College Financial Planning: Everything You Need to Know

college financial planning
August 17, 2023 6 min read Liaison

Paying college tuition for some parents can be a problem, as tuition and fees are increasing.

Key Takeaways

The cost for an in-state student to attend a public, four-year college averages $100,108 over four years, whereas four-year private universities charge a total of $223,360 for tuition, on average.

If your parents face financial challenges, you can apply for scholarships, grants, federal/private loans, or work-study roles on or off campus.

Scholarships and grants are financial aid in the form of a gift offered by schools, companies, and local groups. In most cases, repayment isn’t required.

Student loans should be a last resort. Federal loans are better because they generally have better repayment terms.

You can also apply for a work-study role in the library, administration office, or as an assistant.


The cost of college tuition has been increasing steadily over the years, forcing many students and families to put financial planning at the top of their priority list.

Some parents save money in advance with a 529 plan, but if that won’t provide you with enough money for college tuition and fees, it may be necessary to pursue other options. After you fill out the FAFSA (Free Application for Federal Student Aid), you can apply for scholarships, grants, work-study jobs, and federal or private loans.

Here, we provide an overview of those financial aid options and offer some college financial planning tips that can be helpful as you plan to pay for your education.

College Tuition Planning: What You Need to Know

There are several important considerations you should keep in mind before applying for college.

Tuition and Other Costs

According to the Education Data Initiative, the average cost of living on campus while attending a four-year, in-state public school is $25,027 per year, while students at private universities pay $55,840 per year on average. The tuition and fees you (and your parents) will have to pay vary depending on the state, type of school (private or public), whether you’re an in-state or out-of-state student, and the duration of the program (two or four years).

Besides the usual costs associated with college, you’ll have to pay for books, supplies, and other necessities. If you don’t live in the state where your future college is located, you may have more expenses as a student there — such as higher tuition and travel costs.

How to Save for College?

A 529 plan is a tax-advantaged savings account in which parents and other family members can set aside money, typically in an investment portfolio, that will be spent on a student’s IRS-approved education expenses. Investment earnings can grow on a tax-free basis in a 529 plan, and qualified withdrawals are also tax free. Some states also offer “pre-paid” 529 plans that allow you to pay a future student’s tuition at today’s rates.

There are different types of 529 plans, so talk to your parents about choosing the best option.

Tips for Creating a Budget for College

In order to prepare to pay for college, create a monthly budget to track all of your income and expenses. It will help you make smarter decisions about allocating your financial resources. Financial planning for college students may be a hard thing to master, but once you learn the ropes, you’ll have a new skill that will help you in your professional and personal lives. Once you start tracking how you spend your money, you may be surprised to discover how much more you could set aside for college each month simply by cutting back on unnecessary spending.

Don’t forget about irregular expenses such as birthdays and car or laptop repairs. Keep some money set aside for these expenses so they doesn’t mess up your monthly budget and plans.

financial planning for college

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How to Pay for College: Four Ways

If your parents haven’t set up a savings account for your college tuition, you can help pay for college with scholarships, grants, work-study jobs, loans, or regular jobs. You should research different colleges and talk to your parents to see how much they can contribute to your education.

If you don’t have enough money for tuition, fees, and other college-related expenses, you can apply for financial aid each school year by filling out and submitting a FAFSA. The information you provide in this application will be used to determine your EFC (Expected Family Contribution), which takes into account your family’s income and assets. Schools use the EFC to determine whether you qualify for aid or not.

After submitting your FAFSA, you can apply for grants, federal loans, and scholarships. In the section below, we’ll talk about each option.

Scholarships and Grants

First, you should check available scholarships and grants, which are provided by universities, companies, businesses, and local organizations. Then, compare the requirements and other details of each to determine which options will help you the most when it’s time to finance college.

Students who take this type of financial aid don’t have to pay back the money if they meet the requirements.

Federal Student Loans

Federal loans are a good way to pay for college as they may provide additional benefits, such as a student loan forgiveness program, a fixed interest rate, and income-driven repayment plans.

The US Department of Education offers direct subsidized loans for undergraduate students, which cover accrued interest during your studies, deferment, and grace periods. The second type is a direct unsubsidized loan which doesn’t cover the interest; this type of loan is also available to undergraduate students. Direct Plus loans, which are available to the parents of undergrad students, don’t have a limit on how much someone can borrow.

Private Student Loans

You should only take out a private student loan as a last resort, as they typically charge higher interest rates. Private student loans are offered by different companies, banks, and credit unions. You will most likely need a co-signer, such as a family member, to qualify for a private loan. In that case, the family member’s credit score will be checked by the lender before it decides whether to issue the loan.

Unlike federal student loans, private loans have variable interest rates and don’t offer income-based repayment plans or student forgiveness programs.

Work-Study Jobs

You may also want to consider a work-study job to help pay for college. How much you’ll earn in these jobs depends on your role and skills. Usually, these jobs are performed on campus, such as in the library or administrative office. However, there are work-study jobs off campus in the government, civic, and non-profit sectors.

If you don’t qualify for work-study jobs, you could consider a flexible part-time job on or off campus, but you’ll need to be organized in order to balance your work and school responsibilities.

College Financial Planning — Conclusion

Paying tuition isn’t always easy: the average cost of attending a public college (in-state) is $100,108 for four years, while at private universities, the average tuition amounts to $223,360.

If your parents aren’t able to pay the entire tuition bill, you can contribute in various ways. First, you should fill out your FAFSA and apply for scholarships, grants, federal or private student loans, or work-study jobs, depending on your need and eligibility.

Scholarships and grants, which are offered by universities, businesses, and local groups, don’t require repayment if the terms are met. If you need to take a loan, it is better to take a federal loan as they have benefits such as fixed interest rates and a loan forgiveness program. Private student loans don’t provide the same benefits and typically have a variable interest rate.


If your parents haven’t saved enough money for your tuition, you can help them by filling out the FAFSA, and then you can look for scholarships, grants, and work-study jobs. Also, you can apply for federal student loans, which are a smarter choice than private student loans because of better interest rates and repayment terms.

As a college student, you’ll have to manage money for tuition, rent and utilities, and other day-to-day expenses. If you create a budget and stick to it, that will help you learn how to manage your money efficiently, a skill that will help you personally and professionally.

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