Top Tips to Help You With Saving for College and How to Pay for College
College is one of the largest purchases a family will make, yet parents and students are left mostly in the dark about how college pricing works today, and how they should tackle this major expense.
Figuring out how to pay for college without wrecking your financial life is a real challenge.
Being a savvier college consumer is the first step in protecting your family’s financial well-being through the college buying process.
This comprehensive guide is for parents and students, and anyone else interested in helping families avoid overpaying and overspending on college costs.
Read on for more than 50 ways to save more for college and drive down your costs.
Let’s Get Smarter About Paying For College!
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50+ Insights & Ideas, Saving for College and How to Pay for College
Table of Contents
(click on any item to go directly to that section)
1. Most families do not pay full price. 6
2. Prices can be different even within the same college. 6
3. Financial aid is not just for low-income families. 6
4. Merit aid is not just for straight-A students. 6
5. Colleges are the biggest source of financial aid. 6
6. Research the Percentage of Students Receiving Merit-Based Aid. 7
7. Research the Average Size of Merit Awards. 7
8. Consider less expensive schools and schools that are expensive but generous. 7
9. Embrace the schools that embrace you. 7
10. Use research tools to find the best options. 7
1. Consider employer educational assistance. 9
2. Look into employer tuition reimbursement programs. 9
3. Have your employer deduct contributions for a 529 plan. 9
4. Have your employer match your 529 contributions. 9
Accept Gifts and Use Rewards. 10
2. Use Upromise to save money on purchases to put towards education expenses. 10
3. Use your credit card rewards programs. 10
Save in 529 College Savings Plans. 11
1. Give your 529 savings plans time to grow.. 11
2. Keep your 529 account fees low.. 11
3. Make it easy for people to contribute to your 529 account 11
Take Advantage of Education Tax Benefits. 12
1. Tax-deferred growth and tax-free distributions. 12
1. Prioritize graduating in 4 years. 13
3. Meet with your academic advisor. 13
6. Generate passive income. 13
9. Earn college credits early or elsewhere. 14
10. Learn personal finance. 14
1. Know the difference between grants and loans. 15
2. Say no to excessive loans in your financial aid package. 15
3. Know the types of federal aid. 15
4. Research private loans before accepting them.. 15
7. Know the federal borrowing limits for student loans. 15
8. Consider student loans in relation to future income. 16
9. Know how to read your financial aid award letter. 16
1. Prioritize federal loans over private loans. 17
2. Learn about student, parent loans before applying for or accepting them……… ..17
3. Do not automatically convert federal loans to private loans. 17
4. Take advantage of tuition payment plans when possible. 17
6. Avoid student loan delinquency or default 17
7. Consider a forbearance or deferment 18
8. Understand the terms of your grace period. 18
9. Consider loan forgiveness programs. 18
Know The College Landscape
At first, you might wonder what there is to know. It can seem straightforward: you apply, schools accept you, and you pay the tuition.
The reality, however, is much more complicated. Knowing the college landscape and how pricing works might be the easiest and fastest way to save money when paying for college.
1. Most families do not pay full price
This can seem strange, but tuition breaks are the norm and not the exception. Most families do not pay a school’s published price. At private schools, over 89% of students receive financial aid, and that percentage is over 50% at public schools.
2. Prices can be different even within the same college
There’s a big difference between schools in the amount of aid they offer. But there can also be a big difference between the amount of aid offered by the programs within a given school.
For example, honors colleges or business programs will sometimes have extra scholarships that they can provide to promising students. Other colleges within the same university might offer less money on average or even have a policy of not providing merit aid at all. Look into the details of the specific program you are applying to.
3. Financial aid is not just for low-income families
Need-based financial aid is meant to provide assistance to families with exceptional financial need. The federal Pell grant is one particularly well-known example, but there are many more.
However, in light of today’s astronomical college costs, demonstrated financial need is also relative to the cost of a school – so the more expensive a school is, the more likely even higher income families may have demonstrated need. And, other family considerations are taken into account in determining need-based financial awards.
But also know that many types of aid aren’t linked to financial need at all. This type of aid gets called different things, including merit aid, scholarships, grants, and tuition waivers. These awards can be huge.
4. Merit aid is not just for straight-A students
Being a good student is an easier way to land scholarships. No question there.
