Niche Resources
four ways to pay for college

4 Ways to Pay for College

When it comes to paying for college, you want options. We’ll tell you everything you need to know about cutting down that tuition bill by breaking down the four main ways to pay for college.

Find out how to save on college with these four resources:

1. Scholarships: A Great Starting Place

Scholarships are available to you all four years of college and are even available for graduate students.

On Niche, you can search for scholarships based on your state, intended major, level of difficulty, ethnicity, and special interest:

We also match you to scholarships based on your high school grad year, so you know you’re eligible without having to dig into the rules of each scholarship.  Feel free to apply for as many scholarships as you are eligible for.

Find College Scholarships

Hot Tip: Once you get accepted to college, contact your major department for scholarships — it’s very common for schools to offer department-specific scholarships to students.

2. FAFSA: Your Key to Free Federal Aid

If you need financial aid for school at all, you will need to fill out the FAFSA with your parents.

What is FAFSA?

FAFSA stands for the Free Application for Federal Student Aid, which is a form provided by the Federal Student Aid office of the US Department of Education. They provide more than $120 billion in federal grants, loans, and work-study funds each year. The purpose of this form is to calculate your expected financial needs for college. Completing the FAFSA will unlock federal sources of funding to contribute to your tuition, room & board, books, and supplies.

Many states also use the FAFSA to determine your eligibility for both federal and state-specific aid.

How does FAFSA work?

When you you complete the application, you will receive an award letter from each of the schools you listed on your FAFSA, outlining the federal and non-federal financial aid that the school will offer, which again, could be a combination of grants, loans, or work-study funds.

You must fill out FAFSA every year you are enrolled in school.

What is included in the federal aid package?

Your federal aid package award type and amounts will depend on your financial need, your cost of attendance, your status as a full-time or part-time student, and your plans to attend school for a whole academic year or less.

  • Federal Loans: Available to all full-time students with financial need. You may borrow up to a certain amount with interest.
  • Federal Grants: Free scholarship money awarded only to undergraduate students who have not earned a bachelor’s or a professional degree. Keep in mind that for the 2017–18 award year (July 1, 2017, to June 30, 2018), the maximum Federal Pell Grant award is $5,920.
  • Work-Study: Provides part-time jobs for undergraduate and graduate students with financial need, allowing them to earn money to help pay education expenses.

Hot Tip: The FAFSA application is available in October starting in 2017, giving you plenty of time to apply. In previous years, FAFSA form availability started in January. The national FAFSA deadline is June 30th, but each school has different deadlines.

3. Federal Student Loans: Borrow Wisely

In a survey from high school Class of 2017, we compared the responses to “Did you fill out your FAFSA?” and “Will you be taking out loans?” to find out if a typical high school grad understands their financial needs: According to the to the graph, over 90% are certain they will fill out the FAFSA to get aid for college but are still somewhat uncertain about whether they will need loans.

The reality is that most students must borrow to fund a traditional, 4-year non-profit university:

7 in 10 Students
Who graduated from college in 2014 had student loan debt
Average student loans debt in 2014 for students who graduated from 4-year colleges
Source: The Institute for College Access & Success

Do those numbers look high to you? That’s because they are! It’s important to make sure you understand the terms of your loans before borrowing since this decision could greatly affect your well-being after graduation.

Getting educated about the types of loans available, as well as the terms and interest rates for each, is a great first step to making sure you borrow wisely. Interest rates vary from lender to lender, but federal loans tend to offer lower interest rates and have more flexible repayment options.

There are 4 types of federal student loans:

  1. Direct Subsidized Loans: Based on need, and the interest is paid while you’re in school at least half-time (as in, you won’t pay interest while you’re in school), and for the first 6 months after graduation
  2. Direct Unsubsidized Loans: No requirement for financial need, and you are required to pay interest on your loans during school and beyond
  3. Direct PLUS Loans: Available to graduate or professional students enrolled at least half time in school
  4. Perkins Loans: Low-interest federal loans for students with exceptional financial need. The school is the lender.

As an undergraduate, you would most commonly see a combination of direct subsidized, direct unsubsidized, and (if you’re eligible) Perkins loans.

The unsubsidized loans are less favorable since you’d be obligated to pay interest on your loan while in school. Federal loans, in general, are favorable because of their fixed low-interest rates, so the interest rate stays the same throughout the life of the loan.

Federal loans are also favorable because the government offers repayment plans, deferment options, and forgiveness programs: you have the option to adjust your monthly payments based on your income, defer your loans because of economic hardship, or work in a public service position that offers partial loan forgiveness.

4. Private Loans: The Final Option

After you’ve exhausted all of your options in terms of scholarships, federal aid, and federal loans, you can use private loans to make up the difference in school costs. Unlike federal loans, private loans are made by a lender such as a bank, credit union, state agency, or a school.

Private Loans vs. Federal Loans
Common Question Private Student Loans Federal Student Loans
Common Question "Do I have to repay my student loans while in school?"
Private Student Loans Likely
Federal Student Loans Not Likely
Common Question "What's the interest rate like?"
Private Student Loans Interest rates are variable and can climb up to 18%.
Federal Student Loans Interest rates are fixed and typically low.
Common Question "Will I need a credit check to get a loan?"
Private Student Loans Most likely– the terms of the loan will depend on credit score and other factors
Federal Student Loans No, you do not need a credit check for most loans. You will need a credit check for a PLUS loan, which is available to parents, graduates, and professional students.
Common Question "Do I need a co-signer to get a loan?"
Private Student Loans Most likely
Federal Student Loans No
Common Question "What if I have trouble paying back my loan?"
Private Student Loans Private loans may not offer forbearance or deferment options
Federal Student Loans You can file for deferment or find an income-based repayment plan
Common Question "Could a portion of my loans be forgiven if I work in public service?"
Private Student Loans No
Federal Student Loans Yes, there are loan forgiveness programs available

If you are still interested in finding private loans to cover the cost of tuition, use Niche’s handy tool to view the different available lenders.

Find private loan options

Author: Alex Caffee

Former Marketing and Business Analyst at Niche. Dessert aficionado. Currently living and working in New York City.