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3 Higher-Education Experts Share Tips

3 Higher-Education Experts Share Tips

  • Make affordability a key consideration when drawing up the list of schools you’re interested in.
  • Grants, merit aid, and athletic scholarships are all sources of financing you don’t have to repay.
  • This article is part of the “Better, Smarter, Faster” series focused on the impactful choices you can make with your money to fulfill big life goals.

With the cost of college creeping upward year after year, more families are being forced to consider borrowing money to pay for it. While loans might be a necessary evil in some scenarios, these steps might help people determine whether they can afford the schools out of pocket.

How should you work finances into your college search?

Your financial situation should be central in your decision-making process.

Neeta Vallab is the founder of MeritMore, a search tool that allows students to estimate the amount of merit aid they could receive from particular schools based on their GPA and test scores. She said the most strategic way to avoid student loans is to apply to several schools that make financial sense for you.

Follow traditional college-search advice and look for schools that have areas of study and student organizations that interest you. Also keep in mind that affordability is a factor you need to consider.

“Don’t start with the notion of a dream school,” Vallab said. “It’s important to be able to not get so emotionally invested in a particular school because you may need to make adjustments based on finances. Keep an open mind as you enter this that there are many good schools, there are many great schools, and then you distribute your expectations.”

Most students are familiar with the concept of safety, target, and reach schools as a way of matching their academic profile to the likelihood of acceptance at different schools. Vallab said they can also apply that mindset to their financial compatibility with schools.

“In addition to thinking about likelihood, you should also be thinking about financial fit,” Vallab said. “You should be assigning affordable, stretch, and painful as your financial-fit labels. And then when you look at your list and you’ve got a good slate of schools that are affordable or that are going to be a stretch but you understand that going into that process, then you’re more prepared when it comes to accepting an offer.”

What options do you have to save for college?

The earlier you start to prepare for the cost of college, the more time you have to build up a war chest to pay for school.

Dawn Dahlby, the founder and president of the advisory firm Relevé Financial Group, said planning to pay for college starts with consistent, small actions. Compounding returns on your savings or investments help make that final bill more palatable, she said.

“When you look at a big bill like college, it’s overwhelming,” Dahlby said. “People start to get really fearful, and it creates anxiety for them. And the only way to take away that fear and anxiety and the stress of that big bill is to do comprehensive planning.”

When putting money away for college, families often choose one of two popular options:

529 plan

A 529 plan is a specialized savings account designed to cover college expenses. The owner of the account designs a beneficiary, and the money in the account can be used tax-free for qualified educational costs, such as tuition, books, and room and board.

The money in your account will grow based on what type of investments you select (usually mutual funds or exchange-traded funds, ranging from conservative to aggressive). You might also be able to choose a portfolio with a target date that matches the age of your child. These portfolios grow more conservative the closer your child gets to college age.

“A 529 plan can help families create a financial plan that covers those expensive college costs,” said Amanda Push, a higher-education expert at Student Loan Hero. “It also allows you to get a better return on your money than if you just simply put that cash to a regular savings account.”

Traditional or high-yield savings account

Banks and

credit unions

offer traditional or

high-yield savings accounts

, which gain marginal returns and are insured by the federal government. Your money won’t have the potential to grow in the same way it would if you put it in a 529 plan or a brokerage account, but you’re also guaranteed not to lose value.

What are grants and scholarships?

Grants and scholarships are sources of free money that generally do not have to be repaid. You can get grants designed for specific groups from the federal government.

There are two grants for students with exceptional financial need, one for students who commit to teaching for four years at a low-income school, and another for students whose parent or guardian died serving as a member of the military in Iraq or Afghanistan. Learn more about types of federal grants here.

Merit scholarships are often awarded based on stellar academic performance and can help you pay for college without taking out loans. Stellar performance can include a high grade point average, a great ACT or SAT scores, or another noteworthy academic achievement.

Vallab said students who are in the top quartile of scores and GPA for a particular school are generally good candidates for merit aid. If you believe you qualify, take note of the average amount of merit aid the school gives out. If an award of that size wouldn’t really help you cover the cost of that school, you might want to cross it off your list.

Athletic scholarships are often given because of outstanding athletic achievement, and they usually require you to play one or more sports to qualify. Standards for athletic scholarships vary depending on the school. Schools might also have varying amounts of money available for specific sports.

How do you get more money?

After you’ve received financial-aid offers from multiple schools, you’re able to negotiate the amount of money you have received from schools and pit offers against one another.

Vallab’s website has a tool for students to compare various schools’ financial aid offers side-by-side as well as an appeal letter generator that allows families to create customizable appeals.

“It’s very hard to ask anyone for money, first of all, and you’re also in a situation of you are just thankful that you got in,” Vallab said. “But this is a thing that colleges expect. They don’t publicize it, but it is a thing that families can use, and you can get some significant money knocked off of your out-of-pocket expense.”

Students looking for less-expensive options might also consider the community college, which usually costs less than many universities. In-state tuition also tends to be more affordable than out-of-state tuition, so local schools could be a good place to start your search for a college in your price range. Consider taking advanced placement and dual enrollment classes in high school to reduce the number of credits you need to earn at a four-year university.

What if you’ve exhausted other options and need a loan?

Sometimes, no matter how well you’ve planned for college payments, you have no choice except to consider a loan.

“A lot of people do end up being in a position where they do have to take out student loans, and that’s totally OK,” Push said. “That’s not a failure on the student’s or family’s part. Tuition and room and board are extremely expensive. Sometimes taking out a loan is the right path for some students and families.”

Federal student loans should always come before private student loans. They have the lowest interest rates and come with a level of protection that private lenders don’t offer.

Consider the federal student-loan forbearance the government offered during the pandemic. While private lenders might have offered their own help for people experiencing hardships, private student-loan borrowers didn’t get that widespread benefit or keep interest rates at 0%.

Make sure you understand the interest rate you’re being charged, your repayment-term length, and the total amount of debt you’re taking on before you sign on the dotted line.

“Don’t let a big debt number get in the way of you still being able to make rational decisions on how to work with that debt,” Dahlby said. “You can get knowledge of what’s available to you and work with a professional to come up with a plan to be able to chip away at that debt.”



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