How to pay for college: A complete guide for students and parents

CNBC

4 days ago

Paying for college is one of the biggest financial hurdles students and parents face — whether you're starting your undergraduate degree, thinking of graduate school, or looking to start a nest egg for your kid's future education. Luckily, there are plenty of ways to offset the costs through scholarships, loans and even a few options you might not have considered.
Class is in session. Here is CNBC Select's ultimate guide on how to pay for college.
Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.Undergraduate and graduate students, parents, health professionals$5,000 minimum (or up to state); maximum up to cost of attendance5, 7, 10, 15, years; up to 20 years for refinancing loans
Terms applyUndergraduate and graduate students, parents, international students with U.S. co-signer$1,000 up to the cost of attendance ($180,000 lifelong maximum)5, 8, 10, 15 years for undergraduate loans, up to 20 years for graduate loans
Terms apply
Before you start, you'll need an idea of how much you need to source or save. The cost of college can vary widely depending on the type of institution, location and even the year you attend, though you can likely expect to spend anywhere between $5,000 to $60,000 per year. For the 2024-25 school year, the average tuition at a public four-year in-state college is $11,610, while out-of-state students pay around $30,780, according to the College Board. Costs can also be significantly lower at community colleges or much higher at private institutions.
Keep in mind, that's not including other expenses such as housing, books and technology — so you'll want to account for that, as well.
One of the most common and recommended ways to pay for college is by completing the Free Application for Federal Student Aid (FAFSA). This form determines your eligibility for financial aid such as federal grants, work-study opportunities and federal student loans. It can also open the door to state and school-based aid. FAFSA uses details like your income, dependency status, and other personal information to calculate how much assistance you may qualify for.
When it comes to borrowing money for college, you have two main options: federal student loans and private loans. If you need to take out loans, it's best to start with federal student loans. These come with borrower protections like income-driven repayment plans, deferment and forbearance options.
If federal loans don't fully cover your college costs, private student loans can help fill the gap. However, it's best to consider this as a last resort. Offered by banks, credit unions or online lenders, private loans aren't part of the federal loan system and usually lack the same protections. However, some private lenders may offer flexible terms or competitive rates, depending on your credit profile.
Funding U offers private student loans without requiring a co-signer and instead evaluates other criteria such as GPA, estimated graduation rate and employment experience. Loan amounts go up to $20,000 per school year, with repayment terms ranging from 5 to 10 years.
Qualifying undergraduate borrowers
Up to $20,000 per school year
5 or 10 years
Fixed
Forbearance options available
No
Terms apply.
Ascent Funding is another solid option as it offers a generous grace period of up to 36 months, depending on the program, compared to other lenders that offer a six-month grace period. Borrowers can also get 1% cash back on their principal loan amounts upon graduation.
3.09% to 14.93% APR with autopay discount (Undergraduate New Loan). Other rates and loan types are available. Visit Ascent's website for full details.
Undergraduate and graduate loans, MBA, medical school, dental school, law school, doctorate and Master's, health professional loans.
$2,001 up to $200,000 for undergraduate loans and $400,000 for graduate loans
5, 7, 10, 12, 15, 20 years
Deferment and forbearance options available
For DACA recipients and non-U.S. citizens or permanent residents
No
Terms apply.
In some cases, your school may automatically offer you a merit-based scholarship once you're accepted to help you cover part of your tuition. Some colleges even have special pre-college programs such as summer bridge or leadership initiatives that, if completed, could qualify you for a full ride.
If that's not available, you still have options. You can apply for additional scholarships through your school, especially if they don't conflict with any aid you've already received. Check with your financial aid office to see what scholarships you're eligible for and how to apply.
There are also thousands of scholarships offered by outside organizations, ranging from nonprofits to private companies, cultural foundations and professional associations. Some are based on academic achievement, financial need, field of study or even personal background and interests.
You can visit your school's financial aid office or explore scholarship databases like Scholarships.com or College Board's Scholarship Search.
If you're working full-time or part-time, check whether your employer offers a tuition assistance or reimbursement program. These programs can sometimes cover a portion — or even all — of your tuition. In many cases, you'll pay out of pocket first and get reimbursed after completing the course. Some employers may also pay the school directly or offer student loan repayment benefits to help reduce your existing debt.
If your company offers reimbursement, it's important to understand the terms. Some programs require you to stay with the company for a certain period after completing your degree. If you leave early, you might be responsible for paying back the costs yourself. Be sure to connect with your human resources department to learn about what's available and any conditions that apply.
Parents often play a huge role in funding their child's education and there are several ways they can contribute.
