How To Pay For College Without Parents’ Help
Paying for school is daunting enough when you have the financial support of your family. But for students whose parents can’t or won’t contribute to expenses, figuring out how to pay for college on your own becomes a whole different challenge.
In this guide, I’ll lay out everything you need to consider about how to pay for college without parents and all the steps you need to take.
Seek Out Scholarships And Grants
Parents can find scholarships and grants that their children can apply for online. There are many scholarships that are either based on financial need or merits such as academic achievement. The financial aid office of a college or university has information on how to apply for a scholarship or grant. Make sure you connect with a financial advisor if you have any more questions.
The U.S. Department of Labors free scholarship search tool, federal agencies, state grant agencies, religious or ethnic organizations, foundations, local businesses or civic or community groups are also good resources. Many employers also provide scholarships to the children of their employees.
How Do Parents Pay For College If They Cant Afford It
Your child gets into college maybe even their top choice and you are thrilled. There’s just one problem: you don’t have enough saved up. You want to help pay for their education but can’t afford to. What options do you have?
Of course you can encourage your child to apply for scholarships and grants to help offset the cost of school. But what can you do if you still can’t afford college?
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How Parents Can Pay For College Using Private Student Loans
Private student loan rates can be lower than federal loan rates if you have good credit and an income that allows you to handle the monthly payments with ease. Each lender has its own requirements, though, so its important to do your research and shop around.
You might also be able to access other features and terms through private loans. When you apply for private loans as a parent, make sure you understand the implications and compare your options.
The reality is a parent PLUS loan isnt always the way to go, so get quotes from different lenders and compare them to PLUS loans before you decide.
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Viewpoint : Parents Should Not Be Responsible To Pay For College
Most parents want their children to be safe, successful, and financially sound. But does that require them to foot the full bill for their childs college education especially when paying for college often includes taking out loans? That debt burden can be a financial nightmare for parents who are trying to manage their own expenses while saving for retirement.
In these cases, some experts believe parents should say no to paying for college. These experts say that taking responsibility for funding their own education helps young adults learn how to be smart consumers. For example, when faced with the reality of the price of college, students can learn how to think creatively in order to afford their education. Deciding to pursue part of their program at a less-expensive community college, working part-time while taking classes at night, or choosing a more practical major can help. Plus, while a student can borrow money for school, his or her parent cannot borrow money for retirement.
Still, while one can argue there are benefits to students funding their own education, it often seems colleges expect parents to foot the bill for a college degree.
Should parents be required by the government to pay for their childs education? Tippett says no.
First off, not every family could afford to pay, she explains. And, most importantly, not everyone needs to go to college or straight to college out of high school.
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Tuition Charges Covered For Parents With Income Below $150000
For parents with total annual income below $150,000 and typical assets for this income range, the expected parent contribution will be low enough to ensure that all tuition charges are covered with need-based scholarship, federal and state grants, and/or outside scholarship funds, when students are living on campus.
Families with incomes at higher levels may also qualify for assistance, especially if more than one family member is enrolled in college. We encourage any family concerned about the ability to pay for a Stanford education to complete the application process. If we are not able to offer need-based scholarship funds we will recommend available loan programs.
These levels have been set based on typical cost of living in the United States. These same levels may not apply to families living outside of the United States aid eligibility will be determined based on individual family financial circumstances.
Take Out Private Loans
If you still need more money after youve maxed out your federal student loans and applied for more scholarships, private student loans may be the next best option.
Private student loans usually have higher interest rates and fewer repayment and forgiveness options than federal loans. In 2020, the interest rate for federal undergraduate student loans was 2.75% while the rate for private student loans varied from 3.53% to 14.50%.
Private lenders have higher loan limits than the federal government and will usually lend the cost of tuition minus any financial aid. For example, if your tuition costs $35,000 a year and federal loans and scholarships cover $10,000 a year, a private lender will offer you $25,000 annually.
Taking out private loans should be a last resort because the rates are so high, and theres little recourse if you graduate and cant find a job. Using private loans may be fine if you only have a semester or two left before you graduate, but freshmen should be hesitant about using this strategy.
