If you have a high schooler who is preparing to head off to post-secondary school, you might be questioning how to pay for college. With the national student loan debt sitting at a high of $1.58 trillion, it's important to know all of your funding options.
Here we take a look at the different ways to pay for college and the pros and cons associated with each.
The best way to pay for college and avoid student debt is to start saving early. Parents who can afford to put some money aside can start funneling contributions into a 529 college savings plan as soon as possible. Even if you can only afford a little bit each month, if you start early, you may surprise yourself with how much you save before your child is ready for college.
Students in high school can also help by getting a part-time job and saving their money for college. Every little bit helps. The benefit of using savings for college is it helps to avoid taking on student loan debt.
A grant is a form of financial aid used to help pay for college. Grants can come from a number of sources, including the federal or state government, an educational institution, or a private organization. Grants are often awarded to students based on financial need.
The benefit of a grant is you usually don't have to pay the money back. Yet, there are some exceptional circumstances. For instance, if a student receives a grant for a particular program and then withdraws early and doesn't finish.
Scholarships are awarded by schools, employers, private companies, or social organizations. While many scholarships are allocated based on academic achievement, each scholarship uses different criteria to determine who should win the money.
The best part of a scholarship is that you don't have to pay the money back. It's essentially a gift. However, it does take time and effort to apply for scholarships. Each scholarship will have its own set of applications requirements that the student must fulfill.
Student loans can come from the government or a private lender like a bank. In general, federal student loans have more benefits than a loan obtained from a bank or financial institution, including lower interest rates, graduated repayment options, and even deferment if needed. It's important to do your research before taking on any student loan.
The benefit of a student loan is it can help those with no other financial options to pay for college. The drawback of a student loan is it has to be paid back in full and with interest.
How to pay for college?
There are several ways to pay for college, each with its own pros and cons. The best approach, if possible, is to save early and often to avoid student loans.
If student loans are necessary, you can help your child develop a repayment plan to ensure they stay on track and pay off their debt as soon as possible.
Preparing for college expenses is all about smart money management, something GoHenry can help with. You can try GoHenry, free for 30 days and cancel anytime.