But you don’t need to have straight A’s or perfect SAT scores to win a generous scholarship. Merit aid is often given for leadership, community service, sports, artistic talent, and any number of other talents or achievements. You don’t need to be a top student to get scholarships for college.
5. Colleges are the biggest source of financial aid
Many schools provide tuition breaks in the form of merit or gift aid (money that doesn’t need to be paid back) to attract and retain good students. In fact, the schools themselves are now the single biggest source of financial aid, accounting for nearly 50% of student aid.
Believe it or not, many of the more than 3,000 institutions of higher education in the United States are challenged in filling their seats to enroll a full freshman class. To address this, schools often use merit aid to attract and hang on to more students.
6. Research the Percentage of Students Receiving Merit-Based Aid
A starting point in determining school generosity is to review the percentage of students receiving merit aid. More importantly, consider the percentage of ‘students without need that are receiving merit awards.’ Of course, there are no guarantees, but a school with a high percentage of students receiving merit aid can give you a better chance of getting aid as well. One resource that provides this information is College Transitions (search for a school, click on the details icon and scroll down the column on the right side of the page.)
7. Research the Average Size of Merit Awards
While it’s good to know that more students are receiving merit aid, having insights on the average size of the merit awards is really helpful, so that you can compare that to the school’s cost of attendance and have a truer sense of what you might be expected to pay. Schools that are less generous should fall to the bottom of your college list. You can find this information at College Transitions and College Match Point.
8. Consider both less expensive schools and schools that are expensive but generous
The first part of this advice might seem obvious, but bears repeating: the tuition is not the same at every school. It’s a good idea to consider schools that from the outset you know will be less expensive.
But the second part of the advice is just as important: schools with a higher sticker price don’t always turn out to be the most expensive when the tuition bill actually comes, because they may offer more generous financial aid packages.
9. Embrace the schools that embrace you
It can be easy to get hung up on just a few high-profile schools. But popular schools, with low admittance rates and high cost of attendance, are less likely to offer generous merit aid. So, if cost is a concern for your family, expand your college list and consider additional options.
The US is lucky enough to have many great colleges and universities, and some of the best programs are at schools that are solid but not wildly famous. Study after study tells us that at the end of the day, it’s how a student uses the resources open to them that matters more than the name on their diploma.
Embrace the schools that embrace you. They know things about the school that you don’t know and might see things in you that you don’t even see in yourself.
10. Use research tools to find the best options
When we talk about colleges, we’re talking about a pool of over 3,000 different places. Even the most knowledgeable experts have to work really hard to stay on top of things.
Make life easy for yourself and use the tools that are available to you. Here are a few examples:
- Tuitionfit.org. This is a great website to help you find schools that are in your price range. It can also help you compare your financial aid awards.
- College Board. This one can help you to get a sense of the costs associated with a college. You can search by college name and then click on the ‘costs’ tab for details about the school.
- College Money Smart. College Money Smart has targeted resources that can help you to compare costs, identify unique funding sources, and come up with a personalized plan that can save you money and time.
Draw On Employer Resources
Employers will sometimes provide unique resources that can help you to save money for school.
1. Consider employer educational assistance
The IRS lets employers reimburse employees for up to $5,250 in tax-free dollars for education-related expenses, including tuition and books. Section 127 of the Internal Revenue Code makes that possible.
Additionally, the CARES Act (Coronavirus Aid, Relief and Economic Security) expanded the definition of qualified expenses to include student loan repayment assistance, through December 31, 2025 (fingers crossed they make it permanent).
2. Look into employer tuition reimbursement programs
You can still get assistance even if you’ve already graduated: your employer can provide up to $5,250 per year in tax-free dollars towards your student loans.
Here is a list of companies that currently offer student loan debt repayment assistance: goodlyapp.com/payoff.
3. Have your employer deduct contributions for a 529 plan
Simplify and automate your college savings. Use payroll deduction to get money into your 529 accounts faster and consistently. Save early and often, even small amounts can add-up over time.
4. Have your employer match your 529 contributions
In some cases, employers will match your 529 contributions, and legislation is currently pending to make those contributions be tax-free for employees.
Accept Gifts and Use Rewards
There’s no need to go it alone when saving for college. Make it easy for family and friends to contribute, and try to take advantage of extra earnings power through rewards programs.
1. Use a gift registry
Online platforms like Gift of College streamline the gifting process, making it super easy for others, including employers, to contribute directly to your 529 accounts.
