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How to pay for college when you don't qualify for grants

Courtney Hale/Getty Images

Even families blessed with financial security may worry about how to pay for their child's college education. You may have contributed heartily to a 529 savings plan or a high-yield savings account but had to balance that against saving for retirement or other financial goals. These are natural financial tradeoffs that even well-off families need to consider.

If you make just enough to not receive federal assistance like Pell Grants but won't be able to cover your student's education completely, you still can plan for how to pay for college without grants. The same wisdom that has led you to your financial stability can help you and your child prepare for college costs.

Apply for federal aid no matter your family income

Start by completing the Free Application for Federal Student Aid (FAFSA), whether you think you'll qualify for financial aid or not. It's the main way the federal government and prospective colleges determine a student's eligibility for need-based grants, scholarships, work-study opportunities and low-interest federal loans.

They will assess your tax records and assets to calculate your Expected Family Contribution (EFC) which will change to Student Aid Index (SAI) beginning Fall 2023. Even if you suspect your SAI will be high, it's worth filling out the FAFSA to uncover every financial aid opportunity. Your family's demonstrated need could reveal school-specific grants and scholarships you didn't expect. When the schools send out their financial aid offer letters—complete with a current estimate of total attendance cost—you then can compare all schools with their financial aid offerings included.

It's also important to go through the FAFSA process every school year as your SAI and aid needs are reassessed annually. Each year, it factors in your financial information for the previous two years. So, if anything has changed, your SAI may change as well and open up other aid opportunities.

How your student can cover some college costs

Many families find that even substantial savings may not cover all the expenses of four or more years of college. Students can help cover college costs by taking advantage of transfer credits, early pursuit of scholarships, and finding school-based jobs. Talk with your teen and empower them to play an active role in graduating with as little student debt as possible.

Take advantage of high school & other transferrable credits

As early as your teen's sophomore or junior year of high school, they may be given the chance to take courses and tests for college credit. Even if these come with fees, they'll likely be more affordable than the equivalent college class.

Your teen also could consider starting their college education while living at home. Taking less-expensive transferable courses at a community college or regional university could make your saved dollars go further.

Pursue merit scholarships as early and often as possible

Need-based grants and scholarships aren't the only "free money" out there for college students. Many civic organizations, businesses, churches and interest groups offer gift awards. These awards may not be tied to your child's financial need but instead aim to support a valuable quality they possess, whether it's excellence in athletics, academics, the arts, leadership or community service.

An online search will produce an unending number of merit scholarship opportunities, but you'll want to make sure they're legitimate. You may want to start with well-known hubs like College Board and Also, your teen can check their prospective colleges' financial aid offices and professional associations in their field of interest.

Find a school-based job that fits their college lifestyle & goals

Your teen may want to contribute to their own educational costs with part-time work that meshes with their college schedule. They could find a job on campus doing tutoring or light administrative work for a few hours a week. Some schools may offer tuition discounts for being a residence hall monitor, teaching assistant or student government representative. These experiences can enrich their college experience while also defraying costs.

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Home lifestyle

Early FAFSA planning

Why is the FAFSA important to think about even when college is a year or more away? Preparing for the FAFSA and making strategic financial moves ahead of time can reduce the chance of surprises and maximize your possibilities.

Learn more

Strategize using savings or 529 plans to pay for college

Some families have accumulated savings to help pay for college costs. There is often an urge to use those funds first to avoid taking out any loans. This is totally understandable. If you can avoid paying interest, try. However, financial aid is paid out annually per term. As a rule of thumb, consider using your savings or 529 plan to supplement the other sources of funding by dividing it out the same way, annually and per term instead of using it all up front.

Since financial aid does not often cover the full cost of the term, your hard earned savings can become a great resource to help your student complete college and graduate.

Loan options to consider in paying for college

After sacrificing to save and scraping for all possible scholarships and gift award options, your college savings still may come up short. While you may not want your child to take on loan debt, it could be a strategic choice when you factor in low interest Federal loan rates and repayment options. Consider these factors if you're sizing up loans to cover college.

Federal loans have advantages over others

Offers will include a section on federal student loans, if your child is eligible. These should be at the top of your consideration list because they usually come with more benefits than when you borrow from a bank or private party.

For one, the interest rate will be fixed for the loan's life and is usually the lowest you can get. But also, you don't need a credit check or a cosigner, and repayment doesn't have to start until after your student finishes school.

Undergraduates may be offered subsidized or unsubsidized federal loans. Subsidized loans are for students with at least some financial need. With these, the government pays the interest on the loan while the student is in school (at least part-time) and for six months after leaving. Unsubsidized loans have no financial need requirement. However, the borrower is responsible for all the interest, and if interest payments aren't made while the student is in school, it accrues and is added to the principal.

Take out private loans last & repay them first

When you've exhausted other options, you may need to look into private student loans. You'll want to closely evaluate the available rates and factor in your entire financial picture. Not only do you want to get the lowest interest rate with the best terms, but it may be to your advantage to borrow money if a relatively low rate is available rather than cashing out your savings or investment accounts that have a comparably high rate of return. They may be earning you more than the loan would cost you.

When it comes time for repayment, it's usually best to prioritize paying down private loans faster than federal ones. You'll likely pay less interest overall with this approach.

Chart a course to pay for college

College is the start of a new chapter for your teen and for you as parents. You can look forward to this milestone without the finances hanging over your head. It also can help to gain a financial advisor's perspective. Thrivent financial advisors can help you craft an education savings and spending strategy to ensure the college experience is a positive one for the whole family.