A college education is more important than ever in today’s competitive workforce. Along with a four-year degree comes increased salary potential, job satisfaction and advancement opportunities. However, the cost of college rises every year. Figuring out how to pay for it is daunting – and seems downright unrealistic – for many families.
For the 2018-2019 academic year, The College Board reports that the cost –including tuition, fees, room and board – of in-state public college averaged $21,370 while a private college averaged $48,510. Keep in mind that in-state tuition at a public university is generally half the cost of out-of-state tuition at a public university. If you don’t have that kind of money lying around each year for four years, all hope is not lost. Here are several different options that can help fund a college education.
Savings
If you have some time before your child attends college, consider a 529 college savings plan. A 529 plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code under which it was created. In 34 states and the District of Columbia, parents with a 529 plan qualify for an income tax deduction or credit on contributions.
Grants
Offered by state and federal governments, as well as private organizations and universities, grants are typically need-based and do not require repayment. They can be directed toward educational expenses, specific types of students or general purpose. The federal government is the largest source of this need-based gift aid, primarily in the form of the Pell Grant. The first step when considering a grant is for the student and parents to fill out a Free Application for Federal Student Aid (FAFSA) after Jan. 1 of the student’s senior year in high school and again every year in college. Completing the FAFSA allows a student to qualify for federal student aid, such as grants and federal student loans.
Scholarships
Scholarships also don’t require repayment and can be either need or merit-based. Qualifications include academics, athletics, cultural and community experiences, background, location or desired major, to name a few. Scholarships given by colleges are the most common type. A high school counselor or college financial aid office is a good place to start the scholarship search.
Student Loans
With much lower interest rates and more flexible repayment options, students with financial need should exhaust their federal loan options before looking at private loans. The U.S. Department of Education runs two federal student loan programs – the Direct Loan Program in which the U.S. Department of Education is the lender and the Perkins Loan Program in which the school is the lender. Private student loans are given by banks or other private sources and are more expensive than federal loans. Alternatively, parents might consider a home equity loan rather than a dedicated “student loan.” The typical family uses loans to cover 20 percent of the cost of college.
Work-Study Programs
Student employment through their university is an ideal way to help fund college expenses. The Federal Work-Study program is based on financial need and offers job opportunities to full-time and part-time students at thousands of schools across the country to help finance their education. The jobs may also fall within a student’s area of study, giving them extra experience. Students need to check the box that indicates they’re interested in student employment when filling out the FAFSA.
Additionally, students can earn college credit while still in high school by taking Advanced Placement classes and testing out of college coursework. Or some high schools allow seniors to take college classes at a local junior college. Another way students can drastically cut down on the cost of college is to start at a two-year community college, which is generally a lot less expensive, then transfer to a state or other four-year school where they graduate. Many college students and their families rely on several of the options above to help pay the hefty, yet well worth it, price tag that comes with a college degree.
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Christopher Williston is the president and chief executive officer of the Independent Bankers Association of Texas, the largest state community banking association in the nation. The information above is provided with the understanding that IBAT is not engaged in rendering specific legal, accounting or other professional services. This information is intended to be a helpful guide. If expert assistance is required, the services of a professional person should be sought.
