How to Pay for College

Many parents never get around to proactively saving for their child’s college tuition. In fact, even those parents who have set aside money for school often have saved less than $10,000.

That amount alone won’t pay for four years of college. According to the College Board , the average tuition, fees, room and board in 2020-2021 for a four-year private college is $54,880, $43,280 for a public four-year college (out-of-state) and $26,820 for a public four-year college (in-state).

Applying for Scholarships

Many colleges and private organizations offer merit-based scholarships. This means money is awarded based on academic or athletic ability, not financial need. The College Board maintains a database of scholarships from more than 2,200 programs, totaling nearly $6 billion of potential scholarship funding.

Pell Grant program , but there are other federal student grants available.

To qualify for a Pell Grant, you must be a U.S. citizen attending either a two- or four-year undergraduate program. If you have already earned a baccalaureate or professional degree, you won’t be eligible for a federal grant, so this link has four simple steps if you’re looking for ways to pay for graduate school.

Pell Grant amounts are based on financial need, the cost to attend your college, and your enrollment status. The amount awarded will vary based on those factors, but the current maximum award is $6,495 for the 2021-2022 school year. To apply, you will need to complete the Free Application for Federal Student Aid (FAFSA®) .

Many states also distribute grants. The National Association of Student Financial Aid Administrators maintains a database of state financial aid programs to help you pay for college.

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Asking the College for More Money

While it may seem like a bold move, one strategy for obtaining additional student aid might be asking the college to provide a larger financial aid package. Appealing a financial aid decision is a possibility, but there are no guarantees. Financial aid awards are usually based on information provided on the FAFSA, and in some cases changes in financial circumstances can lead to an amended financial aid award. Some colleges and universities might also be willing to match a more competitive financial aid offer from a comparable school.

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Applying for a Tax Credit

Qualifying students—or their parents, if the student is a dependent—may claim the American Opportunity Tax Credit (AOTC) for up to $2,500 for each eligible child attending college. To be eligible, the student must:

•  be enrolled in a degree program at least half time for one academic period.
•  have not finished the first four years of higher education at the beginning of the tax year.
•  have not claimed the AOTC (or the former Hope credit) for more than four tax years.
•  have not had a felony drug conviction at the end of the tax year.

Another tax credit, the Lifetime Learning Credit (LLC) , is also available for qualifying students, but cannot be claimed for the same student on an individual tax return. The maximum benefit of the LLC is $2,000 per tax return, and there is no limit on the number of tax years the credit can be claimed.

Requirements for either of these tax credits may change from year to year, so it’s recommended to check the most recent information before claiming the credit.

Looking at Student Loans

If you aren’t awarded a scholarship or grant, there are a variety of student loans you can apply for to help pay for college, including federal and private loans.

The Federal Direct Loan Program offers both subsidized and unsubsidized loans. Subsidized loans are awarded based on financial need. The interest accrued on a subsidized loan is covered by the Department of Education while the borrower is enrolled at least half-time, during the grace period, and during periods of deferment. Unsubsidized loans don’t have a financial need requirement, and borrowers are responsible for paying the interest on an unsubsidized loan once it’s disbursed.

If you’ve already exhausted your federal aid options, you may also want to consider a private student loan, which is not subsidized or need-based and may require a cosigner. Banks and financial institutions, private organizations, and even some colleges offer student loans with varying interest rates and loan terms.

The Takeaway

A good place to start may be speaking with a guidance counselor and doing some research about financing college costs that works best for the student and their family. No-fee private student loans from SoFi may be an option to help students pay for school after all federal student aid options have been exhausted. The application process can be completed easily online and you can see rates and terms in just a few minutes. Flexible repayment plans allow borrowers to select the option that best suits their budget.

Learn more about private student loans with SoFi.

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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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