The cost of a college education continues to rise, making it much more expensive to obtain a degree than it was even just two decades ago. College tuition has increased about 175 percent from 2000 to 2021, according to statistics from Bankrate.com. Such a large increase drives home why planning and saving for college is very important. Knowing the many ways you can pay for college – for yourself or your children – gives you options. In this blog, we’ll look at higher education costs in general and discuss the ways you can make these costs manageable.
Higher Education Costs
In today’s economy, inflation has been the leading cause of rising prices, although higher education costs were already rising before this bout of inflation began. Between 2010 and 2022 education costs rose 12 percent each year, according to Bankrate.com. Today, the amount of money needed to cover one-third of higher education costs for a public, in-state college is $60,400, or about $6,800 in savings each year for eight years.
It’s no wonder more than 64% of parents plan to save for their children’s college costs. But for many that’s not enough. Federal student loans and grants, obtained through the annual Free Application for Federal Student Aid (FAFSA), can help fill in the funding gap. But you have to apply; statistics from 2022 reveal that $3.6 billion in available Pell Grants were not claimed through financial aid. Also, education data shows only 7% of college students receive a scholarship.
Still, the cost of a college education shouldn’t discourage people from their educational goals. There are various ways that people can fund university costs. These include savings, financial aid, scholarships and loans.
How To Prepare for College Costs
Whether you are a parent, grandparent or student, financially preparing for college is essential and the sooner the better. The first step is to determine how much money you’ll need. You can do this by assessing tuition costs based on the schools you or your children want to attend.
Note that the cost of each type of post-secondary institution – a university, college, technical or trade school – will vary widely.
Living on campus is another major cost of a college education. Room and board can add up to a substantial portion of your expenses. Also, consider the cost of books and equipment, a computer and extracurricular activities, such as sports, band or something else.
Many students prepare by first completing the FAFSA so they can assess the potential financial aid available to them, according to Nerdwallet.
Ways To Pay for College
Knowing the different ways to pay for higher education will let you strategize your college funding. Here are some ways you can pay for university, according to BusinessInsider.com:
- Save Money: Ideally, parents should start saving money for college as soon as their children are born. One option is through 529 savings plans, which let you save in an account earmarked for college. The 529 plans vary by state but you are not restricted to the state you live in so it may be valuable to compare state plans.
Other ways to save include opening a high-yield savings account, such as a money market account (MMA) or certificate account. These types of deposit accounts typically have a higher yield than regular savings accounts and have slightly different requirements. Also, they’re both federally insured by the NCUA for credit union accounts and by the FDIC for bank accounts.
- Scholarships: Scholarships are a great way to pay for college because the money awarded goes directly to educational purposes and does not have to be paid back. There are scholarships available for every type of major and from every type of industry. For example, they’re offered by school alumni organizations, employers, community groups, professional organizations, governments and more. Start by searching for scholarships online and by talking with your high school counselor.
- Federal Financial Aid: As mentioned, applying for FAFSA is how many students start their quest for college funding. The federal application is shared with all colleges where you apply. If accepted, you’ll receive a package of funding information along with your acceptance letter.
The funding package will show any grants, loans and work study opportunities that you have qualified for if you attend that school. Just remember that you’ll need to apply each year for FAFSA (be sure to note the deadline each year) to see what financial aid options are available to you.
- Employer Tuition Assistance: If you are student who also holds a full- or part-time job, check with your employer to see if there is a tuition assistance program available. Not all companies will have them but they can help defray the costs of tuition or books.
- Serve First, Then College: If you’re undecided about college, you may want to consider service in the U.S. Armed Forces first. The military offers many educational benefits that members can use while they’re serving and after their service. These include financial aid, college funding and loan reimbursement programs.
- Student Loans: If savings and financial aid aren’t enough to cover all of your college expenses, a student loan can fill in the funding gap. The two main types of loans available for students and their parents are federal student loans and private student loans. There are differences between the two that you’ll need to consider:
Federal student loans are offered through the U.S. Department of Education. These loans usually offer lower interest rates and flexible repayment options and are available for students and their parents. Repayment of these loans can be deferred until you graduate from school. There are also options to reduce or pay off your loan balances via public service employment.
Private loans are offered through credit unions, banks or education lending institutions. Qualification and repayment options are strict and these loans may have higher interest rates than federal student loans.
As you can see, there are several ways to pay for college. The key is finding the right combination that works for your unique financial situation. Be sure to explore all of your options so you can focus on your studies rather than worrying about how you’ll pay for tuition next year.
How TCU Can Help
Travis Credit Union has the savings tools and financial resources to help you save for college and prepare you for all of life’s other big financial moments. TCU has partnered with Sallie Mae to provide you with student loan options and we offer personal loans, too. Plus, our money market accounts and certificates offer competitive rates to grow your college savings for tomorrow.
Travis Credit Union members are also eligible to apply in October for our $2,000 Community Impact Scholarships. Your financial wellness is important to us. Visit traviscu.org to learn more about the various ways TCU can help you be better prepared for college.