How to Pay for College: The Steps You Should Take

The rising costs of higher education are a growing concern for students and families trying to figure out how to pay for college. Even if you consider community colleges or in-state, four-year universities, rising tuition has made it harder to afford college without the financial strain.

Planning and saving for college sooner rather than later can pay off financially and emotionally. Our guide provides tips on how to pay for college and prepare for all the expenses associated with higher education.

How to pay for college: 9 steps

Most good things start with a plan, and college preparation is no different. Figuring out how to pay for college may feel overwhelming at first, but if you tackle each goal individually, make a plan, and stick with it, you’ll realize you’re capable of more than you think. 

Here are 9 steps you can take to pay for college. Not everyone will take all of these steps, but they encompass several methods you can pursue to fund your education. 

1. Understand your college costs
2. Save for college
3. Research college scholarships and grants
4. Apply for federal work-study or a part-time job
5. Seek employer tuition assistance
6. Consider a payment plan
7. Apply for federal student loans
8. Take out private student loans
9. Explore alternative loans

1. Understand your college costs

Once you decide where you’ll attend, your first step is to find out how much college will cost. The Department of Education’s Net Price Calculator can help you estimate tuition, fees, and living expenses for your school’s program. 

As of 2024, the average cost for a first-year undergrad to attend an in-state four-year public college is more than $26,000, or about $2,170 monthly. If you’re still undecided on where you’ll attend, start with this number as your general budget. 

2. Save for college

Saving for college should be your priority. Scholarships and grants—more on those later—are never guaranteed, and they will most likely not be enough to cover your education costs. 

There are several types of savings accounts to choose from:

• An education savings account or 529 plan
• Taxable investment accounts
• Matched savings account/individual development account (IDA)
• Certificate of deposit (CD)
• High-yield savings account 

If you have a source of income, you’ll need to figure out a budget by reviewing how much you make and spend each month. Whatever you may have left over should go into savings every month, even if that number is nowhere close to the amount you need. 

I recommend parents open a 529 plan as soon as you have your child’s Social Security number. I also recommend discussing college plans with grandparents. Often they need to spend down their estate for tax reasons and are more than happy to participate in funding college expenses.

Catherine Valega

CFP®

3. Research scholarships and grants

Federal Pell Grants and state grants don’t need to be repaid, making them essentially “free money.” 

You can check out our guide and speak with your high school’s guidance counseling office, your college’s financial aid office, your employer, and local municipal and community organizations to find ones you might qualify for. 

4. Apply for federal work-study or a part-time job

The work-study program is federally funded and offers part-time work, such as on-campus jobs, to students with financial need. You can check with your college or university’s financial aid office to learn if your school participates in the work-study program.

Because the work-study program is based on financial need, it may limit your work hours. You might want to consider a part-time job instead to help pay your way through school.

5. Seek employer tuition assistance

Many employers, including some hospitals, help their employees pay for tuition. Check with your human resources department and ask if tuition assistance is available, or consider applying for a job at a company offering tuition assistance. 

Education benefits are also available for military service members and nurses. 

6. Consider a payment plan

Not every school offers payment plans, but ones that do often set up these installments interest-free. There’s no need to take out a loan or get a cosigner. You can find out from your school’s financial aid office if it offers a payment plan. 

7. Apply for federal student loans 

These widely available loans are offered to undergrads, graduate, and professional students, and parents of students. 

Apply for Direct Subsidized Loans before applying for Direct Unsubsidized Loans or Parent PLUS Loans because Subsidized Loans have interest covered by the U.S. Department of Education. Apply by filling out the Free Application for Federal Student Aid (FAFSA).

8. Take out private student loans

These are loans offered by private lenders. They generally require a cosigner or a minimum income level and good credit but offer more favorable terms, such as shorter payoff timeframes. 

However, private student loans also lack the repayment benefits of federal loans, including income-based repayment plans, deferment, and student loan forgiveness.

We’ve found some of the best private student loans out there. If you want to explore, be sure to do so only after you’ve checked into your other options above.

9. Explore alternative loans

Peer-to-peer (P2P) lending and income-share agreements (ISAs) are alternative ways you can borrow money for college. 

Through online P2P crowdfunding platforms, investors fund your loan, which you repay with interest. Fair warning: they don’t usually offer much borrower protection. 

An ISA is an agreement between you and an institution—generally, schools and training programs—that states it will fund your education costs upfront. In exchange, you agree to pay a percentage of your future earnings for a set timeframe. We’ve dug into how they work, if you want to learn whether they’re right for you. 

I do not recommend taking on more debt for your entire schooling than you expect to receive in your first year’s salary. For example, an engineer may be able to afford more school loans than a sociology major.

Catherine Valega

CFP®

How can you cut costs to pay for college?

You might feel stressed about figuring out how to pay for college on your own, and the possibility of getting stuck with years or even decades of loan payments may be scary. But there are things you can do to help cut costs. 

1. Consider attending a different school

There is the right school at the right price for everyone. Just because you were accepted to your dream school does not mean you should attend if you’ll be debt-ridden for the next several decades.

Also, many people join the military for several years to be able to take advantage of the GI Bill upon termination of their service.

 Going to a community college before transferring? Will you stay in-state or go out of state? These factors will drastically change how much college will cost you. 

According to the Education Data Initiative, the average in-state college tuition is $9,678 compared to $27,091 out of state. But taking general education classes at a community college can be cheaper—without skimping on the quality of your education.

2. Cut back on expenses you can control

Living on campus or off? For how long? Will you cook your own meals or sign up for a meal plan?

There’s no avoiding housing and food expenses, but you can decide to make these essentials more affordable. For instance, the average college student will spend $250 on groceries per month, according to Education Data Initiative. You could spend almost twice as much on a meal plan.

3. Explore alternatives to achieve your goals

Many people are starting to realize that college isn’t for everyone. And that should be okay. 
There are different ways to succeed, so don’t feel pressured to pursue a post-secondary degree if it’s unnecessary. Many careers don’t require going to a four-year university, including cosmetologists and pilots.