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How do you pay for college?

How do you pay for college?

October 16, 2018
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After high school, the next step is rarely entering the workforce, but instead, it's going to college. One problem, college is expensive.

In a span of thirty years, one year of tuition at a public four-year university has gone from $3,200 to $10,000 (source).

In this article, we will review ways to pay for college and how to navigate those options.


Free Application for Federal Student Aid - Offered by the federal government for people who need help paying for college. Here’s what you have to know:

  • Demonstrate your need for financial aid
  • You must be a U.S. citizen or an eligible non-citizen
  • Have valid Social Security number
  • Apply early - use tax filings from two years prior
  • Have important docs ready
    • Social security card
    • FASFA number
    • Tax forms
    • Driver’s license
    • Federal school codes
  • Transfer or use assets in student’s name before you apply to increase chances of more aid

Here’s a step-by-step article about what things mean and how to apply - Dept. of Education

Direct Subsidized

A low-cost loan offered by the federal government.

If you are enrolled in school for at least half-time, you are not required to make payments, and the federal government will pay the interest while you are in school.

Additionally, once you finish school and have to pay the loan back, there are multiple repayment plans available. Learn more about that here.

Here’s what you need in order to qualify:

  • Undergraduate student
  • Need to show why you need the help
  • Need to be a U.S. citizen or eligible non-citizen
  • Have a high school diploma or G.E.D.
  • Enrolled at least half the time
  • Not in default with any current federal student loans
  • One fixed interest rate - 5.05%

Direct Unsubsidized

Similar to the direct subsidized loan with a few key differences.

  • One, financial need is not required, so if you come from a wealthy family, you could still qualify
  • Two, apply to both undergraduate and graduate students
  • Three, interest is not covered by the government while you are in school, so that will accrue until you start making payments

Here’s what else you need to know:

  • You need to be a U.S. citizen or eligible non-citizen
  • Have a high school diploma or G.E.D.
  • Enrolled at least half the time
  • Can’t have defaulted on any current federal student loans
  • Interest rates are fixed (5.05% or 6.6% for 2018)

Direct Consolidation Loans

Allows you to consolidate all of your federal student loans into one loan. Borrowers can consolidate once they leave school or fall below the half-time threshold. This may also give borrowers additional availability for favorable repayment terms or loan forgiveness.

The largest benefit to consolidating your loans is simplifying repayment. Instead of having multiple loans with multiple due dates, you have one.

Federal Loans

  • Direct Stafford Loan - The two loans from above are direct Stafford loans. They come in subsidized and unsubsidized.
  • Federal Perkins Loan - Low-interest loan programs for undergraduate and graduate student that represent a more urgent need for financial assistance. No longer available. Repayment must begin 9-months after graduation, if you leave, or drop below half-time status.
  • Federal PLUS Loan - Eligible for schools participating in the direct loan program (must be a graduate or Ph.D.d program). You must not have an adverse credit history. The maximum loan you could receive is the cost of attendance minus any other financial assistance you’ve already received. If you have an adverse credit history, ask an “endorser” to sign with you (basically a co-signer so they are responsible for the loan if you can’t/won’t pay).

Private Loans

As the name suggests, these are loans that are offered by private institutions, not the federal government. That being the case, there are different rules, regulations, and characteristics for private loans.

  • Interest rates can sometimes be pretty high
  • Your interest depends on your credit score (higher scores get lower rates, usually)
  • Your repayment plan could start immediately after you receive the money, depending on the lender
  • No income-driven repayment plans or loan forgiveness
  • 90% of borrowers needed a co-signer to qualify (source)
  • Difficult to discharge (get rid of) during bankruptcy proceedings

Apply for grants/scholarships

Applying for grants and scholarships can be one of the most important things you do in terms of funding your education.

There is currently over $10 billion available in scholarships. Unigo wrote a great article about the variety of scholarships available. Check it out here.

Dedicate a lot of time to applying for scholarships, it could save you thousands of dollars in tuition.


  • Don’t borrow more than you need
  • Seek out alternatives to keep costs down - off-campus housing, community college for gen. eds, and buy used textbooks
  • It'll cost you - you will have to make loan payments instead of saving for short-term goals and/or retirement
  • Stick with in-state, public universities
  • Make sure you shop around


Student loans and the debt that follows is more prominent than ever. Education is important, but it comes at a cost.

Today, people are getting married later, buying homes later, and starting families later because of student loans.

Follow these tips to help you make decisions. When you’re ready to pay your loans off, follow this guide.