Navigating College Financing

Not everyone has parents or grandparents who can help pay for college, but most family members recognize how important it is to get a degree. Try informing your immediate and extended family that you’ll be attending college and ask if they’d like to pitch in.  

A 529 college savings plan is an investment plan that enables parents to save money for a beneficiary to pay for education expenses later. For Californians, ScholarShare529 is a tax-advantaged way to save for college and other educational expenses. There are also private 529 college savings plans offered by major brokerage firms. Children born in California starting on July 1, 2022, and who are eligible low-income public-school students, are awarded a CalKIDS college savings account with an initial deposit in it. 

To receive college financial aid, including scholarships, grants, and student loans, you’ll need to complete and submit the Free Application for Federal Student Aid (FAFSA) Form with the Federal Student Aid Office. The California Student Aid Commission (CSAC) is the state agency responsible for administering financial aid programs for students attending public and private universities, colleges, and vocational schools in California. Students can attend financial aid workshops, get information, presentations, and assistance from CSAC. 

• Scholarships come in a wide range of amounts, requirements, and application deadlines. This is because scholarships are offered by many different organizations for a variety of students, areas of study, and other reasons. To apply for a scholarship, try the U.S. Department of Labor’s Scholarship Search Tool. 
• Grants can come from state or federal government; your college, career school, or trade school; or a private or nonprofit organization. Do your research, apply for any grants you might be eligible for, and be sure to meet application deadlines. 
• Cal Grant is a California-specific financial aid allocation that does not need to be paid back. Apply for Cal Grant by using the FAFSA or CA Dream Act applications by the deadline and meet all eligibility requirements. Grants are for students attending Universities of California, California State Universities, California Community Colleges, or qualifying independent and career colleges or technical schools in California. 
• Federal Grants are available from the Federal Government for students attending college or a career school. Most types of grants, unlike loans, are sources of financial aid that generally do not have to be repaid. Types of grants include: 

• • Federal Pell Grants 
  • Federal Supplemental Educational Opportunity Grants (FSEOG) 
  • Iraq and Afghanistan Service Grants 
  • Teacher Education Assistance for College and Higher Education Grants (TEACH) 

• Peace Corps: The Peace Corps does not offer college assistance programs, but they do provide their volunteers with housing and a living stipend. After completing two years of service, volunteers can earn $10,000 (pre-tax) or more to help with the transition to life back home. You can use this money however you want, including paying for college. 
• AmeriCorps: AmeriCorps is a network of local, state, and national service programs that connects over 70,000 Americans each year to meet community needs in education, the environment, public safety, health, and homeland security. Upon completion of service, members receive a Segal AmeriCorps Education Award to pay for college, graduate school, or to pay back qualified student loans. 
• CollegeCorps:  CollegeCorps is a state program offered by the Governor’s California Volunteers that places eligible college students in community-based organizations working in K-12 education, climate action, and food insecurity. Fellows can earn up to $10,000 plus college credits in exchange for their community service. 
• Military Service: Although it requires a significant commitment, military service provides servicemembers and veterans access to tuition assistance programs. Certain Military Occupational Specialties (MOS) will even reward recruits with large enlistment bonuses, which can be used for college or other expenses. Learn more at the following links: 

• • Montgomery GI Bill 
  • Post-9/11 GI Bill 
  • Military Student Loan Repayment Programs 

Student Loans can be taken out by a student or their parents to pay for college tuition and other education-related expenses. Although student loans are a great way to offset education costs, it is important to remember that student loans are a legal obligation that must be paid back with interest. This kind of debt cannot generally be discharged in bankruptcy. Track the loans you are accepting and only borrow what you need. Here are a few of the most common student loan options: 

• Federal Loans: There are four types of federal direct loans, subsidized, unsubsidized, Grad PLUS, and Parent PLUS, to help eligible students cover the cost of higher education at a four-year college, university, community college, or technical school.  

• • Direct Subsidized Loans: Available to undergraduate students with financial need. The U.S. Department of Education pays the loan interest while you’re in school at least half-time, for the first six months after you leave school, or during a period of deferment. 
  • Direct Unsubsidized Loans: Available to undergraduate and graduate students; there is no requirement to demonstrate financial need. You are responsible for paying the interest on a Direct Unsubsidized Loan after receiving it. If you choose not to pay the interest while you are in school or are in deferment or forbearance, your interest will accumulate and be capitalized, meaning your interest will be added to the principal amount of your loan. 
  • Direct PLUS Loans: There are two types of Plus Loans, Grad PLUS and Parent PLUS. Grad PLUS loans are available to graduate or professional degree students and Parent PLUS loans are available to parents of dependent undergraduate students. These loans are unsubsidized, and you will be charged an origination fee which is deducted from the loan amount before disbursement. Parent Plus loans also require a credit check and have no grace period, which means parents must start making payments as soon as the loan is fully disbursed. 

• Private loans can cover any costs related to attending college and usually come from a bank, credit union, educational institution, or an online lender. Since private student loans have less flexibility and fewer protections for borrowers, you should use these loans only after exhausting all available federal loan options. 
• Income Share Agreements (ISA) are increasingly being used by for-profit companies and schools offering postsecondary education and training programs. Under an ISA, a student agrees to repay a school a fixed percentage of the student’s future gross income after graduation, but only if the student is employed and making above an agreed upon amount. The DFPI licenses and regulates ISAs in California, treating these private financing products as student loans.