College has become the traditional next step for many of today's students despite its high price tag.
According to information from Education Data Initiative, the average cost of college is now $35,551 per student per year, including books, supplies, and daily living expenses. However, many schools cost much more annually.
Families facing the prospect of college on the horizon would undoubtedly like to do all they can to make college more affordable. There are many different ways to pay for college tuition. The following are some of the paths students and their families can take.
Savings and investment accounts
Some guardians feel that it is their responsibility to pay for college, while others say that it is up to the students to handle some, if not all, of the costs. Most people cannot afford to pay college tuition bills each semester as they would a utility bill or mortgage. That makes it essential for families to begin saving for college very early on.
People can put funds in bank accounts or tax-advantaged investment opportunities, and Education Savings Accounts, such as Coverdell accounts and 529 Plans.
It's important to note that investment accounts have a higher percentage of risk than low-interest savings accounts, particularly because they are tied to investments. However, such accounts boast the potential for greater growth. Families must weigh the pros and cons accordingly.
Financial aid
One of the first steps prospective college students in the United States who need help paying for college should do is fill out the Free Application for Federal Student Aid. This form will help the government, as well as individual schools, determine financial need and aid eligibility.
The FAFSA will ask for personal and family income information as well as tax records to determine eligibility.
It also will establish an Expected Family Contribution (EFC), which will be renamed a Student Aid Index (SAI) for a given school year. It is a formula that the Department of Education uses to crunch family financial data and determine eligibility for financial aid, says Lending Tree.
Those with lower EFCs/SAIs generally receive more financial aid. There are ways to lower EFCs if families start well before the college application process.
Grants and scholarships
Some schools offer grant money or scholarships to students based on academic performance, alumni ties or other factors, which does not have to be paid back. Students also can pursue private scholarships and grants through outside organizations, such as parents' employers.
Loans
After all financial aid, personal savings, investments, and scholarships/grants have been exhausted, student or parental loans may be needed to round out the cost of attendance. If possible, students should opt to, at the least, make interest payments on student loans while in school.
Lenders require students to take out a Federal Direct Loan prior to applying for private loans. It's essential to shop interest rates and payback rules for each loan to secure the best deal.
College tuition is expensive, but students and their families have various options to plan for and potentially mitigate those costs.
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