Aspiring students know that a college education is considered valuable in business, but getting a degree can cost tens of thousands of dollars – money most young adults do not have. Before blindly signing off on a complicated loan or deciding to forgo college altogether, investigate your options. There is a variety of ways to get money for school, including loans, scholarships, and other methods you may not have considered.
- Scholarships and grants. If borrowing money seems daunting, scholarships and grants can be essential for paying tuition. Both awards are essentially free money – they’re considered gifts, so in most cases, you don’t need to repay them in the future. Grants are usually need-based, intended for students who would otherwise be unable to afford college. Scholarships are generally merit-based, meaning the recipient has a high GPA, is an excellent athlete, volunteers in their community, or has earned some other distinction. Federal student aid offers some grants (mostly need-based), but hundreds of awards are available elsewhere.
- Federal loans. Many students attending college borrow money from the federal government using Direct loans. These loans are sponsored by the US Department of Education and are often a student’s best option if loans are necessary. Direct loans do not require a credit check or cosigner, and they have fixed interest rates that are usually lower than those offered by private lenders. There are also several different repayment plans available, including options like income-based repayment or deferment for people suffering financial difficulties.
- Private student loans. Students should always seek federal loans first, but if they do not cover your education costs, private loans could be a solution. These loans often involve credit checks to qualify and, unlike federal loans, are subject to variable interest rates. Additionally, interest rates and fees associated with private loans are based on your credit score. Because of this, many students are required to have someone cosign their loans. Although this might result in a more attractive loan offer, be aware that anyone who cosigns a loan becomes responsible for its repayment.
- 529 plans. Although this method requires planning ahead, 529 plans are an effective way of saving for your child’s college education. There are two types of 529 plans – prepaid tuition or college savings – and they work very differently. With a prepaid tuition plan, credits are purchased at participating schools at the current tuition price and are guaranteed to gain value proportionately to tuition increases. College savings plans are based on investments such as stock mutual funds or age-based portfolios. 529 plans are not subject to federal taxes, but if the money is used for something other than school, you might owe income tax or other penalties.
- Benefactors or sponsorship. If you value community involvement, there are many programs that will reduce your debt in exchange for work. Members of the Peace Corps can eliminate significant portions of their debt through dedicated service, while other organizations such as AmeriCorps can receive awards that help pay existing and future education expenses. Even doctors and lawyers can qualify for loan forgiveness or assistance by seeking public interest organizations.
Remember – even though college looks like an enormous expense initially, on average, graduates earn more money over their lifetimes than people without degrees do. By being mindful of how much you borrow and paying attention to your finances, you can afford your education and not spend the rest of your life in debt.