College: 4 Ways to Pay

Hi Money Masters,

I came across a quote the other day, however, I don’t know who said it. It goes like this…“Which scholarship do you have ZERO chance of winning? The one you don’t apply for.” I thought to myself, “good point!” When a student makes the decision to get a college education, the first question is mostly how will this be paid for. A scholarship is, of course, an extremely desirable method of payment, but it is not guaranteed that a student will get one just because he/she applied. I wish this was the case!

So, I want to talk about the other ways in which a higher education can be financed…

Scholarships/Grants

Scholarships and grants are very similar. They are both forms of financial aid that are not required to be paid back. These are offered by both federal and state governments, colleges and private organizations (i.e. churches, employers, community organizations and foundations). The main difference is that scholarships are usually merit based, whereas grants tend to be need based.

Loans

A loan, by definition, is a sum of money that is borrowed with the expectation of the sum being paid back at some point, usually with interest. I am going to break down this section into two areas: federal loans and private loans.

A federal loan is money borrowed from the federal government. Typically, these loans can have lower interest rates than a private loan. However, it is still required that the student fill out the FAFSA (Free Application for Federal Student Aid). Generally, it’s a good rule to try federal programs before private ones due to both the interest rate as well as certain benefits that come with a federal loan, such as repayment flexibility.

A private loan is money borrowed from a private lender (not associated with the government) like banks, credit unions, online lenders. You’ve probably heard of SoFi, Discover, and Sallie Mae, to name a few. If you choose to go this route for any of the funding, it is important to shop around and compare the interest rates and offers you are given.

Work-Study

A work-study program means undergraduate or graduate students hold a part-time job on or near campus. This program is offered by schools participating in the Federal Work-Study Program. Often times, the on-campus job will be for the school itself in some area. Off-campus employment is usually for a private nonprofit organization or a public agency.

Work-study is awarded depending on the time of application, the level of the student’s financial need, and the level of the school’s funding.

Savings/Income

Some people begin saving for college once they realize they will become parents. Some people cannot do this right away or at all. The average cost for an in-state college is about $10,000 per year (that’s just tuition and fess). Tuition isn’t the only expense incurred by college students. There is also room and board, transportation, supplies, etc. According to a study by Sallie Mae, the average family uses savings and income to cover 34% of these education related expenses. Students who need to rely solely on this method of finance have options.

They might need to choose a school with lower tuition, one that is closer to home to save on room/board, an online school or plan on working more which can extend the length of enrollment.

So, my money masters, you see there are options for financing a higher education. It may require a mixture of methods, hard work, sacrifice, and even creativity. Start saving, applying, planning and researching as early as possible!

Blessings to you all,

-Helen