward process ensures a lifetime foundation of good financial habits.
Open a credit card in both your names that has low interest and a mutually agreed-upon credit limit
This is a terrific way for you as the parent to monitor expenses and a great way for your child to start building their credit history.
Fill out the Free Application for Financial Student Aid (FAFSA)
This is a critical first step in managing funding opportunities for college. The FAFSA is submitted to the U.S. Department of Education and to schools your child may be considering so that each can determine eligibility for federal student loans and alternative funding, like scholarships, grants, and work-study programs.
Apply for scholarships
Scholarships are a form of financial aid that doesn’t have to be paid back. Schools, businesses, and service organizations are active in funding and awarding scholarships to deserving students based on merit and need.
Apply for grants
Like scholarships, grants do not have to be repaid and are based on merit and/or need. Also similar to scholarships, applying for and managing the application process takes time and focused organization to be successful.
Consider a work-study program
Most colleges offer work-study programs where your child pays for college through part-time, flexible employment at the school. The school determines eligibility based on the information you share on the FAFSA. Work-study programs are good if your child doesn’t have transportation or wants to stay close to campus.
Evaluate part-time employment opportunities
Depending on your child’s school schedule and study-load, a part-time job, either on or off campus, may provide additional funds that offset the need for financial aid. Summer employment is another way to earn money for school.
Consider federal student loans
Federal loans are offered by the U.S. Department of Education based on what you qualify for through the FAFSA. They are relatively easy to obtain and don’t require any credit check, making them a good alternative for students with a limited credit history. While they tend to have high interest an upfront origination fee of 4-5%, they offer several benefits and options for repayment, including:
- Student loan forgiveness programs
- Eligibility for repayment assistance programs
- Forbearance and deferment options
- Income-driven repayment plans
Learn about Parent PLUS Loans
Parent PLUS Loans are available to the parents of college students through the federal direct loan program, part of the U.S. Department of Education. The interest rates for these loans (and the federal loans above) are set annually by Congress and are administered the same for everyone. Having outstanding credit doesn’t warrant a reduced interest rate with Parent PLUS loans.
Discuss private student loans
By using a private lender to secure a loan, you are able to use your good credit history in receiving reduced interest rates. Private student loans are a good option to fill in tuition funding gaps after taking out federal loans. These loans do require a credit check and will also allow a co-signer if you want to put the loan in your child’s name.
On the flip side, by using a private student loan you won’t have access to any of the various loan forgiveness or forbearance programs mentioned above and common with federal loans.
Compare private student loan rates to find the best deal
Use Purefy’s rate comparison tool to evaluate options for private student loans, including interest rates and terms.
The bottom line on how to pay for your child’s college tuition
If you are making plans for your child to head to college, the steps we’ve outlined ensure you and your child are financially ready for tuition, college life, and life beyond school.
With smart planning and realistic funding goals, the process of securing dollars for your child’s education can be efficient as well as a teaching opportunity for you and your college-bound student.
It’s a simple truth — not all private student loan lenders are equal. Purefy has assembled a superior group of highly vetted loan companies that stand ready to offer you their pre-qualified loan options. By filling out our simple form, you are provided with options that outline private loan interest rates in seconds with no credit check required. Easy and simple.