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10 Ways to Pay for College

When you’re a parent, it’s normal to spend a lot of time making decisions to guide your kids’ lives. There are little choices, like T-ball or gymnastics? And there are big decisions, like college or trade school? But one decision that really requires time to think through is, How will I pay for college?

No matter what stage you and your kids are in, it’s natural to wonder how to pay for college.  And whether they’re 6 years old or 16, you can start preparing and saving right now. It’s easier than you think.

Listen, paying for college doesn’t have to be stressful. You can send your kids off to school without debt, student loans or private loans. It’s true! Understanding how much you should save for college—and where that money will come from—will help you get a head start on covering the cost of school.

Here are 10 steps you can take to learn how to pay for college:

  1. Calculate the costs.
  2. Have a realistic goal in mind.
  3. Consider your school options.
  4. Start saving as early as possible.
  5. Save in the right place.
  6. Apply for need-based scholarships and grants.
  7. Don’t forget about financial aid.
  8. Say no to student loans.
  9. Do work-study as a student.
  10. Look into tuition assistance and reimbursement programs.

Trust me, this might look like a lengthy list, but each step is pretty simple when you break it down. Let’s take a closer look.

How to Pay for College in 10 Steps

When you’re thinking of ways to pay for college, you can do plenty of things to save money and cover the costs of education without going into debt.

1. Calculate the costs.

How much is college, anyway? Well, that depends. How much you pay for college is based on the school—whether it’s private or public, in-state or out-of-state, and the degree program. To figure out how much to save for college, you need to know what it costs first.

Here are the estimated tuition costs for U.S. colleges based on the type of school for the 2022–2023 school year, plus room and board, books and supplies, transportation and other personal expenses:1­­

  • Public, Two-Year College: $19,230
  • Public, Four-Year, In-State College: $27,940
  • Public, Four-Year, Out-of-State College: $45,240
  • Private, Four-Year College: $57,570

These costs are known as the sticker price. This is what you’d pay without any scholarships or grants. But those numbers don’t include the “real” extras—things like the snazzy new dorm decor on your college packing list, laundry, parking passes (or parking tickets . . . oops), and those late-night coffee runs.

Plus, those are today’s estimated costs. What if your son is still learning his ABCs and eating Cheerios out of a spill-proof cup? How will you know how much to save for college until he turns 18 and graduates high school? Don’t worry—you don’t have to be a math professor to figure out the answer.

All you need is the average college inflation rate and a good online college cost calculator. As for the college inflation rate? It depends on the year.

The numbers have ranged from 3.47% in 1978, all the way up to 13.44% in 1982, and all the way back down to 1.38% in 2020.2 But between the years 1977 and 2023, the average college inflation rate landed around 6.19% per year—making college costs 1,482.04% higher now compared to 1977!3

Because inflation rates can vary by year, I suggest setting the rate in that cost calculator to 5%. And as for how much you plan to cover from savings? Go ahead and set that to 100%—student loans are a big no-no.

graduation cap

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Here’s an example: Jack and Beth have a 10-year-old daughter. That means they have eight years until she’s 18 and off to that public, four-year, in-state college. Using the college tuition calculator at 5% inflation, they’ll need to save $41,280 for her freshman year and $177,922 total.

2. Have a realistic goal in mind.

If your blood pressure is a little high right now, take a deep breath. That total may not be how much you’ll actually pay. Remember: Every family’s financial situation is different, so you need to be realistic about how much you can contribute to your kids’ college expenses.

If you’re up to your eyeballs in debt and retirement is only 10 years away, your college savings goal will be different than a couple in their 30s who are debt-free and already putting 15% of their income toward retirement every month.

If you’re married, you need to sit down with your spouse and look at your financial situation. What are your long-term goals? How much debt do you have? What’s your plan for getting rid of your debt? How much have you saved for retirement? Can you put money toward retirement and put money away for college expenses? Don’t hold back on retirement savings just because Junior wants to go to an Ivy League or out-of-state school.

