How to Pay for College

Are you concerned about how you're going to pay for college for your teen?

If you are looking at the cost of college for one (or more!) teens in the next couple years, I would guess that the answer is Yes! and you are wondering how you are going to pay for tuition.

The best way to pay for college is to get it free (of course).

There are three ways to get your tuition for free:

• One way is to receive a full tuition scholarship (from the college itself).
  
  
• A second way is to get a full tuition scholarship from a scholarship contest or lottery (also called outside scholarships).
  
  
• Finally, if you are very poor, you might be able to get the government to grant you the money for college. These monies are called federal grants or state grants (depending on who's providing the money.

Although most scholarships do not offer the entire cost of tuition, full tuition scholarships do exist at several institutions. If you can't get full tuition, perhaps you'll be able to snag another scholarship with big figures. Even 50-75% off the cost of tuition is a great deal. And for those who want a private education (which comes with smaller classes, greater attention to the student, and/or specific programs of study), a 50% reduction in tuition at a private college can bring the cost in line with the public university.

So how do you get these scholarships?

College-sponsored scholarships are usually based on merit. You have to have good grades for academic scholarships. Or you have to be an excellent athlete for the sport the college is looking for. For talent scholarships, you have to demonstrate talent in music, drama, or art and be prepared to perform or display your talent as a student of that college.

By the way, these merit scholarships are often the most lucrative college scholarships you're going to find. Many offer full tuition. Some even supply room and board and cost for books and a laptop computer. If you want to compete for these scholarships, you must find which colleges offer the best awards. This takes a lot of research. But your competition will be limited to just those students who also apply at that specific educational institution.

Scholarship contests are often national contests for which you have to write an essay or demonstrate your potential in some manner. Competition is severe, because you are competing nationally with all students graduating your same year who wish to attend college anywhere in the nation. These scholarships are good for nearly any college in the land, and thus have significant numbers competing for the grand prize.

Scholarship lotteries offer free money simply for entering one's name in the lottery. No need to have the excellent grades here. No need to be good at a sport or at music or any specific talent. You just enter your name. How wonderful is that! The downside is that your competition is tremendous. Now you're competing with every other student graduating your same year in the entire nation who can type his name into the web form.

Conclusion: If you want to get the large college scholarships, then make yourself desirable to the colleges somehow. Then you can apply for those excellent academic scholarships or the athletic scholarship or the talent scholarship.

The third way to get free money is from the government. To qualify for large grant monies, you have to be pitifully unable to pay for tuition yourself. Neither you nor your parent can have much savings (although your home equity does not count against you). Neither you nor your parent can be making much money. And the amount you can get is usually below what it costs to attend a state university. See the Free Application for Federal Student Aid to determine how much you can get.

These grants may help at the community college level, simply because community colleges often charge much less for tuition than universities do. But expect to pay for your own room and board. Or live at home.

That's the simple scoop on getting money for college freely given, without having to pay it back.

Or you can borrow the money.

Next are the loans you can get. It seems every bank and his brother is happy to loan you money for college. There are four types of loans.

First are government subsidized student loans. These monies are lent to you by the Federal Department of Education. The Department sends the money directly to your college. The loan carries interest, but the government pays that interest for you as long as you are in school. After you get out, then you take over the loan (and the interest). There are limits on how much aid you can get. The limit is fairly low for your first year of college, but goes up each year after that. (The government assumes you are a better risk, the more you've proven you can make it in college.)

You can get these loans only by filling out the Free Application for Federal Student Aid (FAFSA). Those who make too much money cannot get these loans. Those whose parents make too much money cannot get these loans.

The second type of loan is the UNsubsidized student loan. Also lent by the government, and also sent directly to your college, and also limit-determined by filling out the FAFSA. The "great" part about these loans is the low interest rate. But these are not subsidized - meaning, you do have to pay the interest on these loans. No worry, though. They are set up so that you do not have to make payments until after you graduate (or stop attending school). Interest continues to accrue, however, during the time the loan is sitting there waiting for you to get out.

The third type of loan is called the parent PLUS loan. This one also requires the federal government to say that you have little enough money. This is a loan a parent may take to cover the cost of tuition (and room and board). The best thing about this loan is that the parent need not have collateral, but may get the loan simply on the government's saying the parent may take that amount.

The downside? Interest is not low. (Interest on a plus loan is actually quite higher than current mortgage rates.) Payments begin immediately. (Parents are still working, supposedly, and can therefore start making payments right away.) One must have a good credit history to get this loan. (As with most loans, the borrower must be a good credit risk.) One more downside: One's parent must be willing to undertake this responsibility. When parents are borrowing every year for the four years a student is in school (plus maybe a second or third child?), payments can quickly be as costly as one's mortgage.

Finally, one can get a standard bank loan. But one must first convince the bank that one can pay it back.

Going the loan route doesn't look much fun, does it? College is costly, and many students are graduating college with huge debts and dismal outlook for getting a good job to pay back the loans.

If you ask me, getting scholarships is the very best way to go. And if you plan ahead and make yourself look good to the scholarship judges, you increase your chances tremendously.

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