Strategies to Pay for College

by Laura Adams

With the rising cost of education, it’s no wonder that the amount of outstanding student loan debt exceeds the total amount of credit card debt in the United States. Whether you’re looking to head back to school yourself or are saving up for a child’s education, be sure you understand all your options and have some solid strategies in place to pay for college.

Which Types of Student Financial Aid are Available?

There are three main types of financial aid for students:

  1. Loans to the student or student’s parents that must be repaid after graduation.
  2. Work-study assignments that allow a student to earn money for their college expenses.
  3. Scholarships or grants that do not have to be repaid.

To learn the ins and outs of the different kinds of loans, scholarships, and grants that are available, you can check out chapter 9 of my award-winning book, Money Girl’s Smart Moves to Grow Rich.

How Do You Get Student Financial Aid?

Paying for collegeThe gatekeeper for the three types of aid mentioned above is a lengthy standardized form called the Free Application for Federal Student Aid or FAFSA. Even though “federal” is in the name, the FAFSA is also used to apply for state aid or funds from your college.

Financial aid is awarded on a first-come first-served basis, so submit the FAFSA as soon as possible after January 1 of the year you want to attend school. For instance, if you want to start graduate school in the fall of 2012, you should submit the FAFSA in early January 2012. Some schools may also require additional paperwork. You do have to be accepted by a school to receive aid, but you can submit the FAFSA in advance of your welcome letter.

Who Qualifies for Student Financial Aid?

Even if you think you earn too much to qualify for financial aid—file the FAFSA anyway. Many people who don’t submit it end up leaving money on the table. Aid is awarded based on how much your school will cost—including tuition, fees, books, and room and board—and how much you or your family can pay.

Your parents’ income and assets must be reported in addition to your own on the FAFSA if you’re in your early 20s because you’re considered a dependent until your 24th birthday (unless you’re married). This is the case even if your parents don’t claim you as a dependent on their taxes.

The FAFSA calculation takes into account your income, assets, family size, and the number of children who will be in college at the same time and results in a number called your Expected Family Contribution or EFC. If your EFC is less than what your college will cost, you have demonstrated a financial need and will be eligible for aid.

How to Maximize Your Financial Aid Eligibility

Since the amount of student financial aid is based on your income and assets, it’s important to understand which types of financial assets count against you and which don’t. You should avoid taking additional income from investments or distributions from retirement accounts during the years you’re seeking aid, for instance.

To learn legitimate ways to save for education without jeopardizing your ability to qualify for financial aid, read 8 Ways to Get the Most Student Financial Aid.

Strategies to Pay for College

Whether you qualify for student financial aid or not, don’t forget about other strategies to pay for college. Maybe you have family would be willing to pay for all or a portion of your tuition, or an employer who offers tuition assistance.

If you plan to continue working while you go back to school, approach your employer about your eligibility for tuition reimbursement. Even though I worked for a Fortune 500 company when I got my MBA, they didn’t have a tuition reimbursement program. I knew getting the degree would be valuable to the clients I was training and consulting, so I gave my employer a detailed business proposal for reimbursement anyway. They eventually accepted it and paid for one third of my business school education.

A strategy that I recommend in Money Girl’s Smart Moves to grow Rich is what I call The Plan of Thirds. Once you know what college will cost or you have a savings goal, divide it up into thirds. Let’s say you want to pay for a $60,000 program:

  • Save $20,000 before you or your child start school
  • Earn $20,000 by you or your child working during the school years
  • Pay off the final $20,000 as loan payments after you or your child graduate from school.

It’s a good idea to apply to a variety of schools including one or two that are relatively inexpensive. That way, if you can’t save enough or get sufficient financial aid to pay for a pricey school, you’ll still have options!

Published or updated August 1, 2011.
Print or e-mail this article:

{ 2 comments… read them below or add one }

1 Krantcents

Often private colleges offer better financial aid packages than public colleges/universities. Then there is the element of public universities are under budgetary pressure and you may need to stay longer to get all your classes. Privat may ultimately be less expensive, 4 years versus 6 years at a public university.


2 James Russell

I do not know the full list of exceptions to the rule about being a dependent until your 24th birthday but I do know that serving in the military is also one.


Leave a Comment

Previous post:

Next post: