Before asking yourself how to pay for college, you want to make sure that you should be paying for college in the first place. Don’t worry, we’ll get to cash currying options shortly. But consider this: most people use more scrutiny when purchasing a stereo or new washing machine than they do when shopping for college.
I’m not talking about asking questions about your college’s campus, dorms, or dining hall. I’m talking about cold hard facts concerning job placement, earning potential, and career support after graduation. Before freaking out about how to pay for college, before possibly going $10,000 to $150,000 into debt, make sure that your college education makes sense. One great resource to check out is our post on the Best Paying College Degrees.
We’re not suggesting you pick a major based solely on money. But be realistic and understand that a college degree isn’t what it used to be. Paying $200,000 for an English major makes little sense if your first job out of college is going to be doing Data Entry.
How to Pay for College: Student Loans
The most popular and direct how to pay for college is, of course, to take out a loan for school. There are a number of private and federal lenders who will be very happy to consider lending you anywhere from $10,000 upwards of $150,000 for school depending on your financial needs. Be prepared to fill out a FAFSA form, or financial aid form, disclosing pretty much all the information on record about your finances, and the finances of your parents if you are applying with their help.
If you’re a young person who either comes from moderate to low income family, or if you are on your own financially, and you are wondering how to pay for college, you may actually be better off than you think. You are actually in a position to get a good amount of money from the federal government in financial aid. This aid can come in the form of student loans or even outright grants and gift amoutns.
Student loans work differently from other loans. If you want to take out a loan for a house or car, banks look at your credit history and really rake you over the coals to make sure you can pay. But because banks consider a degree an investment in long term earning potential, they are more likely to invest in you. And strangely enough, the less income you have the more you are often allowed to borrow. It is the most popular solution when people are wondering how to pay for college.
While credit has tightened in recent years, student loans are still readily available. But it’s not all rosy and lovey dovey.
1. Getting a loan doesn’t guarantee you a job, or an income. College grads are facing unemployment just as bad as everyone else right now. Just because on paper a degree has, in the past, seemed to signify a greater earning potential, doesn’t mean you are necessarily going to be able to get the income to pay it back. That’s why it is important to examine the job market before taking out a loan and freaking out about how to pay for college. Unfortunately, most students just rush into college without thinking about this.
2. Student loans can be a lifelong responsibility. A $100,000 loan can cost anywhere from $500 to $1000 a month to pay back. You can refinance and lower the monthly payments, but the lower the payments the longer the payoff period. Many grads spend 20 to 40 years paying off their student loans. And that extra payment each month can be crushing if you haven’t found a way to make that History degree translate into a good job.
3. Student loans are not forgivable in a bankruptcy. Student loan debt is your for life. Seriously. Even if you run out of money and go bankrupt, it will stay on your record and you will be responsible. Student loan debt is more serious than credit card debt, something most students do not realize.
We’re not saying student loans are bad, but make sure the degree is worth the debt. If you choose the right major and understand the job market, then getting a college degree can open you up to a promising new career with more fulfillment and earning potential. Consider your post college options long before taking out a large loan and freaking out over how to pay for college.
How to Pay for College: Grants & Scholarships
Grants & Scholarships are the “American Idol” of how to pay for college. On paper they are different, but in practice they are pretty much the same things. They are funds set up to help young people out with their education, and are typically merit based. Your “audition” is your GPA, your extra curriculars.
Grants more often come from the government or non profits. Scholarships are often from private individuals or schools themselves. There are grants and scholarships available for many different qualities. The most famous kind of scholarship, of course, is the athletic scholarship. A star wide receiver in high school rarely has to worry how to pay for college: various schools will pay for them in order to get him on the team.
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Schools have their own little agendas with scholarships. Often one is diversity. There is a desire to have a variety of races, minorities, and cultures on campuses and so often times schools will establish funds to help these students out. There are also academic scholarships and music related scholarships.
Obviously, this is a more desirable way to answer the question how to pay for college. The best part of a grant or scholarship is that you don’t have to pay it back! That naturally makes them more competitive, and less reliable than loans.
The typical way how to pay for college typically involves a mixture of loans, grants, financial aid, and scholarships.