The Complete Guide to Paying for College

paying for college

The Complete Guide to Paying for College


Paying for College is a topic parents need to consider whether their child is in diapers or is currently enrolled in college. There are many options for paying for college, including saving through 529 accounts or Roth IRAs, scholarships, grants, financial aid, current income, and loans. Most college educations will be paid for with a combination of these methods. The Complete Guide to Paying for College explains all of these payment options.

For more information about paying for college see:

Paying for College Resources

How to Complete your FAFSA

Tax Credits and Deductions for Parents of College Students

The Complete Guide to Paying for College 1

This post contains affiliate links, which means if you click on a link and make a purchase, I may receive a small commission. As an Amazon Associate I earn from qualifying purchases. For more information, see the full disclosure in the foot bar.  

Paying for College 101

There are five main ways to pay for college:




Work Study


If we all could choose a way to pay for our child's college, it would be through scholarships. 


Some schools offer a tremendous amount of merit based scholarships and others give mostly need based aid. It will pay to compare the types of scholarships and aid offered at a variety of schools. The difference in packages can be in the tens of thousands.


University-based scholarships are usually merit-based and do not have to paid back.

Scholarships are wonderful chunks of change falling from the sky and into your child's bursar account. Some scholarships are awarded automatically by the school for certain test scores or other achievements, however most scholarships require an application. Search the college website of all of the schools your child is interested in attending to find out information about qualifying for and applying for their scholarships.

Follow the instructions exactly and apply early!! 


Another option is private scholarships. 

Your family can SAVE money by having the kids pay for their own college. Check out these two scholarship resources:

The Scholarship System 

How to Win Scholarships

Scholarships for Upperclassmen: Some scholarships are only offered to upperclassmen. Continue to search for scholarships from both the university and private sources as they continue their education.

Grants are another awesome way to pay for college.

Unless you have enough money saved or have enough current income to fully fund your child's education, chances are you are going to find yourself filling out the FAFSA.


FAFSA stands for Free Application for Federal Student Aid. Go to the FAFSA website to file your FAFSA and to learn more about it. Do not pay anyone to file your fafsa. It is a free application and can be completed online at the .gov website. See my post How to Complete Your FAFSA for a checklist of items to gather before you begin. How to Complete Your FAFSA also includes a list of the terms you will need to know to complete your filing.

The FAFSA gives you access to grants, work-study jobs, and loans. 

  • Grants are usually need-based and do not need to be repaid. They can be awarded by colleges, states, the federal government, public and private organizations, and professional associations. You will find out if you have been awarded any federal, state, or university based grants on your university's Financial Aid Award Letter.

Federal Grants:

  • Federal Pell Grants  go to the most needy families and have a maximum amount of $6345 for the 2020-2021 school year. For more information see the website.
  • Federal Supplemental Educational Opportunity Grant (FSEOG) are awarded to students with exceptional financial need. Amounts are between $100 and $4000 per year.
  • Teacher Education Assistance for College and Higher Education (TEACH) Grant are for undergraduate and graduate students who agree to teach a high-need subject in a low income area. Failure to complete the service requirement will revert the grant to a loan that must be repaid.
  • Iraq and Afghanistan Service Grants are awarded to students whose parent or guardian was killed performing military service in Iraq or Afghanistan after 9/11/01. The student must be ineligible for a Pell Grant and under the age of 24 at the time of the death.

State Grants

  • State grants operate similarly to federal grants, but are awarded by a student's home state. Programs vary by state, but most state grants are awarded based on the FAFSA. Check with your home state and college for details on any other documentation or applications needed to apply for state grants.

Non-Government Grants

  • Non-government grants can be researched the same way as scholarships. I highly recommend The Scholarship System as a resource for researching scholarships and grants.

Federal Work-study is a federally funded program that allows your student to work part-time to help pay college expenses. 

  • Federal work-study is available to undergraduate, graduate, and professional students with financial need.

The most popular way to save for college is through a 529 account. There are two types of 529 accounts. One is a savings plan and the other is a prepaid planAll fifty states and the District of Columbia sponsor at least one type of 529 plan.

  • 529 Savings Plans: 529 savings plans allow you to save money in an investment account specifically to pay for tuition and room and board expenses for the beneficiary of the account. Many states give a tax benefit for in-state investors. The money grows tax-free and is withdrawn at the time of need tax-free.
  • 529 Prepaid Plans: Some states allow you to prepay college tuition for instate schools, locking in the cost of college at the time of payment. If you KNOW your child is going to State U, then this could be a good idea.

Roth IRAs can also be used to pay for college. If you are not sure you want to specifically earmark savings for college, then a Roth IRA may be a good option. The money put in a Roth is taxed up-front and allowed to grow tax-free. You may withdraw the principal and earnings from the account after age 59 1/2 without taxes or penalty.

You may withdraw the principal of a Roth IRA account to pay college tuition without paying additional taxes or a penalty. You may withdraw the earnings of the account without paying a penalty, but you will have to pay tax on it. It is probably not the best way to save for college, given the restrictions on withdrawal, but it does give you more long term flexibility and more investment options. If your child is already in college or about to attend and you have a Roth IRA, you may have found some extra dollars to put toward the cost. (Consider how this affects your retirement planning before making the withdrawal.)

Your Financial Aid Award Letter also tells you about the loans you are eligible for. While everyone wishes that paying for college without loans was an option, many of us will end up with them. Exhaust every other paying for college option first.

There are three types of federal student loans.

  • Direct Subsidized Loan: These loans are need-based and have a maximum annual award of $3500 for the 2020-2021 year. They usually do not accrue interest while the student is enrolled in school.
  • Direct Unsubsidized Loan: These loans are not need-based. Although Interest accrues the entire length of the loan, the interest rate is less than a private or PLUS loan.
  • Direct PLUS Loan:  These loans have a higher interest rate than the Direct Unsubsidized loans and the parent must qualify for the loan. The limit is the estimated cost of attendance less any other financial aid awarded.

Private loans are also an option. I have not investigated private loans. Offers that look a lot like credit card offers have come to us in the mail. I do not know if they are a good option or not. If you are considering a private loan, I would carefully compare all terms of the loans with the terms of the federal loans. You can also compare private student loan terms with a Home Equity Loan or Line of Credit.

Here is the government websites with reputable information about loans.


Paying for college is no easy matter. You will most likely need a combination of the above options to cover the complete cost. Save as early as you can. Apply for all the scholarships and aid you can and then sit down with your student and make the best decision possible about where they should attend and where you should send your money.


Get your FREE copy of the Planning for College Checklists - Junior Year, Summer Before Senior Year, Senior Year, FAFSA, CSS-Profile, Scholarships, Dorm Shopping, Packing for the Move, and the Parent Survival Kit for College Drop Off and the Glossary of College Admissions Terms.

More From Almost Empty Nest:

Hey There!

I’m Laura

Welcome to Almost Empty Nest! I began this blog in September 2014 after leaving my oldest son at college and realizing that my nest was emptying. Join me on this journey as we explore the path of guiding our children to adulthood and rediscovering ourselves beyond the mom years.