These questions will help you determine how much to save for college. Once you have answers to these, it’s time to set a reasonable goal. Yes, you want to help your children. But you may not be able to pay for all of it—or any of it. And that’s okay. There are other options for covering college expenses besides the Bank of Mom and Dad or student loans. But more on that later.

3. Consider your school options.

Is college worth it? Well, not all schools are created equal, especially when it comes to price. But when you’re interviewing for a job, most hiring managers weigh bachelor’s degrees the same, no matter where you went to school. An HR manager is looking for skill set and experience, not whether someone went to an Ivy League school or how much they paid for their degree.

Have a heart-to-heart with your kid early on when they show interest in certain schools they might want to go to. Let them know exactly how much money you can contribute. Talk about how far that money will go considering each of the school options: public versus private, in-state versus out-of-state, community college versus university. All of these choices matter when it comes to the price tag.

If you’re planning to send your kid to a local college, look into scholarships and grants for students who remain in their home state. Some states, like Georgia, offer state grants and scholarships to residents who have demonstrated academic achievement (but you might need to fill out the FAFSA first to find out). Don’t live in Georgia? Do some research and see what your state has to offer. Make sure you review the fine print though. Some in-state scholarships won’t pay for off-campus housing as a freshman, for example, so you’d cover the room and board costs. Do your research ahead of time.

4. Start saving as early as possible.

It’s so important to start putting money away for college as soon as possible. That’s because time plays a major role when it comes to compound growth. If you put money away as soon as your child is born, you have almost 20 years of growth potential—and you don’t have to invest as much each month.

If you put away just $100 a month between the year your child is born and the year they turn 18, you could have over $60,000 for their college fund. But if you wait until they turn 10, you’d have to save $400 a month to reach that same $60,000. Which is easier to afford? That’s right—starting early.

5. Save in the right place.

Now, people often ask where to put the money they’re investing for their kids’ college. The two most common options are the 529 plan (named after a section of the IRS code) and the Education Savings Account (ESA).

These two options are similar in one important way: The money in the accounts grows tax-free and isn’t taxed when it’s taken out—as long as the money is used for qualified education expenses.

Here’s the bottom line: You want to stay in the driver’s seat with your money, whether it’s in a 529 plan or an ESA. If you go with an ESA, you have more control over how you invest your cash, but 529 plans are beginning to offer more flexibility. Here are the account features at a glance:

529 Plan

  • No age limit for using the money
  • No income restrictions
  • No contribution limits (but there’s a gift tax if you contribute more than $17,000 in 2023)4
  • Nonqualified withdrawals are taxed
  • Can be used for college or primary/secondary education

Education Savings Account (ESA)

  • Money must be used by age 30
  • Can be used for primary/secondary education
  • Has income restrictions
  • Contribution limit of $2,000 per child/year5
  • Nonqualified withdrawals are taxed

Whatever you do, don’t go with a prepaid tuition plan. Lots of restrictions are involved, and over the long haul, you’d get more bang for your buck by investing that money instead of locking in a tuition rate. Trust me, just don’t do it.

P.S. Before you start saving, talk with a financial professional in your area about which plan is best for you.

6. Apply for need-based scholarships and grants.

For a lot of Americans, thinking about the cost of college is stressful. And if you’re in that boat, you might be forgetting about some money that’s free for the taking: scholarship and grants.

But here’s the catch: Before you claim any need-based scholarships or grants, you have to complete the FAFSA (Free Application for Federal Student Aid) every year—and each state has its own deadline for completion.

The FAFSA is used to figure out how much you can get in federal grants (such as the Pell Grant) and state grants. Even if you think you make too much money, do it anyway. Many colleges, foundations and corporations use it to award scholarships.

Filling out the FAFSA probably isn’t how you’d like to spend a rainy afternoon, but if you don’t fill it out, you might be leaving cash on the table. One third of undergrad students don’t file the FAFSA, and of those, 2 million would have qualified for a grant!6 Spending an hour filling out these forms sounds worth it now, doesn’t it?