2. Use Upromise to save money on everyday purchases to put towards education expenses
Upromise allows you to earn money back on purchases you make with affiliated companies – for dining, shopping and groceries. That money can be directly deposited into your 529 account or checking account.
3. Use your credit card rewards programs
Credit card reward points can be an excellent way to fund travel, buy gift cards, or earn cash back. Those same resources can be useful for covering some of your out-of-pocket college costs.
Using rewards to buy store gift cards, including for places like Barnes and Noble and Amazon can support students in buying their college textbooks. And store gift cards to Staples, Target and other retailers, can support students in buying supplies, dorm room décor, clothing and much more.
And Fidelity Investments has a rewards credit card that offers cash back and purchase rewards that in turn can be deposited into other Fidelity brokerage accounts, including their 529 accounts.
Save in 529 College Savings Plans
529 College Savings Plans are tax-advantaged investment accounts for future qualified education expenses. Investments can grow tax-deferred and account distributions are tax free for qualifying expenses. Contributing to your own state’s 529 plan may provide you with a state tax credit or deduction.
1. Give your 529 savings plans time to grow
The longer you save and invest, the greater the opportunity to earn more through interest and investment gains. That’s the power of compounding, multiplying your account value over time.
2. Keep your 529 account fees low
529 plans are a great way to save for school, but they’re not created equally. Some can have high fees. These fees can take a few forms, but regardless of why they are imposed, it’s worth keeping them as low as possible. Research plans before you invest.
3. Make it easy for people to contribute to your 529 account
All 529 plans can accept contributions from third parties. Gifts can be made via check, gift card, or online savings service. A few online platforms include Gift of College, Ugift529, GoTuition and Fidelity.
Take Advantage of Education Tax Benefits
Skillful use of tax benefits can offset some of your college costs through savings on your tax bill. Be sure to consult with an accountant. You can also learn more through IRS Publication 970.
1. Tax-deferred growth and tax-free distributions
Education savings vehicles, such as Education Savings Bonds, Coverdell Accounts and 529 Plans afford you the opportunity to keep your money growing while invested in these accounts, because you do not pay taxes each year on any investment earnings. And, when funds are used to pay for qualifying educational expenses, you do not pay taxes on such account distributions.
2. Tax credits
The American Opportunity Tax Credit and the Lifetime Learning Credit offer a dollar for dollar reduction in taxes you owe. The AOTC is $2,500 per year and the LLC is up to $2,000. Income phase-outs and other limitations apply.
3. Tax deductions
A tax deduction allows you to reduce the amount of income you are being taxed on. Deductions are available for student loan interest payments and tuition payments.
Reduce Student Expenses
Saving ahead of time to pay for school is essential. However, there’s a lot you can do while in school to reduce your tuition bills and manage your finances to minimize expenses. These choices are as important as any other in making college affordable.
1. Prioritize graduating in 4 years
One way to save money on school is to spend less time in it. That is easier said than done, as the average four-year graduation rate is only about 41%. Unfortunately, nearly 60% of students take longer than four years to complete a four-year degree. Focus on graduating on time.
Some schools are more effective than others at helping students to pass through the pipeline on schedule. Take that into account when choosing your school: try to pick a school that has an established track record of graduating students on time.
2. Take summer classes
Summer classes can be a great way to speed up your time to graduation. In some cases, summer tuition is reduced. Or, taking summer classes at community college can be even more affordable. Taking an extra class or two each summer could easily trim a semester or two off your time in school.
3. Meet with your academic advisor
Set up regular appointments with your advisor and double-check their suggestions. They can help to make sure you’re on track to graduate, as well as being a great source of information about your major, internships, letters of recommendation, or what to do after you graduate.
4. Plan courses carefully
Achieving 120 credits hours in four years in order to earn a bachelor’s degree is really challenging. Students need to strategize mastering all of those credits as they face inevitable hurdles; from completing prerequisites to repeating failed classes to not having certain classes available when needed.
Examples of such strategic class planning include taking a really hard but required class in the summer so you have more time to study, putting off taking a class until a semester when a committed professor will be teaching it, which could make it easier to learn the material and pass the class, or not taking all super challenging classes at one time, which may lead to burnout or poor class performance.