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Other Sources For College Tuition Payments
If a child has custodial accounts that have been set aside to apply toward higher education costs and expenses, those would likely first be utilized before either parent is assessed a payment contribution. A student is expected to maintain a reasonable course load to illustrate a devotion to his or her studies. Should the student work on vacations or during breaks and summers, that income may be applied toward entertainment expenses rather than toward tuition. However, if the student is working full-time during the school year, then it may be reasonable to expect that the income earned be contributed toward educational or living expenses. Still, parents must recognize that the fact that a student is capable of earning income is not a substitute for a divorced parents obligation to contribute to a students support.
Review Inheritances And Encourage Gift Giving
When a loved one dies and gifts money to a family member or friend, its often with the intention that theyll use it for a worthwhile purpose.
However, they might set up an inheritance so a child is unable to access the funds until theyve reached a certain age, which could be well after college.
Consider contacting an attorney who can help you understand the terms of your childs inheritance. You should review any hardship clauses your child might qualify for. Avoid inheritance loans or advances, given their high interest rates and risky terms.
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What Grandparents Should Know About Paying For College
If grandparents have simply saved money in a savings account or in a Certificate of Deposit , they can wait until the grandchild graduates and help them pay off student loans. That way, theres no impact on the grandchilds financial aid eligibility.
Experts say that this may help the grandchild have an incentive to graduate, and the student can deduct loan interest of up to $2,500 on their tax return. This plan also has some downsides. Loan payments are considered gifts. If a grandparent gives more than $15,000 per year, the gift tax will kick in. If a grandparent dies or gets ill, that financial promise may not happen if the money is in a savings account or CD.
One way to be sure that helping a grandchild doesnt impede on financial aid is for grandparents to pay for any portion of the college bill after January of sophomore year. Since FAFSA relies on tax forms from two years prior, the tax year ending December of a students sophomore year will be the last tax form to be used for determining financial aid for the students senior year.
Grandparents could then contribute to the second half of a students sophomore year and all of junior and senior year expenses. Grandparents could also help a student pay for books and living expenses instead of contributing outright for tuition.
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Know Your Savings Options
In figuring out the best way to save, there are several approaches you can take. The Internet is usually the first place people go when they need answers, and the resources you can find online, such as the ones previously cited on this page, are useful in terms of creating a college savings plan. However, you should meet with an expert, such as a financial planner or someone in your local bank, who can walk you through each savings option. They can answer any questions that arise while you are there, and they help you decide the best option for your family. The following savings options are also good places to begin:
529 Savings Plans
With 529 plans, you can create a fund that allows tax-free withdrawals for educational expenses. Every state offers a 529 plan, and there are two types of plans:
Prepaid Tuition Plans These investment plans allow you to purchase as much or as little tuition as your student needs, and you will pay the price of education as it is today. As tuition costs raise, you will keep what you buy if you pay for one year of tuition now, in ten years, you will still have one year of tuition. Either you or your child needs to reside in the state where the account is opened, but anyone in your family or circle of friends can contribute to the college fund.
Coverdell Education Savings Account
Penalty-Free IRA Deductions
Savings Accounts & Money Market Funds
Savings for Elementary School Students
Savings for Middle School Students
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Expect The Best But Plan For The Worst
Some parents set aside a certain sum of money for higher education costs. Others opt to keep on saving every year before their child joins college. Whichever direction you decide to take, set aside funds in a 529 plan which is a tax-free place to keep college expenses, or a straightforward trust account.
Securing your money in any of these accounts reduces the temptation of one spouse to borrow or withdraw if its easy to access the cash. After all, you wouldnt want to reach your kids 18th birthday only to realize that the college fund is depleted.
You should also include requirements for disability and life insurance with amounts sufficient enough to cover all college expenses. In doing so, you make sure that your child is protected in case a tragic and unforeseen calamity befalls you or your spouse.
How Some Parents Are Sharing The Costs
Telling kids they are on their own when it comes to paying for higher education can be tricky. This is especially true if you havenât had a lot of conversations about money with your children.