7. Don’t forget about financial aid.

Financial aid comes in a few forms. In addition to federal scholarships and grants, don’t forget about applying for all the private scholarships you can. These are scholarships funded by companies and nonprofit organizations that reward academic achievement, extracurricular experiences, hobbies, skills and even personal traits, like being tall (and the eligibility isn’t need based, so award amounts don’t usually depend on your family’s income).

Apply for all the scholarships you can. In today’s digital age, websites like Fastweb and CareerOneStop make finding and applying for scholarships much easier. In fact, I used websites like these to help me win thousands of dollars in scholarships for my education, so I know you can use them to earn scholarship money too!

8. Say no to student loans.

When you complete the FAFSA, you’ll start getting offers from banks that will be more than happy to “help” you pay for college. In fact, some financial advisors actually tell their clients to count on paying for part of their college expenses with student loans. Listen, it’s this advice that has led Americans to carrying around $1.57 trillion in federal student loan debt.7

Let’s look at the real costs of that so-called student loan help. In 2022, the average student loan borrower carried about $39,487 in student debt.8

So, what will paying off that debt look like?

Assuming you have a 10-year payment plan and an interest rate of 6%, you’d be paying just over $400 a month. And throughout those 10 years, you’d pay around $15,000 in interest. So, that “help” in the form of a nearly $40,000 loan cost you almost $55,000. If you do the 20-year payment plan, you’d pay only $278 a month, but you’d end up paying close to $30,000 in interest—almost the original loan amount! Paying nearly double for a degree? No, thank you! 

9. Do work-study as a student.

Instead of taking out loans and sacrificing your financial future, take advantage of work-study programs instead. Federal work-study gives students part-time jobs while they work on their undergrad and graduate degrees. This means they can earn money to pay for school by working as a student—as long as the job is relevant to the degree program or based on-campus. This is a great way to get professional experience for your resumé and take care of school expenses.

10. Look into tuition assistance and reimbursement programs.

If you’re asking yourself How much should I pay for college? the answer will always be, What you can actually afford. If money looks tight even with scholarship and grant awards, your student can pitch in with their earnings from a part-time job. This is super empowering and helps involve them in the process of paying for school. If they’re currently looking for a job, help them find one with tuition assistance or reimbursement. Some companies will help pay for college degrees as long as your student is employed part-time, enrolled in an accredited program, and maintains a certain GPA.

A Debt-Free Degree Is Possible

Even after applying for grants and scholarships, your student might still have to pay out of pocket for some of their college expenses. If that’s the case, I want you to encourage them to avoid student loans at all costs. Instead, they can start a side hustle, get a part-time job . . . anything to cash flow their education will help. Besides—being involved in paying for school means they’re more likely to work at those scholarships and grants, graduate sooner, and develop a strong work ethic.

If you want more details about graduating debt-free, check out the free resources on my website at You and your child can learn how to save for college step by step, how to prepare for college, how to do college visits, and even how to create a college student budget. I’ll see you there.

Get Help From an Investment Pro

When it comes to saving for college, you don’t have to do it alone. There are financial professionals in your area who can help. Our SmartVestor Pros are the best in the business. You can trust them to help you navigate the waters of college savings any day. Sign up here and you’ll be matched with a pro in your area—for free.

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Kristina  Ellis

About the author

Kristina Ellis

Kristina Ellis is a bestselling author who believes no student should be burdened by loans. Drawing from her experience of earning over $500K in college scholarships, Kristina helps thousands of students graduate debt-free through her syndicated columns, podcast appearances, online courses and books. She’s a co-host of The Ramsey Show, the second-largest talk show in America, which reaches 18 million weekly listeners, and she appeared in the award-winning documentary Borrowed Future. Kristina has appeared on NBC News, Business Insider, Fox & Friends, USA Today and Yahoo!, where she’s shared practical, real-world strategies for going to college without debt. Learn More.

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