5. Work
Of course, school should be your primary focus during college—especially if you want to graduate on time. But that doesn’t mean you can’t defray some of the costs of your education by working a few hours. In fact, doing work related to your major or starting a side hustle can be a great way to build your resumé and set yourself up for success after graduation.
6. Generate passive income
There are a lot of creative ways to make money, for both students and parents. One particularly powerful approach is to find sources of passive income.
Passive income refers to a situation where you do the work one time, but then continue to receive money for that work. Writing an e-book is a good example: after you do the work once, you’ll make money every time someone downloads it. If writing a book isn’t your thing, here is a list of great passive income ideas: https://thecollegeinvestor.com/16399/20-passive-income-ideas/.
7. Housing costs
On average, room and board can be about 50% of the cost of attendance. Getting that bill down can save you thousands over the course of earning your degree.
It’s not the most glamorous option, but living at home for a few semesters can save quite a bit of money. Another good solution might be to get a job in student housing or work as a resident assistant, which can give you a significant break on the costs of student life.
8. Study
This one can seem almost too obvious to mention, but failing classes is the easiest way to add time to your degree. There can be a lot of distractions in college—some good, some bad. You’ll thank yourself later if you can keep those in check and focus on getting solid grades, learning useful skills, and graduating on time.
9. Earn college credits early or elsewhere
Earning a college degree from a school does not mean all of your credits have to be earned there, especially for elective courses and freshman intro courses. Get a jump start by earning college credits in high school – through Advanced Placement, Dual Enrollment or completing CLEP (College Level Examination Program.) Also consider taking summer classes or a few classes at community college. Sometimes you can even get college credit for doing an internship.
10. Learn personal finance
Basic money management skills can go a long way in helping students (and parents too) be smarter consumers. Take advantage of today’s vast resources, much of which can be found online, to become more informed and build a more solid financial foundation. Checkout CFPB Consumer Education and FDIC Money Smart.
Maximize Financial Aid
Financial Aid is a critical component in college affordability. Today, schools give out more aid dollars than anyone else. It’s important to understand how it works and how to apply for it. From there, evaluating aid offers closely and appealing offers when needed, can make a world of difference in reducing your out-of-pocket costs.
1. Know the difference between grants and loans
It’s very important to know what you’re signing on to when accepting a financial aid package. This one is basic but very important: in general, loans need to be paid back and grants don’t.
2. Say no to excessive loans in your financial aid package
Just because you’re offered loans doesn’t mean you have to take them. It’s possible to accept just part of your financial aid package and turn down excessive loans. If a school offers you a financial aid package loaded with loans, contact them to ask if there are other options.
3. Know the types of federal aid
Chances are that if you’re borrowing money for school, you’re probably borrowing at least some money from the federal government. For undergrad, the primary options will be Direct Subsidized and Direct Unsubsidized Loans. There’s also the opportunity for parents to take out loans.
One big point to keep in mind is that subsidized loans do not accrue interest while you are enrolled in school, and unsubsidized loans start to accrue interest immediately—even before you graduate. Go for the subsidized loans first.
4. Research private loans before accepting them
Be cautious when it comes to private loans. If you decide to accept them, be sure to do your research and consider all of your options. Mark Kantrowitz is one of the nation’s foremost experts on private loans, and he runs a helpful website at www.privatestudentloans.guru.
5. Get clear on the cost
To know how much you’ll ultimately have to pay for school, start by subtracting the amount of gift aid you may receive (i.e., merit aid) from the cost of attendance (COA), which includes tuition, room and board, and other miscellaneous fees such as school supplies.
6. Understand the FAFSA
The Free Application for Federal Student Aid (FAFSA) is the form used to determine your family’s demonstrated financial need (Cost of Attendance – Expected Family Contribution) and eligibility for need-based financial aid. Keep in mind though, FAFSA does not determine eligibility for merit-based aid, but schools may still require the completion of it in order to access their aid.
7. Know the federal borrowing limits for student loans
As of now, that maximum is $31,000 for students who are dependents and $57,500 for students who are independents. The amounts you can borrow vary by year, and there is a cap put on the amount you can take out in subsidized versus unsubsidized loans.
8. Consider student loans in relation to future income
On one hand, it’s important to consider the future earnings potential of your field when deciding whether to accept student loans. Having $40k of student loans is very different if you’re an investment banker rather than an aspiring actor.
