If your child is college bound, you probably have questions — including how to pay for their higher education. What may surprise you is how many different sources you’ll draw from to cover tuition, room and board — plus expenses like books, fees, travel and more. A recent study revealed over a dozen funding sources parents used to help fund their kids’ education. According to the College Ave Student Loans survey, 97% of parents said they’re currently helping — or planning to help — their child pay for college.
Here are the most common ways to cover the biggest investment you’ll make in your child’s future.
1. The FAFSA
The first step to obtaining financial aid is filling out the Free Application for Federal Student Aid (FAFSA) at FAFSA.gov. Filing the FAFSA as early as possible each year is crucial, as some aid is first come, first served. Information you provide on the FAFSA determines your child’s eligibility for certain grants, work-study, federal student loans and more.
2. Scholarships and grants
In the survey, 70% of parents reported their children were using scholarships or grants to help pay for their education. How do you tap into this vital source of funds? First, by filling out the FAFSA to access government-funded grants or school-based scholarships.
However, many scholarships are available from community organizations, your home state or online sources. Your child should ask their high school guidance counselor and their college’s financial aid office about other opportunities. Then check out websites like Fastweb, Cappex and College Board’s Big Future. Not all opportunities are scholastic in nature; many are based on things like extracurricular interests, where you’re from or even chance. For example, you can apply for $1,000 monthly scholarship sweepstakes at CollegeAve.com.
Like scholarships, grants do not need to be repaid. Some, like government-funded need-based Pell Grants, will be made available to you by filing your FAFSA. Others may be state-based, so visit your state’s Department of Education website.
3. Savings and income
In the College Ave survey, 62% of parents cited regular savings and income as funding sources for their child’s education, with 40% mentioning their 529 savings plan. Use the time now to review your budget and identify where you may find extra money to put toward college expenses. You may also find that you don’t have as much flexibility in the budget. Have a candid conversation with your child now about financial concerns which can affect school choice and whether the student must help contribute to their education.
4. Student contributions
Some students may have money saved from working during high school that can help pay for expenses. For many students, holding a part-time job while in college will also help cover costs. Some students also consider working full-time jobs over the summer. As they get older, your child may also look for paid internships in their career field. The study found that 37% of families drew from a student’s job to help with finances. Many students qualify for part-time work-study campus jobs by filing the FAFSA.
5. Federal student loans
Over half (55%) of parents surveyed said student loans helped pay for their child’s education. How do you qualify for a federal student loan? You guessed it: the FAFSA.
“Take out federal loans in the student’s name first, as these come with low fixed interest rates and unique benefits, like flexible, income-based repayment plans,” said student loan expert Mark Kantrowitz. “But federal student loans have annual limits, so you may need additional funds if there’s a gap between what you can borrow and your total cost.”
6. Private loans
Private student loans can help bridge the gap between financial aid your family receives and the amount you need to cover remaining expenses. Use the student loan calculator at CollegeAve.com to look at possible monthly payment, private loan interest rates, and repayment terms.
You may also consider private parent loans, if you have strong credit and are able to take on the debt. Private parent loans such as those at College Ave, offer a choice of fixed and variable rates and no origination fees, unlike federal parent PLUS loan options.
“When looking for a lender, ask questions about the terms of the loan,” said Joe DePaulo, co-founder and CEO of College Ave Student Loans. “Make sure you understand everything from the interest rate to the terms of repayment, so you can get the best option for your family.”
For more information and tips about financing your child’s college education, visit CollegeAveStudentLoans.com.