Finding the Funds to Pay for a College Education

Finding the funds to pay for your child's college education is like filling a glass. The full glass represents the cost of education at any one school, which includes tuition, fees, room and board, books, transportation, and personal expenses.

Meeting college expenses

To the fill the glass, the first ingredient is what you and your child have to contribute from your own pocket, which is determined by your student aid index (SAI) that is calculated by the FAFSA. This contribution can come from money in a checking or savings account, or from assets, such as a 529 plan, Coverdell education savings account, or brokerage account.

The second ingredient may come from financial aid. This might include loans, grants, scholarships, and/or work-study funds from the federal government, colleges, and/or independent organizations. In a perfect world, you want to maximize grants and scholarships while minimizing loans.

Your child may not receive all the financial aid he or she needs to cover 100% of expenses. If so, you'll have to top off the glass with a third ingredient. This can include more of your own funds in the form of current income, additional savings or assets, or a parent loan, for example a parent PLUS Loan or a home equity loan.

Maximizing grant aid

The federal government offers two main grants — the Pell Grant and the Supplemental Educational Opportunity — but these grants are only available to students with the greatest financial need (as determined by the FAFSA). The maximum Pell Grant for the 2024-2025 year is $7,395.

For additional (and potentially larger) grant awards, look to individual colleges, where many awards can be in the tens of thousands of dollars. Colleges can award grants on the basis of need or merit. As college costs have soared, the income thresholds that many colleges use to award grants have made even upper-middle class families eligible for need-based college grants. Using a net price calculator on a college's website is a good way for families to get an estimate how much grant aid (need-based or merit-based) a student might be eligible for at a particular school.

Creative cost-cutting options

If college costs are simply too high for your family's budget even after financial aid is factored in, consider the following potential cost-cutting measures:

• Have your child attend community college for two years, and then transfer to a four-year college
• Explore accelerated programs where your child can graduate in three years instead of four
• Encourage your child to become a resident assistant (RA) in junior and/or senior year to save money on housing and food
• Have your child live at home for one or two years to save money on housing
• Have your child take a gap year to work for a year before starting college
• Explore trade/vocational schools, online learning, and certificate programs