Anyone who is contemplating going to college knows that the cost of college has risen dramatically in recent years.
Tuition costs at a 4-year, private college or university in 1997-1998 cost an average of just over $16,000 per year. In 2017-2018, the average shot up to over $41,000 per year according to a recent cost of college report. This does not account for inflation or additional expenses.
Understanding that college is pricey is the first step, but the next step is figuring out how to pay for it. Figuring out how to pay for college may be challenging for many new students. There are plenty of financial aid options so it may seem like a confusing system, but we have a few tips on how to get the process started.
Start with the FAFSA
The FAFSA is the Free Application for Federal Student Aid. It should be the starting point for all students entering college. It can be filled out online for free, and the annual application opens October every year.
As the name indicates, the FAFSA is offered by the federal government, and you need to fill it out to be eligible for federal student loans and grants. The application requires basic information including your Social Security Number, federal income tax returns, W-2s, bank statements, etc. If you are a dependent student, you will also need most of this information for your parents.
You should start with federal aid because it comes with more benefits. You may be eligible for Pell grants that do not require repayment (for more information on Pell Grants, check out the Education Department page), and federal student loans come with accessibly low fixed rates. You can access various repayment plans and can defer payments when in trouble.
Look for Free Financial Aid
Free financial aid refers to scholarships and grants – lump sum awards to pay for education. These are highly advantageous because they don’t require repayment. If you’re going to college, you should never stop looking for scholarships. You should search early and often throughout your time at university.
There are many opportunities to shave off a part of tuition, and they’re offered to various candidates. Many scholarships are based on academic or athletic merit, and some private organizations offer need-based scholarships. Others are offered for any number of reasons, like attending a particular organization, choosing a field of study, or even being left-handed.
Fill in the Gaps
Even after looking into financial aid and FAFSA, you may still be short on the college bill. If you’ve talked to your school and exhausted all options, then you may be able to get help from the private sector. Private student loans are offered by banks and lenders to qualified student applicants, and they can be a last resort option in financial aid. A private student loan can mean the difference between missing a semester and paying the bill, but they come with distinct risks.
These do not come with as many benefits as federal loans. Some private loans require repayment immediately on top of limited repayment options (for more information on private loan repayment, refer to this guide from LendEDU). They require an applicant to pass a credit check, risking the chance of denial. Additionally, since a private loan approval is dependent on credit, the interest rate is also derived from an applicant’s credit history. This opens the door to higher rates compared to federal student loans, especially for new students.
Deciding how to pay for college can be overwhelming, but there are basic steps to follow when figuring it out. Knowing this is key if you want to make it out of college with a degree.
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Andrew Rombach is a guest author from LendEDU – a consumer education website and financial product marketplace. Andrew graduated from college in 2016 with his own chunk of student loan debt. Since then, he’s taken an interest in personal finance and written on plenty of different topics.