Attending college is a rewarding and exciting time in a young person’s life. It’s a period marking your transition from childhood to adulthood and the obligations that come along with it. A critical area of responsibility necessary for this change is finances; you must be financially prepared for college and everything that comes after. Savings, scholarships and grants, and student loans are topics you need to become educated in.
Hopefully you already have a savings program, such as a 529 plan, in place. Named after Internal Revenue Code 529, these plans are designed to invest in higher education. Parents and guardians typically open these accounts to save money for their children’s future education. All qualified education expense withdrawals from 529 accounts are free from federal income tax.
Related: The Quick Guide to Education Accounts: 3.2 Tax-Free Ways to Invest for College
If you do not already have a savings plan in place, start now; even small savings add up and make a big difference in the long term. One way you could start is with Upromise. Upromise is a service that uses your purchases at participating members to earn cash back for college. You can earn money by shopping at participating online stores, eating out at restaurants, and grocery shopping. You can also invite your friends and family and have their eligible purchases earn money for your account.
Scholarships and Grants
Scholarships and grants are funds awarded to you based on merit or need. They are “free money” in the sense that you are not required to repay the funds you receive. Scholarships may be “merit-based” meaning you have to meet certain standards set forth by the scholarship giver; whether that is in the area of academic achievement, sports, or talent. Grants are typically awarded based on financial need rather than merit. Schools, employers, private organizations, and state and federal government may all be sources of free money. The funds may cover a small portion or the full amount of your tuition, easing your financial burden, in either case.
Free Sources for scholarship and grant information:
- High school guidance counselor
- College financial aid office
- Local library
- U.S. Department of Labor’s search tool
- Federal agencies
- State grant agency
Student Loans and Repayment
Scholarships and grants may not cover the entire amount of your tuition and educational expenses. There’s also the possibility that you were unable to qualify for scholarships or federal loans due to your academic standing, criminal convictions, or non-US citizenship. At this point, you may need to turn to private loans to cover any remaining portion of your expenses.
It is important to repay your loans to remain in good credit standing. Repayment is especially important if you are looking to continue your education – as mentioned above, you can be denied for federal loans if you’ve previously defaulted. Some students choose to consolidate their debts after college in order to have one lower monthly payment. Another good option is to make an ascending list of your debts and begin paying them off in that order (debt snowball or debt avalanche). With the snowball, at the start you get the satisfaction and confidence boost from eliminating the small debts, and as time goes on you’ll be better equipped to take out the larger ones.
More on Student Loans:
- Doing Your Debt Homework: 3 Strategies to Plan Ahead for Student Debt
- 5 Ways to Lower Student Loan Payments
- 4 Great Strategies For Paying Off Student Loans
It’s important to prepare for college. Saving from an early age can be particularly beneficial, but any and all savings can go toward your college education. Grants and scholarships are especially effective in reducing your overall financial obligation, but are not a guarantee, which is where student loans come into play. Make sure you are financially responsible and repay those loans – you do not want to ruin your financial reputation as you are just getting out of the gate.
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