529 College Savings Plans are tax-advantaged investment accounts specifically for those who are saving for someone's future education expenses. Parents can contribute over time, and the money grows tax-free as long as it's used for qualified education costs. Keep in mind that funds in this account must be used for qualified expenses, or you risk paying penalties. Fortunately, that definition is generous — you can use the funds for things like tuition, room and board, computers, and student loan repayments.
Many 529 plans are state-sponsored, but you can shop around for a 529 plan that offers lower fees and better investment choices — even if it's based elsewhere. Utah's my529 is a direct-sold plan available to residents of any state, offering age-based portfolios that automatically rebalance and become more conservative as college approaches.
None
$540,000
4 age-based options with various risk tolerance, which automatically rebalances each year; 10 static options based on risk tolerance and U.S. stocks and bonds (investors will need to manually change their allocations); 2 customizable options (either age- or static-based)
Investors can choose from Dimensional Fund Advisors mutual funds, PIMCO Interest Income Fund, Vanguard Group funds and FDIC-insured accounts from Sallie Mae Bank and U.S. Bank
Total asset-based expense ratio: 0.131% to 0.136% for my529 target-date options; 0.130% to 0.455% for customized static and age-based options, depending on investment mix; 0.211% for stable value option
Terms apply.
Ohio's CollegeAdvantage 529 plan is another strong option open to everyone, featuring a variety of low-cost investment choices from well-known providers like Vanguard and Fifth Third Bank.
$25
$523,000
Choose from age-based, risk-based, DIY options and FDIC-insured accounts
Age- and risk-based portfolios from Vanguard; individual options includes ones from Dimensional Fund Advisors and Vanguard
Total asset-based expense ratio: 0.145% to 0.435%
Terms apply.
Offered through the federal government, Parent Plus Loans allow parents to borrow money to help pay for their child's education. So if you've already received all the financial aid you can get and your parents are willing to help supplement the costs, this can be a helpful option. Though, they tend to have higher interest rates than student loans and require a credit check so be sure that the debt can be comfortably managed.
If you're applying for a private loan and don't have sufficient credit, you may be asked for a co-signer. Your parents can help, which can help you qualify for the loan but it will also make them responsible for paying the loan if you can't.
It's easy to make mistakes when figuring out how to pay for college, like borrowing more than you need, choosing a repayment plan that doesn't fit your situation or ignoring your loans altogether. Here's how to avoid it.
Financial aid is often first-come, first-served. Delaying your FAFSA application could mean missing out on grants, work-study opportunities or even institutional aid.
Just because you're offered a certain loan amount doesn't mean you have to accept all of it. Only borrow what's needed to cover school-related costs.
Not understanding the terms of your loans can hurt you later. For example, some private loans require payments while you're still in school or have high interest rates that kick in immediately. Always compare interest rates, repayment options and grace periods to make sure the loan fits your financial situation and long-term goals.
Skipping payments or failing to keep up with your loan status can lead to delinquency, default and damage to your credit. Stay in touch with your loan servicer and if you're struggling, explore options like deferment, forbearance or income-driven repayment plans.
Scholarships aren't just for top students or athletes. There are awards for specific majors, hobbies, identities and more. Applying to even a handful could save you thousands in future debt.
Even if you do everything you can to minimize debt, paying for college can still be challenging, and you might end up borrowing more than you'd like. If that's the case, here are some tips to help manage it.
For federal loans, income-driven plans adjust your monthly payment based on your income and family size — sometimes lowering it significantly. These plans can also lead to loan forgiveness after 20-25 years of payments.
Most federal loans offer a six-month grace period after graduation. If it works for you, making small payments during this time — especially toward interest — can help reduce the total amount you owe over time.
If you have multiple loans or high-interest private loans, refinancing or consolidating might lower your interest rate or simplify your payments. Just be cautious: refinancing federal loans with private lender means giving up federal protections.
Many loan servicers offer a small interest rate reduction if you enroll in autopay. Plus, even small extra payments toward your principal can shorten your loan term and reduce the total interest you pay.
The best way is to start with free money — grants and scholarships — then explore work-study and savings, and only borrow what you truly need through federal loans.
You should start saving for college as early as possible. But it's also never too early too start. Small contributions can make a difference.
A good rule of thumb is to borrow no more than you expect to earn in your first year after graduation to keep monthly payments manageable.
Yes, it's possible by combining scholarships, grants, work-study, community college and other low-cost options — though it may require more planning and flexibility.
You can submit the Free Application for Federal Student Aid (FAFSA) online at studentaid.gov.
It is possible to negotiate your financial aid package but you may have to provide documentation to support your case.
Working a regular job while in college may slightly reduce your financial aid eligibility, depending on your earnings. However, work-study jobs don't impact your aid package.
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