How to avoid going broke paying for college!

A cheap state school cost $25,000 and the average private college is $58,600. That makes college the second most expensive thing you will ever pay for.

To pay for college, the best approach is to start with "free money" like grants and scholarships, then explore federal aid options and savings plans, and use private loans only as a last resort.

.1. File the Free Application for Federal Student Aid (FAFSA)

Every major college planning website will say, "Filing the FAFSA is the most important step for accessing financial aid, as it determines your eligibility for federal grants, work-study, and federal loans. Many states and colleges also use FAFSA data to award their own aid." The second part of that paragraph is true! But the first part is not.

The fact is that most students do not get any serious money from FAFSA. Period. But that doesn't mean that you don't need it. As long as you understand the reality behind FAFSA, then you will probably find it a necessary tool. What is that reality? First, federal aid has been nearly stripped to it core. It's just not there. And in about half the states, aid had been striped as well. You have to be in the very bottom of wage earners and in the very top of the applicant pool to get your hands on any significate FAFSA money.

But the other side of the coin is that just to get basic merit scholarships, many universities asks families to complete the FAFSA. Even if you are a top contender for merit scholarships, athletics grants, or endowments, they will want you to fill out the FAFSA so they can make sure that the money they are doling out to you can't be recouped through out agencies.

So go ahead and do the FAFSA but do it right and do it early

• Fill out the FAFSA early: Submit the form as soon as it becomes available each year, usually on October 1, since some aid is awarded on a first-come, first-served basis.

• Don't pay for help: The FAFSA is free to file, so you should never pay a service to complete it for you. 

2. Search and apply for grants and scholarships

Grants and scholarships are forms of financial aid that do not need to be paid back. 

• Grants: These are often based on financial need. The federal Pell Grant is a common example for low-income students. Some states offer their own grant programs, like the Cal Grant in California.

• Scholarships: These are awarded based on various factors, including academic merit, athletic performance, musical talent, or volunteer service. You can search for scholarships through your school, national databases, or private organizations. 

3. Consider federal work-study

The federal work-study program provides part-time jobs for college students with financial need. 

• Flexible work: Work-study jobs are typically on campus and tailored to fit a student's class schedule.

• How to apply: You must submit the FAFSA to be considered for federal work-study. 

4. Utilize personal or family savings

If you or your family have savings, using them can reduce the amount you need to borrow.

• 529 plans: These are tax-advantaged investment accounts designed specifically for education savings. Earnings grow tax-free, and withdrawals for qualified expenses are not subject to federal income tax.

• Other savings: Other accounts, like a Roth IRA or standard savings account, can also be used, though they may have fewer tax advantages. 

5. Take advantage of employer tuition assistance

Many employers offer tuition assistance or reimbursement programs that can help cover your college costs. Some companies, like Target, have tuition-free degree programs for their employees. Check with your human resources department for available benefits. 

6. Borrow with student loans (as a last resort) --- And stick with federal loans!

Student loans should be considered only after exhausting other forms of aid, since they must be repaid with interest. 

• Federal student loans: These offer more flexible repayment options and protections than private loans.

  • Direct Subsidized Loans: For undergraduate students with financial need; the government pays the interest while you're in school.

  • Direct Unsubsidized Loans: Available to undergraduate and graduate students regardless of financial need, but you are responsible for all interest.

  • Direct PLUS Loans: Designed for graduate students and parents of undergraduates, requiring a credit check.

• Private student loans: Offered by banks and other financial institutions. All of the advisors in our program would avoid private student loans at all cost. However, people still jump in despite the plethora of warnings from all sides. So if you are determines to take on private loans they should only be used to fill funding gaps after maximizing federal loans, as they typically offer fewer borrower protections.

FACTORS INFLUENCING REPAYMENT LENGTH:  

• Initial Loan Balance: A larger principal amount will naturally require a longer repayment period. 

• Interest Rate: Higher interest rates on private loans can significantly increase the total cost and extend the repayment term. 

• Repayment Plan Options: Unlike the federal system, private lenders offer different repayment terms, and you should discuss these options with your lender. 

• Statute of Limitations: This legal time limit varies by state and dictates how long a lender has to pursue legal action to collect an unpaid debt. 

• Default: If you default on your private loan, it can remain on your credit report and impact your finances for an extended period

7. Choose an affordable school: THE BEST CHOICE OF THE BUNCH!!!

The total cost of attendance varies significantly between institutions. 

• Start at a community college: Many students save money by attending a community college for their first two years and then transferring to a four-year university.

• Consider public universities: In-state public universities are often the most affordable option for residents due to discounted tuition.

• Compare net price: When comparing schools, look at the net price (cost after grants and scholarships) rather than just the sticker price. The school with the highest sticker price may offer the most aid. 

8. Work while in school (not so easy these days)

In addition to federal work-study, you can get a part-time job or freelance work to help cover daily expenses and reduce the need for loans.