On the other hand, build in some room for flexibility. Especially at the start of college, very few people know exactly what they want to do or what it really means to work one job rather than another. Try to err on the modest side when considering loan packages and give yourself room to pivot.
9. Know how to read your financial aid award letter
It seems like this one should be simple, but financial aid award letters can be shockingly complicated. There isn’t one standard approach for schools to take, and the letters are often filled with strange acronyms and unusual abbreviations.
A good way to start is to keep in mind the four key parts of any financial aid letter:
- Cost of attendance (the estimated total one-year cost for a school)
- Merit aid (gift aid that you do not have to repay)
- Expected Family Contribution (the amount of money the government thinks you can pay)
- Loans (borrowed money that must be repaid)
Manage Loans Effectively
Borrowing less is better! But even the savviest college consumer may need to borrow money in order to cover the cost of attendance. It’s essential to know how to work with loans so they do as little damage to your financial life as possible.
1. Prioritize federal loans over private loans
We mentioned this above, but be cautious when it comes to private loans. If possible, try to prioritize federal loans. They often provide more protections and flexibility. For example, some private loan lenders require that you make payments while still in school, impose penalties for paying off your loans early, or change the interest rate on your loan after you’ve already accepted it or are even making payments on it.
2. Learn more about student and parent loans before applying for or accepting them
The federal government provides mandatory loan counseling for all students who accept federal loans. That seems like a well-intentioned policy, but the sessions are short (roughly 30 minutes), which is nowhere near enough to prepare people to make complicated financial decisions.
It’s a good idea to start early so you have time to get clear on what you are committing to when you accept student loans.
3. Do not automatically convert federal loans to private loans
Some private loan companies will offer the option to convert your federal loans into private ones. Think carefully about that decision. It doesn’t always help to save money, and it can lead to you losing quite a bit of control on things like repayment options.
4. Take advantage of tuition payment plans when possible
Tuition payment plans break up the costs of college into smaller monthly or periodic payments.
Many families would struggle to come up with a single, lump sum payment for each semester of school. Tuition payment plans can make those payments more manageable in size.
Be sure to consider your options when enrolling in these plans. Not all schools offer them, and some will tack on extra fees for enrolling in a plan. Still, do some calculations—often even with the fees, you’ll still end up saving money by using a tuition payment plan rather than taking out loans.
5. Loan repayment plans
One of the nice things about federal loans is that they provide a lot of repayment options. For example, some repayment plans will link the size of your monthly payment to your income. Others will gradually increase the size of your monthly payments to give you time to increase your income before doing the heavy lifting. Consider your options to see if any of those will work for you.
6. Avoid student loan delinquency or default
This one is essential. Missing payments or defaulting on your loans can lead to long-term economic pain that can impact your entire financial life. It’ll crater your credit score and make it difficult to do things like get an apartment, a car loan, or possibly even a cell phone plan. Aside from that, you’ll end up paying a lot more in the long run.
Default policies vary by private loan lender, but with federal loans, your loan will become delinquent the first day after you miss a payment and will go into default after 270 days of not making a payment.
7. Consider a forbearance or deferment
Contact your loan company if you’re struggling to make your loan payments. One option would be to request a forbearance or deferment. These are also available for people in select situations such as those serving in the military.
Both policies allow you to take a break from making loan payments. In the case of a deferment, your loans will not accrue interest during your break. With a forbearance, unfortunately, they will.
Deferments and forbearances are mostly for people with federal loans, but some private lenders might have similar programs.
8. Understand the terms of your grace period
Federal loans will generally offer borrowers a six-month grace period before you will need to begin making payments on your loans. Private loans generally do not, though that varies by the lender.
This is an important point: those six months can give you a big jump in providing you with time to get on your feet before your loan payments kick in. Keep in mind, interest does not accrue on subsidized loans during the grace period, but does accrue on nonsubsidized loans during the grace period.
9. Consider loan forgiveness programs
Sometimes you can have your federal loans forgiven if you do certain types of work, including teaching in high-need areas or working in some public service positions.
Conclusion
This list is a great start in equipping you to make more informed decisions and choices that can help make paying for college less burdensome.
I believe that when you know more, you won’t owe more in paying for college.
But there is more to do beyond reading this list. Good financial outcomes don’t happen by chance. Develop your personal plan that addresses financial readiness, provides for sensible school selection, and makes ample opportunity for students to prepare for success.
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