How to Pay for College: 7 Financial Planning Tips for Higher Education

For many people, going to college is an exciting step toward a rewarding career. It’s a chance to learn new things, gain skills and open doors for your future. And while college can be expensive, there are lots of ways to make it more affordable. Knowing how to pay for college could reduce how much you need to borrow and make your college dreams a reality.

Whether you’re heading to college yourself or helping your child get ready for a 2- or 4-year public or private school, we have you covered. Here’s what you can do to help cover college expenses.

Tip #1: Budget and Save for College Costs

If college is still a few years away, start saving now. Set a monthly savings goal and consider opening a 529 plan, which makes qualified education expenses tax-free. If you’ve already picked a school, get an estimate of yearly costs and compare it with your savings and income. Remember to budget for all college costs, including tuition, room and board, books, transportation and personal expenses.

If you’re not sure which college you want to go to, review the differences between community colleges, in-state public universities and private schools. Each has their own unique benefits. For example, community college can be a smart way to save money by earning credits at a lower cost before transferring to a 4-year school. 

Tip #2: Start With the FAFSA

The Free Application for Federal Student Aid (FAFSA) is your ticket to getting financial help for your college education. It’s one of the first steps in figuring out how to pay for your education. Here’s why the FAFSA is important:

• It determines if you’re eligible for any federal government grants, work-study programs and loans.
• Many schools use it to decide if you qualify for their financial aid, too.
• Some scholarships require you to submit a FAFSA to be considered.

Fill out your FAFSA as early as possible. Some financial aid is awarded to students on a first-come, first-served basis, so don’t miss out on money you might be eligible for!

After you submit your FAFSA, you’ll get a financial aid award letter from each school you applied to. This letter will show you what kind of aid you’re eligible for. If you need help understanding your award letter, Navy Federal Credit Union’s student loan specialists are here to help.

Tip #3: Explore Financial Aid and Federal Programs

Beyond the FAFSA, getting financial help for college is easier than you might think. There are lots of options out there, and many of them don’t need to be paid back. Here’s what to look for:

1. Scholarships. Many scholarships focus on good grades, sports, community service and other merit-based factors. Check out our guide on how to find and apply for scholarships.
2. Grants. Another form of free money, grants are usually based on financial need. The most common is the Federal Pell Grant.
3. Work-study programs. These give you a part-time job (often on campus) to help pay for school.
4. Federal student loans. If you need to borrow money, start with federal loans. They generally offer more favorable terms and protections than private student loans.

Start by checking what your school offers. Many colleges have their own financial aid programs, especially for students from lower- or moderate-income families. Don’t hesitate to ask the financial aid office for help.

There are also lots of scholarships and grants available from community groups, businesses and organizations. Apply for as many relevant offers as you can to maximize your opportunities.

Tip #4: Consider Private Student Loans to Fill Funding Gaps

After you’ve explored scholarships, grants and federal student loans, you might realize you still need more money for college. That’s where private student loans can help cover the remaining costs of your education.

Private student loans work differently from federal student loans. They can cover up to the full cost of attendance^{Footnote 1} but might require a co-signer if you don’t have a strong credit history. Be sure to compare offers from different lenders to find the best deal. Look at interest rates, repayment terms and any special benefits each lender offers.

Tip #5: Add a Co-Signer to Your Student Loan

When you’re just starting out, you won’t have credit history to rely on. This is common, but it can make it tougher to get approved for a private student loan or get a good interest rate. A co-signer can help.

A co-signer is someone who agrees to pay back the loan if you are unable. It’s often a parent or another family member with good credit. Having a co-signer can increase your chances of getting approved and might even help you get a lower interest rate. Here are some key things to know about co-signers:

• They’re taking on responsibility for your loan, so choose someone you trust (and who trusts you).
• Some lenders offer co-signer release. This means after you graduate and make a certain number of on-time payments, you can remove the co-signer from the loan.
• Being a co-signer is a big deal, so have an honest talk with your potential co-signer about expectations and obligations.

Tip #6: Borrow Smart—Not Too Little, Not Too Much

Figuring out how much to borrow for college can feel like a guessing game. If you borrow too little, you might struggle to cover all your expenses. If you borrow too much, you could end up with larger loan payments than necessary. Here’s how to find the right balance:

1. Calculate your total costs. Add up tuition, fees, books, housing, meals and other expenses. Your school’s financial aid office can help you estimate these costs.
2. Subtract your resources. This includes savings, gifts from family, scholarships, grants and work-study earnings. The final amount is what you might need to borrow, which is called the “funding gap.”

You don’t have to borrow the full amount that’s offered in your financial aid package. Only borrow how much you really need. It’s usually better to err on the side of borrowing more rather than coming up short. You can always return any extra loan money you don’t use.

Obtaining a loan for college can be a savvy investment in your future. By borrowing wisely, you’re setting yourself up for financial success after you graduate from college. If you need help figuring out the right amount to borrow, don’t hesitate to contact your school’s financial aid office.

Tip #7: Keep an Eye on All Your College Costs

College expenses go beyond your tuition. Being aware of all your costs can help you budget better and potentially save money. Here are some areas to watch:

1. Housing. Compare the costs of living on-campus, off-campus or at home if possible. Use our college housing comparison calculator to see which option is best for your budget.
2. Textbooks. Look for used books, rentals or digital versions to save money. Some classes might even have free open-source textbooks.
3. Meal plans. Choose a meal plan that fits your eating habits so you don’t end up paying for food you won’t eat.
4. Transportation. Factor in costs for a car, public transit or flights home if you’re going to school far away.
5. Personal expenses. Don’t forget about things like laundry, toiletries and entertainment.

While you’re looking at expenses, consider the opportunities to earn money during college. Many schools offer work-study programs or on-campus jobs with flexible hours. You might also consider part-time work or freelancing in your field of study. Every bit of income can help reduce what you need to borrow.

The goal isn’t to eliminate all expenses. College is about learning and growing, which sometimes comes with costs. The key is to be aware of where your money is going.

Carefully Review Your Options to Decide How to Pay for College

There are lots of options for student and parents to finance higher education, including college savings accounts, scholarships, federal student aid and private student loans. If possible, plan ahead to pay for college to reduce your loan debt after you graduate.

Navy Federal supports students and their parents with plenty of college planning resources as well as private student loans and education savings accounts. Reach out to us today and we can assist you in your college planning journey.