4 Ways to Save Money on College

Not Enough College Savings? Here's What to Do

Campus von Harvard
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You never imagined college would be so expensive.  

You had a rough idea that you should be saving something for college, but you weren't sure how much.

Now that your child is about to go on to complete their higher education, you’re realizing just how substantial their bills are going to be...and how little you've saved towards this expense. 

What can you do? Here are four ways to save money on college.

1. Apply for Financial Aid

Fill out your financial information on the Free Application for Federal Student Aid (FAFSA). Our federal government and schools consider it to be the family’s responsibility to pay for college, and they use this form to determine how much aid you'll receive.

Filling out this form does not and will not bind you to any loans taken out by your student. However, it's necessary paperwork that will determine their eligibility for aid. If you refuse to help your child fill out the form, they will only be eligible for an unsubsidized Stafford loan. Unfortunately, there are limits to how much they can borrow.

By filling out the FAFSA, you can determine a metric that’s known as your expected family contribution, or EFC. This is the official amount that you or your family are expected to contribute toward your child’s education. Starting with this knowledge will allow you to properly plan for what’s ahead.

2. Meet With College Financial Aid Officers

The sticker price of a college or university isn't necessarily the price you’ll be paying. In many cases, the ultimate price is substantially less than sticker price.

Don’t be afraid of certain private colleges or schools with a high sticker price. Often times, these schools offer scholarships and grants that make the final price of attendance equal to or cheaper than a public school that has a lower sticker price.

In other words, sometimes a private school will be cheaper than a state school after discounts and aid are taken into consideration. Other times, this isn't the case.

The takeaway lesson is that your child should apply for any college or university that he or she wants regardless of its sticker price. Once your child gains acceptance to that school, then it’s time for you to start chatting with the financial aid office about what your actual price will be.

You may be surprised to find that Ivy League colleges are extremely low-cost or even free for low-income families because of the value of their need-based scholarships and grants.

3. Run a Comprehensive Scholarship Search

There are many websites that aggregate scholarship opportunities and allow students to search for merit-based or special interest-based scholarships.

Your child should be applying for scholarships like it’s his or her job. Instead of working 10 hours a week flipping burgers at McDonald’s, your child should be applying for scholarships. There’s a much bigger return on investment there.

4. Be Wise About Loans

Guide your child through the loan process and help them understand what they’re signing. A good rule of thumb for taking out a student loan is to borrow no more than what their first-year starting salary will be.

For example, if they expect to earn $35,000 per year out of school, they should borrow no more than $35,000. This way, they can pay back 10 percent of their salary annually (not adjusting for raises) and repay the loan in ten years.

Conclusion

“Tempus fugit” – time flies. That should be written on every high school diploma.  

It feels like your children were just taking their first steps. Now they're driving cars, enjoying prom, and ready to head off to college.

Yes, they face looming bills. But that's part of adult life. Plan in advance, create a budget, and explore scholarships and aid.

Use this as a teaching tool to help your child learn money-management skills. And relax. These next four years will pass by in a flash.