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How to pay for college, given rising tuition levels and student debt.

Over the past four decades, higher education costs have soared three-fold. Not only have expenses outpaced the cost of living, they have also risen higher than median family incomes and medical care costs. Today, student debt in the U.S. exceeds $1.7 trillion, which is more than all credit card debt combined.

As costs continue to rise, the bigger question is how to pay for higher education. For many, this falls heavily on student loans and family assistance. On top of this, some begin saving years in advance to cover the myriad of college expenses.

This article will provide an overview of strategies for paying for college, from choosing the right school to qualifying for sources of financial aid.

Key Takeaways

  • Creating a strategy for affording college is critical, especially with college costs rising faster than median family incomes and medical care costs.
  • Tuition is rising at about twice the rate of inflation.
  • Strategies can range from carefully choosing the right school, working part-time, and researching scholarships, grants, and other sources of financial aid.
  • In-state public school tuition is far less expensive than private school costs, averaging a third of the costs for a four-year enrollment period at $10,560.
  • Two-year colleges are cheaper still, averaging $3,770 for in-district students.

Average Costs of College

For the 2020–2021 academic year, undergraduate tuition and fees, not including room and board, for an in-state four-year public college rose 1.1% from the previous year to an average $10,560, according to College Board. At a private nonprofit four-year college they rose 2.1% to $37,650. Two-year college tuition averaged $3,770 for in-district students, a gain of 1.9%.

Often, the financial aspects are daunting. As a result, putting together a strategy to afford college can help prepare for the years ahead.

How to Pay for College

Here are some tips for fitting higher education costs into your budget.

1. Choose Your School Wisely

In-state public schools—or a public school in a surrounding state that has reciprocity for reduced tuition—costs much less than an out-of-state public or private school. If you are not satisfied with the quality of the state schools where you live, consider moving to a state with a school that you prefer and establish residency.

To establish residency, you will have to meet strict requirements that vary by state and sometimes even by the school, but this may be worth it for the savings. Most states require you to live in the state for at least one year to be eligible, but there could be other criteria to meet.

In California, for example, it is difficult for students who do not have a parent living in California to establish residency before their mid-20s. In addition to living in-state for 366 days immediately before requesting resident status, potential students must provide documentation demonstrating an intent to make California their permanent state of residence such as a driver's license, ownership of property, or steady employment and financial independence.

If you can wait it out and meet these criteria, it is possible to attend quality schools at in-state rates.

2. Research Scholarships and Grants

Apply to schools where you have unique characteristics they seek. For example, you might have an ethnic background that a school is looking for, a compelling academic expertise, or excel at a sport or musical instrument that makes you stand out. Schools that see you as a valuable addition due to an unusual skill—or have bequests that support students with your characteristics—may provide a scholarship. Also look for national-level grants, such as the Pell Grant, which are awarded to students that have financial need, to see if you qualify to apply.

Another tactic is to work in a field where you may be paid to go to college. Some companies provide tuition reimbursement or support for advanced training. So does the military—and some of those benefits are also available to spouses and dependents of service members.

A third technique is to look into an income share agreement. These plans lend you money now, in return for a share of your future income for a specified period of time. These plans differ according to your major and your college. However, some plans have been accused of racism in their offers, with lenders treating students attending historically Black colleges and universities differently.

3. Consider the Cost of Living

Keep in mind that housing and other living costs will vary by location. If you choose to live off-campus, your living expenses are typically much less. Geographically, an apartment in New York City will be much pricier than an apartment in the Midwest, and the college where you obtain your undergraduate degree can sometimes influence where you will end up working and living after school.

Therefore, consider where you want to live after graduating and the cost of living in that location. If possible, it should be a place where you would like to live, the cost of living is affordable, and where your school will be a recognizable name that will allow you to get more mileage from your diploma. Various branches of the University of California may be considered terrific schools in the West, but may not be held in the same high regard in New York.

