How to Pay for Your Dream College

Congratulations! You got in. Your dream college has accepted you. 

And now the million-dollar question. How will you ever pay for it?

Don’t panic. When it comes to making your college dream come true, you and your family have plenty of options.

There are scholarships, grants, and student loans available to help supplement any money you and your parents have put aside for your college education. And your dream school may have a generous financial aid department.

You never know what kind of grants and scholarships you may qualify for. So take a deep breath and breathe and believe. You can make your college dream a reality.

File a FAFSA

First things first: File a Free Application for Federal Student Aid (FAFSA). To be eligible to receive federal and state financial aid, you must file a FAFSA.

So put the filing of your FAFSA forms on the top of your to-do list.

A couple of weeks after submitting your FAFSA forms, you’ll receive a Student Aid Report. This report summarizes all the financial information you and your parents submitted on the FAFSA and most importantly reveals the expected family contribution. 

The expected family contribution is the amount of money that the federal government expects you and your family to pay in college education costs.

Your dream college and university will try to make up the difference between the cost of attending their school and your family’s expected contribution with a financial aid package.

Private colleges and universities tend to have deeper pockets than state universities, so a generous financial aid package may help make up for the additional costs of attending a higher-priced private school. Private colleges and universities may have additional financial aid forms that need to be submitted. Be sure to file all forms promptly.

Once you receive the financial aid award letter from your college or university, you’ll have a true sense of just how much attending your dream college or university will cost you and your family.

Many students and families end up paying for college with a combination of grants, scholarships, and loans and you can, too.

Scholarships and Grants

How does some free money sound? Apply for as many grants and scholarships as you can. Scholarships are available for everything from athletics and academics to community involvement and financial need.

Spend some time with your high school guidance counselor and find out what scholarships may be a good fit for you. Explore local sources of scholarships such as churches, civic organizations and businesses. Every little bit helps.

For larger, national awards, you may want to visit the library and check out some books on scholarships.

Or hop online.  You can search for scholarships for free by visiting sites such as fastweb.com, fastaid.com and collegeboard.com. Avoid sites that charge you to search for scholarships.

Be sure to check with the financial aid department of the college you’ll be attending. You may be a perfect fit for a grant or scholarship offered by your dream college or university.

With scholarships and grants, just a little bit of research can really pay off, so get digging.

Federal Loans

To pay for your dream school, you may need to take out some student loans.  Look to lower-priced federal loans first, such as the Stafford loans, before considering private and alternative loans.

Stafford loans are available to undergraduate and graduate students that attend classes at least half-time. Typically, there are no credit checks with Stafford loans. Loan payments are deferred until six months after you graduate or leave school.

Stafford loans are available through the William D. Ford Federal Direct Loan Program (DL) and the Federal Family Education Loan program (FFEL).
 
With direct loans, the money is borrowed directly from the federal government and borrowers make repayments to the federal government.

In the FFEL program, the money is borrowed from a bank or credit union or other lender participating in the program. Both programs offer students subsidized and unsubsidized Stafford loans.

With a subsidized Stafford loan, the government pays for the interest on your loan while you attend classes (as long as you’re enrolled at least half-time), during the six-month grace period after you leave school, and if you should defer payments. To qualify for a subsidized Stafford loan, you must show financial need.  

With an unsubsidized Stafford loan, you are responsible for the interest on your loans at all times.

Many students borrow a mixture of subsidized and unsubsidized Stafford loans to pay for their college educations.  

Federal loans are available to parents, too. These loans, known as PLUS loans, require a credit check.

The yearly borrowing limit on a PLUS loan is equal to the yearly cost of attending your college or university, minus any financial aid that you may be eligible for. Some parents turn to PLUS loans to pay for all or most of their expected family contribution.

Like Stafford loans, PLUS loans are available through the William D. Ford Federal Direct Loan Program and the Federal Family Education Loan program.

There is no grace period with PLUS loans. Your parents must begin repaying the loan while you’re in school. 

Private or Alternative Loans

Private education loans, also called alternative loans, exist outside of the federal student loan program. 

Private loans are variable-rate commercial loans that require credit checks. So you’ll need a good credit history or a co-signer to land a low rate. If you have less-than-stellar credit, you could end up paying a much higher rate, as much as 18 percent.  

And because rates on private loans are variable and fluctuate according to market conditions, whatever interest rate you qualify for could change.

The repayment terms on a private education loan vary by lender. With some lenders, repayment begins immediately. Other lenders may allow borrowers to defer loan payments while attending classes.

A private loan is an option to consider after you’ve exhausted your more affordable federal lending options. 

And finally, remember to be reasonable about your college financing. It could spell trouble if you borrow more to pay for school than you can reasonably repay after you graduate and start working. You can reduce your college expenses by choosing a school that gives you good financial aid or by attending community college and then transferring to your dream university.