5 Overlooked Ways to Pay for College
Paying for college is a challenge for most families and often involves pulling from a variety of sources – from financial aid to savings.
According to a Sallie Mae study on “How America Saves for College,” more than half of parents surveyed with children under age 18 have some savings tucked away. The report also found 51 percent of surveyed parents say they have a plan for funding all years of college – these parents also saved around 76 percent more on average than those without a plan.
With many avenues for financing a child’s education, experts acknowledge it can feel overwhelming to develop a plan. Whether it’s paying for your child’s tuition next fall or several years down the road, here are five often-overlooked ways to consider for covering college costs.
1. Start a 529 plan: Ideally, a tax-advantaged 529 account is opened for a young child, so the savings can accrue over time – especially if the funds are in an age-based investmentstrategy, wealth advisors say.
While this is an attractive option for families with younger children, experts say it’s still worth opening a 529 account even if your student is already in high school.
“Start saving as early as you can for your education. No matter how small the amount, every cent counts. A 529 savings account offers tax advantages, so it is one of the best ways to save for college,” says Bob Collins, vice president of financial aid at Western Governors University in Utah.
But 7 out of 10 Americans don’t realize that a 529 plan is an option for saving to pay future college expenses, according to a 2017 Edward Jones 529 Plan Awareness Survey.
“Numerous studies have shown that 529 college savings plans are underutilized, partly because parents are unaware of them and partly because the prospect of paying for college is not an immediate expense,” says Mark Kantrowitz, a college admissions and financial aid expert.
2. Fill out the FAFSA: According to a NerdWallet analysis, families left up to $2.3 billion on the table this year in federal grant money that can help pay for college.
The Free Application for Federal Student Aid, commonly known as the FAFSA, is the key application to determine college financial aid. Filling it out not only unlocks access to federal aid such as student loans or the Pell Grant, but many institutions also use this form to determine their own need-based financial aid awards.
3. Exhaust federal loan options: Federal loans, such as the Stafford, have more flexible repayment options compared with private loans. For this reason, experts say students with financial need should exhaust their federal options before borrowing private education loans.
But for some families, it’s worth exploring private loans, says Collins from WGU. “Private student loans may have lower interest rates than federal student loans. This will depend on your credit history, so make sure you take that into account before selecting a lender.”
4. Negotiate financial aid awards: Colleges – especially private institutions – might be willing to increase a financial aid package based on a reevaluation of need-based aid due to a change in income or a special circumstance, financial aid experts say. In some instances, institutions may even increase merit-based aid to entice a student to enroll, they say.
“Families may be surprised how often colleges say ‘yes’ and send a few more thousand dollars their way as an enticement to enroll,” Shannon Vasconcelos, director of college finance at College Coach, a national admissions consulting organization, told U.S. News in 2016.
5. Apply for scholarships: While students can still apply for scholarships when they’re in college, experts also recommend applying for awards before freshman year.
“Scholarship searches can be your full-time job. After filling out the FAFSA and seeking any aid within the college, don’t be afraid to scour the internet for random scholarships for people fitting your profile,” says Erin Goodnow, CEO of Going Ivy, an Arizona-based college admissions consulting firm. “Just don’t pay any money to apply for a scholarship.”
Prospective college-bound students can even receive scholarship money from recycling their application essay.
Stephanie Klein Wassink, founder of Winning Applications, a Connecticut-based educational consulting company, said via email: “A lot of schools offer their own presidential scholarship. If a student wrote an essay for another school’s application, why not reuse that essay? But this time for a different school’s scholarship application.”