4. Find a Job With the Most Impact

Make your after-school and summer jobs count. For the most impact, consider looking for high-paying work. To find high-paying work—particularly in the summer when you may be free during business hours—students can consider a number of options. For instance, seek out office jobs through temp agencies. Temp agencies do most of the job hunting work for you, and the office jobs they offer tend to pay above minimum wage, provide work experience closer to the situations you'll encounter post-college, and may give you connections that will help you land a meaningful internship or your first salaried position. Also, despite what the name implies, you can find both short and long-term jobs through temp agencies.

If you cannot get a high-paying job, get a job that will help keep your living expenses down. If you work at a bakery, for example, any unsold goods at the end of the day may be fair game for employees since the business cannot sell day-old bread. Another possibility is to find a campus job that offers perks. If you can get a job in your school's residential life office, you may be able to get a discount on housing during the school year or the summer.

If you are still in high school, start working now and save your paychecks for college. Presumably, you are still living at home, which is low cost, and you probably do not have high living expenses eating into your earnings as you will later on. Check if your high school has a program that will allow you to leave school at noon every day to go to work during your senior year. This will increase your job options—including the possibility of a higher paying job—and allow you to work more hours.

5. Be Flexible With Your Schedule

Some college programs, such as engineering, are more intensive than others, making it challenging to work while in school. For these programs, it is possible to consider attending school part-time so you can still work part-time. Even if your program is not overly demanding, attending school part-time can help you spread out tuition costs and free up more time to work. However, part-time students may not have the option of living on campus, which can make it more difficult to be involved in the social aspects of college. Also, if you have student loans that require you to be in school at least half time, be careful to meet these requirements so you don't trigger early repayment of your loans.

Another option is to take a year or two off after high school to work full time so you can save up enough money to make school affordable. If you don't want to postpone college, you could take your classes during evenings and weekends and work full-time during the week. This strategy will mean that your degree will take more than four years to complete, but it can be easier to budget, and you will gain valuable work experience as you go. 

6. Qualify as an Independent Student

With the high cost of education, some parents may not be able to make significant contributions to a child's higher education. If you are older and meet the requirements, you may qualify as an independent student as defined by the Higher Education Act, which has a different definition of "dependent" than the Internal Revenue Service (IRS). The requirements to qualify as an independent student are the following:

  • 24 years or older by December 31 of the award year
  • Orphan or ward of the court
  • Armed Forces veteran or serving actively
  • Graduate or professional student
  • Married
  • Dependents other than a spouse
  • Student for whom a financial aid administrator makes a documented determination of independence because of other unusual circumstances

Being an "independent student" under the Higher Education Act means that you could be eligible for financial aid because the financial aid formulas applied to this group do not take parental contributions into account.

How Fast Is Tuition Growing vs. Wages?

Wages have been growing in the 3% range for several years, while tuition gains about 8% each year.

How Is Someone Supposed to Afford a College Education?

Create and implement a strategy, with the most important rule being to start saving early. Other rules include getting up to speed on savings programs like 529s, in addition to researching loans and grants.

Does School Location Make a Difference?

In-state tuition is considerably less expensive than out-of-state and far less than private schools. Attending a two-year community college in your district is another way to save costs on the first two-years of higher education.

The Bottom Line

With costs rising higher each year, the financial burden of college can seem difficult to afford. Yet a number of strategies, such as starting school later or staying in-state, can help make these costs more manageable. Like many other areas, planning early, remaining focused, and seeking out a range of solutions can help with paying for college.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Bureau of Labor Statistics. "Consumer Price Index."

  2. Finaid.org. "Tuition Inflation."

  3. College Board. "Trends in College Pricing."

  4. FinAid. "In-State Tuition and State Residency Requirements."

  5. University of California. "Residency Requirements."

  6. Military One Source. "Military Services Education Assistance Programs."

  7. Student Borrower Protection Center. "Inequitable Student Aid," Page 15.

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