Navigating College Financing
Tips and Insights to Ease the Financial Burden
Figuring out how to pay for college can be daunting – especially if you are a first-generation college student or do not have someone to assist you with navigating the complexities of admissions and financial aid. Understanding college financing options can help students make informed decisions. The following is a list of financing options available and expert tips to help ease the financial burden of a college education.
Options for Paying for College
Paying Out of Pocket
Most schools will bill you every semester for the number of classes, credits, or units that you’ve enroll in. After being billed, you can pay the school using your own money or savings. Need a job? Many colleges also offer work study programs, including the federal work-study program.
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.
College Savings Plans
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.
Scholarships and Grants
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:
Military and Community Service
- 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:
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.
Other Things to Consider
- Avoid High-Interest Loans: You may be tempted to use high-interest loans or credit cards to pay for tuition. Try to exhaust all other financing options first, prior to getting into a debt that is difficult to pay off. If you must resort to this option, be sure that you carefully read and understand the terms, so you do not fall into a compounded interest debt trap where the minimum payments pay off interest accrued but don’t reduce your balance. Never assume that you can sign a loan agreement and get out of it later. Many private student loan agreements are not renegotiable, nor can they be forgiven in bankruptcy.
- Take a Break: If you can’t pay for one semester of college; you can always take a break. This may allow you to save more money and get caught up on other expenses. The danger comes from not ever returning to school or getting dropped from your educational institution because you forget to reenroll the next semester. Remember, if you already have student loan debt, you may be required to make payments on these loans while you are not enrolled or enrolled less than half-time.
- Ask the DFPI: The DFPI regulates student loan servicers and providers. We can answer your questions about financing higher education at Ask.DFPI@dfpi.ca.gov or by calling toll-free at (866) 275-2677.
- File a Complaint: If you are having a problem with your student loan servicer or provider, you are encouraged to Submit a Complaint with the DFPI.
- DFPI Student Loan Servicing Ombudsperson: The DFPI has a Student Loan Servicing Ombudsperson that can answer questions and help settle disputes with your student loan servicer or provider. If you are having a student loan related issue or you don’t know whether you need to file a complaint, contact Celina.Damian@dfpi.ca.gov.