Have you heard the rumor that college tuition gets more expensive each year?
If you've ever wondered if it's true, the answer is yes. According to a recent College Board report, from 1993 to 2023, the average tuition and fees at a public four-year university increased from $5,380 to $11,260 after adjusting for inflation. Costs do indeed continue to rise.
The good news is that, even though college costs are expensive, there are ways you can help pay for college. Here are five options to consider as you plan for college tuition.
1. 529 Education Savings Plan
A 529 plan allows your money to grow tax-deferred, and withdrawals are tax-free if used for qualified expenses. The funds can be used at any accredited institution across the country, and you can change beneficiaries so eligible family members, including you, can use the funds toward college costs. Some 529 plans may even have rewards programs like Upromise Opens in a New Window. See note 1 This is a free, online cash-back rewards account for college savings.
2. 529 prepaid plan
With this plan, you prepay some or all in-state college tuition, locking in future education costs in today's dollars. But keep in mind that, while your state's plan may be transferable to a private or out-of-state university, the dollar value likely won't go as far as it would at an in-state institution.
3. Scholarships
Thousands of scholarships are available if you take the time to apply. Even the small $100 or $200 scholarships that many people overlook can add up. Consider all scholarship sources, including federal, state, employer, civic organizations, athletic and college-specific scholarships.
4. Post-9/11 GI Bill
Transferring some or all of your unused education benefit to an eligible spouse or dependent children is one of the best ways to pay for college. Those using the benefit are eligible for a housing stipend which is prorated based on a few factors, the percentage of Post 9/11 GI Bill they're eligible for, how many credits being taken and how many clock hours scheduled to attend per week. The bill currently pays all in-state tuition and fees for a public school, while a private or foreign school will have dollar limitations. These amounts can be found on the VA benefits website Opens in a New Window. See note 1
5. Financial aid and college loans
Unless your child gets a full-ride scholarship, uses the Post-9/11 GI Bill or attends a service academy, you'll probably need some type of loan to supplement scholarships, grants and 529 plans. You can get a private loan through a bank, credit union or Sallie Mae, or you may be able to get a federal loan.
Federal loans generally have lower interest rates than private loans. Your college graduate can even pay off a federal student loan through certain types of public service. But the amount you can borrow is usually less with a federal loan than a private loan.
All this begins with completing a Free Application for Federal Student Aid (FAFSA). It's important to submit a FAFSA as early as possible when it opens on October 1st of each year. If you don't know where you want to go to school, don't worry. Go ahead and submit your FAFSA and just list any school you are considering as you can add or remove schools later.
It's also important to know and remember important FAFSA deadlines at the college, state, and federal levels. You can study them here Opens in a New Window. See note 1
As you explore these options, keep your own financial priorities in mind. Your student can get a loan for college, but you can't get a loan for retirement.