Why it’s important to understand how to pay for college… and different ways to pay for college!

Planning and preparing for college admissions is one thing; however, paying for college is entirely different. Unfortunately, many families only focus on how to get into college, not how to pay for it. What is important for families to understand is that there are very real and serious consequences of student debt. Understanding how to pay for college is crucial because it allows families to offset the sometimes exorbitant cost of college.

To help you understand the very real and serious consequences of student debt, it’s important for you to first understand how much college costs. Below are 2016 statistics of the “true” cost of college which incorporates both direct and indirect college expenses. Direct college expenses include tuition and room and board. Indirect college expenses include books and supplies, transportation and personal expenses.

The average national cost of attendance for undergraduate students in 2016 was the following:

Public four-year in-state college: $24,061/year
Public four-year out-of-state college: $38,544/year
Private nonprofit four-year college: $47,831/year

The above figures are college costs per year!  As you can see, earning a college education is expensive! And the cost of college has very real and serious consequences when it comes to student debt. Let’s look at student debt statistics.

Student debt statistics:

  • 40% of college grads with debt live paycheck to paycheck
  • 14% of young adults delay marriage because of debt
  • 20% of young adults delay having children because of debt
  • 27% of college grads delay medical/dental care due to debt
  • 48% of grads paying off school debt admit that it’s contributed to their anxiety and sleeplessness

Overall, U.S. borrowers carry more than $1.3 trillion in outstanding student debt. And students who fail to graduate on time pay for an extra year—or more—of college, and absorb more tuition/fees, and enter the workforce later.

The bottom line is student debt is very real and shocking, but the good news is it can be greatly offset in most instances, or even avoided.

There are many different ways to pay for college

Fortunately, there is more than $185 billion in aid to help students pay for college. The five main sources of college financial aid are the following:

1) Federal government (the largest source)
2) State governments
3) Colleges and universities
4) Private organizations such as companies, clubs, and religious organizations
5) Banks and lending companies

Of the five main sources of financial aid available, there are four main types of financial aid. The four main types of financial aid are the following:

Grants are called gift aid because they do not have to be paid back. Grants come from federal and state governments and from colleges. Most grants are need-based, which means they are usually given based on your or your family’s financial circumstances.

Scholarships are also gift aid. Scholarships come from governments, colleges and private organizations. They may be awarded for academic or athletic ability, interest in a certain subject, or volunteer work, for example. Some scholarships are given based on membership in an ethnic or religious group. Companies may also give scholarships to children of employees.

Borrowing money from a bank, government or lending company is called taking out a loan. A loan must be paid back with an extra charge called interest. The federal government offers low-interest loans to students with financial need. Other lenders charge more interest.

Work-Study Programs
The Federal Work-Study Program offers paid part-time jobs to help students pay for part of their college cost

The Wrap-up

We have given you a snapshot of the very real circumstances and statistics of the true cost of earning a college education. A college education is powerful and immensely beneficial for many reasons, but without fully understanding the financial component to an education, you are setting yourself up for financial hardship.

Being part of the statistic of college debt is a burden in life that takes on a life of its own, from impacting when a student eventually decides to marry, buy a home, have children, to taking care of him/herself when it comes to medical/dental bills. Understanding how to plan and prepare for college admissions is important; however, just as important is understanding the real implications of college costs, and how to offset college debt so that you won’t be part of the national student debt statistic!

To help you get better clarity on how to pay for college, we have put together a webinar that will dive deeper into the college financial planning process. We look forward to being able to give you further insight and a step-by-step game plan that will help you pay for college. Look out for our webinar on “How to Pay for College” coming soon!