Pursuing a higher education may seem like an unattainable goal if you don’t have the money to pay for it. Today, the cost of higher education has saddled many students with substantial amounts of student loan debt. If you are planning to attend a college, university, or trade school (or are helping someone who is), it is wise to learn how to pay for school the smart way.
In this blog, we will review some ways to pay for higher education. By learning more about the options available, you will be better prepared for the costs so you can avoid getting into too much student loan debt, which you will need to start paying soon after graduation.
Why Is It So Expensive?
In the last two decades, college expenses have only steadily gone up, with more students than ever before having taken on student loans. College tuition has increased by 175% from 2000 to 2021, outpacing inflation, which has increased by 65% during this same period, according to Bankrate.com. In 2021, about 64% of college students had student loan debt upon graduating, says USNews.com.
Start Saving Early and Now
Ideally, parents and guardians should start saving for their child’s college education early in their child’s life. This can be as simple as opening a savings account and making regular deposits during those wonder years or saving through a special account designed for higher education expenses.
For example, saving with a 529 College Plan could help you accumulate a hefty nest egg that is dedicated for future college expenses. Today, nearly 7 in 10 American families are not aware of a 529 plan, says Bankrate.com. A 529 College Plan is a tax-advantaged account that can be used to pay for education expenses from kindergarten to graduate school.
If you are near college age already, a 529 plan might not be the best choice. Instead, you may want to consider a more traditional savings account, which you can find at Travis Credit Union and other financial institutions. Typically, the highest yields can be found on Money Market Accounts and Certificates so search for one that fits your needs.
Seek Grants, Scholarships & Financial Aid
Another smart way to pay for college is to apply for grants, scholarships, and financial aid. Grants and scholarships are monetary awards that you typically do not have to pay back but you will need to meet the program’s requirements first to apply. These funds are usually offered by schools, government agencies, community organizations, charitable foundations, or some other non-profit business. According to Fox Business, these funds are given to those students that may have financial need or based on meeting specific criteria such as coming from a particular ethnic background or majoring in a specific field. Any money received from this form of aid does not need to be repaid.
For financial aid, the federal government offers a variety of financial aid programs. The first step to qualify is to complete the Free Application for Federal Student Aid form, otherwise known as FAFSA. This opens the doors to apply for federal student loans and grants such as the Pell Grant and other programs.
Borrowing for Higher Education
Obviously the most common way to gain funds for college is to borrow the money. This can be through a family member, a financial institution, or another lending program. There are two types of student loan programs: federal and private. If you find that financial aid is not enough to cover your college costs, borrowing the money may be necessary.
Federally funded loans tend to have lower interest rates. For example, the Direct Loan program for undergraduate students comes with a fixed 4.99% APR (Annual Percentage Rate), while Direct Loan program for graduate students in 2022-23 came with a 6.54% interest rate, according to Foxbusiness.com. Private loans may offer low rates too, but that will depend entirely on the borrower's creditworthiness. Private loans can be found at financial institutions, such as TCU, banks, and other lending programs.
Travis Credit Union Can Help
TCU can help you find smart ways to pay for higher education. Start by exploring our deposit products such as our high-rate Money Market Accounts and Certificates. Travis has also partnered with Sallie Mae to provide you with student loan options, too. We can also teach you about financial wellness so you can plan, save, spend and borrow better.