The question of "how are we going to pay for college?" is something that many parents and students discuss each year. Did you know college graduates in the United States graduate with an average of $30,000 in student loan debt? In addition, everyone is anxiously awaiting the outcome of President Biden's Student Loan Forgiveness Plan. While much of the focus related to Biden's Student Loan Forgiveness Plan is on the debt cancellation of eligible borrowers, it should serve as reminder for many parents and students exploring options to help pay for college to take the necessary steps to avoid going into debt. Here are some things you should know about saving and paying for college.
College Savings Plan
One place to start when preparing for college costs is creating a savings account geared specifically towards higher education. A 529 account is a tax-advantaged college savings plan that can be used for the beneficiary's education expenses. There are two types of 529 plans.
- Education Savings Plan: With this plan, the account holder contributes money which is then invested in a preset selection of investment options. Account holders select what they want to invest in, and then how those investments perform will dictate how much the account grows. Many of these plans also offer target-date funds, which adjust the assets to become more risk-averse as the beneficiary draws closer to college.
- Prepaid Tuition Plan: This option is offered in a limited number of states, including Pennsylvania. The idea is that it allows you to lock in the tuition price at a state college at current rates for a student that is not yet of college age. While there is a restriction on which colleges take part in this option, college tuition is constantly on the rise, so this allows you to avoid those rising costs. Like the savings plans, prepaid tuition plans grow in value over time. Unlike the savings plans however, this plan does not cover the costs of room and board.
Begin Preparing in High School
A great way to cut higher education costs while you are still in high school is by earning college credits. Colleges will often award credits to students who earn certain scores on standardized subject exams, such as Advanced Placement (AP) and International Baccalaureate (IB). College credits earned in high school can mean paying less for college. In some cases, if you earn enough credits in high school, you could end up graduating a semester or even entire academic year early, which could lead to massive savings.
Pro Tip for Philadelphians
The Pennsylvania Transfer and Articulation Center (PA TRAC) has a tool that can help you find exams accepted for credit by PA TRAC colleges.
Tuition Assistance
As parents and students begin the process of figuring out how to pay for college, it's important to know about the wide variety of tuition assistance programs, such as:
- Free Application for Federal Student Aid (FAFSA): Regardless of your family's financial situation, every college-bound student should apply for aid through FAFSA. FAFSA is used to determine the amount of financial aid a student qualifies for from the federal government. It determines eligibility for need-based grants that don't require repayment such as the Pell Grant and Federal Supplemental Educational Opportunity Grants. You'll also find out about eligibility for subsidized loans and unsubsidized loans (both are federal loans; however, you'll pay less over time with subsidized loans because interest does not accrue while you are in school), federal work-study, state-based financial aid, scholarships, and more. The more federal assistance you can get to help pay for schools the better, as the interest rate on federal loans is much lower than that of loans secured from private financial institutions.
- Pennsylvania Higher Education Assistance Agency (PHEAA): After you fill out your FAFSA application, check out what is available to you at the state level as well. PHEAA has a number of different programs to help students pay for school. They offer a state grant program for eligible students, offering a financial aid award that does not require repayment. There is also the PA Forward Student Loan Program, which was created to assist Pennsylvania students and families with tuition costs not covered by grants, scholarships, federal student loans, or other aid. They also have a work-study program, aid for U.S. military services, and much more.
- Scholarships: Similar to grants, scholarships are financial aid to help you with the costs of higher education without any repayment required. To find scholarships you are eligible to apply for, speak with your high school guidance counselor and contact the financial aid office at the school you plan on attending. The U.S. Department of Labor also has a free scholarship search tool.
- PFCU Student Services: PFCU offers a number of programs to assist students with the costs of college. The PFCU Scholarship Program awards $2,500 annually to four high school seniors who are members in good standing at PFCU. Our CCP scholarship offers $400 per fall semester for a member enrolled at the Northeast Regional Center. PFCU also has a Tuition Rewards Program, which is a college savings plan designed to earn guaranteed scholarships for your family members at participating private colleges and universities across the country.
Compare Costs
An important thing to do before selecting your school is to compare prices before selecting your college. There is a massive cost difference between attending a public and private university. For the 2022-23 academic year, the average cost for tuition and fees at private colleges was $39,723 compared to $22,953 for out-of-state students at public colleges and $10,423 for in-state students at public colleges.
However, when comparing costs make sure you are considering the net price not the sticker price. The net price is the cost of college attendance minus any grants or scholarships. A number of private schools offer more financial support than public schools which can often get their net prices around those of public schools and sometimes even less.
Prepare for Indirect Costs
After taking care of the costs of tuition and room and board, there are still plenty of costs associated with college to consider. This includes books, other class supplies, travel, dorm room essentials, and more.
The average cost of books and supplies for a first-year college student is $1,226. A way to save money on books is by renting or purchasing used. You'll likely never be using these books again once you finish the class, so there's no need to shell out the extra money to purchase the new version. Chegg and Amazon are a couple of notable places that allow you to rent college textbooks.
For all your dorm room essentials such as linens, toiletries, and electronics, make sure to monitor back-to-school sales. Most retailers in the lead-up to the return to college will offer back-to-school promotions where you can get most of what you need at a discounted rate.
Higher education is a significant investment that is not getting any cheaper. By following these tips, you can help lessen the long-term financial burden of getting a degree.