How to Pay for College without Going Broke

Did you know that the average student loan debt for college graduates is about $25,000? That’s a massive burden to carry in your post-college life! Understanding how to pay for college from the very beginning is important so you are not broke when you graduate.

Get to know the four major components that go into paying for your education and then sit down with your family and create your “paying for college strategy.” It will save you from a lot of financial trouble later.

1. Financial Aid (includes the FAFSA)
Financial aid is the sum of all the money that is awarded to a student for his or her studies. This includes the money awarded by the government (both federal and state) as well as the money awarded by the school.

The money awarded by the government is processed by using your FAFSA and includes grants, subsidized and unsubsidized student loans, and work study - most of which is determined by the EFC (Expected Family Contribution) of each student.

College financial aid is money given to you by the university or college and its requirements are determined by the institution itself.

Both government money and college money are packaged and presented to the student by the university they are attending in the form of a financial aid package. It is up to the student to accept all, some, or none of the package. A student should always apply for financial aid so that she can accept all of the free money that comes in the form of grants. However, she does not have to accept the loans if she has an alternative way to pay for her education.

Keep in mind that when accepting loans there is a difference between subsidized and unsubsidized loans. A subsidized loan means that the loan is based on need and therefore does not accumulate interest while the student is enrolled at college. An unsubsidized loan means that the loan is not based on need and therefore accumulates interest until the loan is paid in full. In both cases, repayment on the loan does not begin until at least six months after the student has either graduated or stopped attending college. Both of these loans are considered much safer to accept than private loans.

Work-study is an employment program that helps students earn money for their education by working part-time.

2. Family Contribution
Your EFC (Expected Family Contribution) is the amount of money the government determines your family can afford to help you pay for college. This is determined by calculating many factors when processing your FAFSA.

Regardless of what your EFC is, in most cases, your family is able to help you in many different ways other than paying for your college education. General financial support from your family may include savings they put together for you, a monthly allowance for personal expenses, buying your groceries, or even paying for your rent. Buying clothes for you and giving you money to have dinner with your friends also counts. These are all part of your family contribution, and are ways your family can help you with the overall expense of going to college.

3. Scholarships
A scholarship is a monetary award given to a student based on merit, good scholarly standing, or other factors determined by the entity giving the award. Scholarships are awarded by entities outside of your financial aid package. Once scholarships are awarded, they are processed through the university and the amount is deducted from any loans you have been offered. Any money left over is given to the student for college-related costs outside of tuition and fees. Scholarships are not the same thing as grants, even though they are both considered free money.

Scholarships are the best and most impactful way to pay for college because the money is yours to keep and you never have to pay it back.

Who doesn’t like free money? Though it’s not really free because you have to work searching and applying to get them. There is work involved in writing essays and completing forms, but it is totally worth it! Where can you find this free money? You have to dig! That is why New Futuro created the Scholarship Tracker to help you. You can find scholarships everywhere, from your local grocer and your parents’ employer to big companies and nonprofit organizations. Like I said, you have to do some digging but you’re sure to turn up gold.

4. Student Contribution
A student’s job is to get good grades and graduate from college, right? Yes, but unless you have a full scholarship, it is also important to take responsibility for your education and pitch in. You can do so by getting a part-time job, either through work-study or an internship. Working while you’re in college also helps to give you good work experience as well as help you figure out what you really want to do once you graduate.

If, after you have all of your financial aid, scholarships, parents’ contribution, as well as your own, and you still need more money to cover your costs, there are always private loans. I don’t recommend private loans because a private loan for school is just like a car loan: you have start paying on it immediately. You are also not guaranteed low interest rates and you can’t consolidate it with your other loans to make your payments easier once you graduate.

Now you know, it’s a lot to keep track of but well worth doing it. A college education is invaluable, but that doesn’t mean you have to owe an arm and a leg to pay for it, so get to it!

Photo by NeeravBhatt

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