If youâre looking for ways to break the news that, yes, your child will have to chip in for their college education, there are plenty of strategies to consider. We asked parents how they plan to split college costs with their kids, and here are their ideas:
1. Give Kids a Budget
Certified Divorce Financial Analyst and Certified College Finance Counselor Victoria Lowell says that, when it came to paying for college for her two daughters, each of them was given a budget for how much of their college would be covered. The deficit was on them, she says, which gave them an incentive to make smart decisions when it came to picking a school and finding other forms of financial aid.
Lowell, who also authored the book Empower Your Worth: A Womanâs Guide to Increasing Self-Worth & Net Worth, said this worked pretty well for her family. One of her daughters took out a small amount of student loans and worked while in college. Meanwhile, the other daughter received a lot of merit scholarships to make up the deficit. She is also looking for a job so she can have some extra cash for living expenses.
2. Keep College Costs Down
âThis does require additional work, but children can start college being a sophomore or possibly a junior by using this program,â he says.
3. Work Part-Time
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Are Parents Legally Obligated To Pay For College
State law rules that the obligation to financially support your kids ends when the child turns 18. That means parents have no legal obligation to pay for their childs college education with one exception. If the parents are divorced and the divorce agreement includes paying college costs, one or both parents are legally obligated to pay for college.
Private Parent Student Loans
Think carefully before taking out a federal loan. As a parent, you have the option to borrow a private parent student loan in order to help your child pay for college. This type of loan is available to borrowers with strong credit, and will require a credit check from your chosen lender . You may need to apply with a cosigner to qualify. In contrast to the federal loan option, private loans offer many competitive, and cost saving, features. If youre deemed to be eligible for a private parent student loan, your lender may offer zero to no loan fees and a competitive interest rate based on your credit. You can borrow up to your childs cost of attendance minus any other aid received.
Because this is not a federal student loan, this loan may not have the same type of repayment plans, opportunities for forgiveness, or other federal benefits provided with a federal student loan.
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Using Student Loans To Pay For School
The average U.S. college graduate has about $29,000 in student debt after graduation. If you’re paying for college without the help of your parents, you may end up with more than the average amount of student debt, especially if you are responsible for paying the “parental contribution.”
Student loans aren’t inherently bad, and you’re not a failure if you graduate with student debt . If you’re smart about the types of loans you take out, your debt should be pretty manageable over the long run.
How Do Parents Save For College
If you have the means to save for your childs future college education, you absolutely should. Given the numbers above, if you hope to save enough to pay for your childs education in full, just for their undergraduate studies, you will need $130,000 to upwards of $300,000 or more.
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There are tax-advantaged ways to do this 529 plans that allow the earnings on your savings to compound tax-free, and remain that way so long as you withdraw the funds to pay for school. You can learn more about college savings plans here, how specific 529 plans in your state may offer state tax benefits here, and a whole new type of 529 Plan, the Private College 529 Plan, that allows you to pay tuition at todays rates.
Scenario #: Student From A Relatively High
Students from high-income families may not qualify for much need-based financial aid , but that doesn’t mean they can’t get funding from other sources, especially if they have solid grades and test scores.
Based on expected out-of-pocket costs, he thinks ASU will be the less expensive choice. Still, he doesn’t think he can come up with $18,760 per year while he’s a full-time student.
Here are the steps he can take to reduce his costs:
- Live at home. If he attends an in-state public school, and the school’s close enough to his parents’ home, he could save a pretty good chunk of change.
- At ASU, the cost of room and board comes to $10,400. If Student B lives at home rent-free, he could deduct that amount from his out-of-pocket costs.
- He might end up paying for some or all of his meals, and he might incur extra travel expenses to get to and from school. This could decrease the amount he actually saves.
- Maximum Amount Saved: $10,400
- Apply for outside scholarships. Student B receives a $3,000 grant from ASU, but he knows that applying for outside scholarships could help get him more funding. He starts by checking out our guide to scholarships for high school seniors.
- It’s free to apply for most legitimate scholarships programs, so he wouldn’t lose any money by submitting applications.
- Maximum Amount Saved: Indefinite
Here are the steps he can take to cover his remaining cost:
|Estimated Out-of-Pocket Costs|