Essential Guide to Financing Your College Education

We know the journey to paying for college can feel like a wild rollercoaster with unexpected twists and turns. But don’t worry, we’ve got your back! This guide is your go-to resource for understanding how to finance your college education. Let’s dive in and make this process as smooth as possible.

1. Start with the FAFSA®: Your Ticket to Financial Aid

First things first, you need to fill out the Free Application for Federal Student Aid, or FAFSA®, as soon as possible. This form is your gateway to federal financial aid, including grants, work-study opportunities, and federal student loans. It’s also a must for many state-level and school-based financial aid programs.

Be thorough when filling out the FAFSA® because it’s how the federal government gauges your family’s financial situation. For instance, if your family has a 529 Plan (a college savings account), the government expects you to use that money to help cover costs.

Timing is everything! Some colleges distribute both need-based and merit-based aid on a first-come, first-served basis, so the sooner you submit your FAFSA, the better. Oh, and keep an eye out—some schools might also require the CSS Profile for additional financial aid consideration.

2. Hunt for Scholarships Like a Pro

Who doesn’t love free money? Scholarships are your best friend because they don’t need to be repaid. The trick is to start your scholarship search early. We’re talking as early as freshman year of high school—yep, it’s never too soon!

A great place to start is Going Merry. It’s a one-stop shop for scholarships where you can find and apply for multiple scholarships all in one place. Plus, it’s super user-friendly. Thousands of scholarships are out there, so get busy applying!

Also, check out the Department of Labor’s Scholarships Finder. Some scholarships might require you to submit the FAFSA, but most will have their own application process. The earlier you start, the more options you’ll have.

3. Choose a School That Won’t Break the Bank

Let’s be real—college is a major investment, but you don’t want it to drain your bank account. One smart strategy is to consider starting at a community college, technical, or trade school where tuition is often lower.

If you’re eyeing a four-year university, do some homework on the school’s net price. This is the cost to you after grants and scholarships have been applied. Sometimes, a school with a higher sticker price can be cheaper in the long run if they offer you significant financial aid.

Check out each school’s Net Price Calculator on their website to get an estimate of what you’ll actually pay out of pocket. This tool can help you make an informed decision and avoid any surprises down the road.

4. Grab Those Grants if You Qualify

Here’s a jaw-dropping stat: the high school class of 2023 left over $4 billion in Federal Pell Grant money on the table because they didn’t complete the FAFSA. Don’t let that happen to you!

As long as you submit the FAFSA and renew it each year you’re in school, you’ll get any Pell Grant money you’re eligible for. And remember, grants are essentially free money—they don’t need to be repaid!

In addition to Pell Grants, the federal government offers other types of grants, and many states have their own grant programs too. Use the Education Department’s State Education Contacts and Information Locator to find out what’s available in your state and apply for everything you qualify for.

5. Land a Federal Work-Study Job

Who doesn’t love making some extra cash while gaining work experience? The Federal Work-Study program is a great way to do just that. It funds part-time jobs for students with financial need, helping you earn money to cover your expenses.

To qualify, make sure you’ve submitted your FAFSA. If you’re eligible, “Federal Work-Study” will be listed on your financial aid award. But here’s the deal: you won’t automatically get that money. You’ll need to find a qualifying job on campus and work the required hours to earn the aid.

This is more than just a paycheck—it’s a chance to build your resume and make valuable connections that could benefit you in the future.

6. Work for an Employer That Pays for College

Did you know that nearly half of employers offer tuition assistance for undergraduate or graduate education? This could be a game-changer for your college financing strategy!

Companies like Target offer programs that cover a percentage of your tuition, a flat amount, or even the full cost of your education. This might come in the form of tuition reimbursement, where you pay upfront and get reimbursed later, or direct payments to your school.

If you’re job hunting, make sure to research the educational benefits offered by potential employers. And if you’re already working, chat with your HR department to see what kind of tuition assistance might be available to you.

7. Take Out Federal Loans If You Have To

Let’s face it—sometimes loans are a necessary part of the college financing puzzle. But before you sign on the dotted line, here’s a tip: aim for student loan payments that don’t exceed 10% of your projected after-tax income in your first year out of school.

When borrowing, always opt for federal student loans before considering private ones. Federal loans offer benefits like income-driven repayment plans and loan forgiveness programs, which can be lifesavers if you face financial challenges after graduation.

8. Use Private Loans Only as a Last Resort

If you’ve exhausted all other options and still need extra funds, private student loans¹ might be necessary. But proceed with caution! Private loans often have higher interest rates and stricter repayment terms compared to federal loans.

Before choosing a lender, shop around for the best interest rate and the most favorable borrower protections. For example, Earnest offers competitive rates and flexible repayment options, making them worth considering.

Keep in mind that qualifying for private loans can be tougher because they usually require a credit check. Borrowers with a strong credit history or a co-signer with good credit can get better rates and terms.

Remember, once you graduate, you’ll need to start repaying² any loans you’ve taken out. Many loans accrue interest while you’re still in school, so it’s essential to understand the full cost of borrowing. Use a student loan simulator to get an idea of how much you’ll owe down the road based on what you borrow now.

Financing your college education might seem daunting, but with the right approach, it’s entirely manageable. Start early, explore all your options, and make informed decisions to ensure that you get the most value for your investment in education. Good luck, and remember—we’re cheering you on every step of the way!

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

¹ Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grants, and work-study opportunities. 2) Next, fill out a FAFSA(R) form to apply for federal student loans. Federal Direct subsidized and unsubsidized loans, excluding PLUS Loan for Parents and PLUS Loan for Graduate and Professional Students which require a credit check and a credit worthy endorser if the parent or graduate or professional student has adverse credit, do not require a credit check or cosigner, and offer various protections if you’re struggling with your payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.gov.

² As was announced by the U.S. Department of Education (ED), federal student loans have resumed accruing interest starting September 1, 2023, and federal student loan payments were reinstated starting in October. Please note that you may lose benefits associated with your underlying federal loans, such as federal Income-driven Repayment Plans (an example of which is the SAVE plan), Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options, if you refinance into a private loan. If you file for bankruptcy, you may still be required to pay back this loan. See https://studentaid.gov for more information.

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Daniel Bod

Writer at Going Merry

Daniel Bod is a seasoned higher education professional with two decades of expertise in financial aid. He began his career at Hofstra University in 2004, after completing his Bachelor's degree from Stony Brook University in 2000, where he provided comprehensive financial aid support to families from diverse backgrounds. In 2007, he transitioned to LIU Post and advanced to Senior Assistant Director of Enrollment Services, dedicating over ten years to assisting students and families in various capacities. During his tenure at LIU Post, Daniel also earned a Master's degree in Childhood Education. Transitioning to St. George's University in 2019, he spent over four years focusing on the financial needs of medical students. Daniel excels in advising on loan options and empowering students and families to make informed decisions about educational finances.