How to Pay for College

The rising costs of higher education are showing no signs of letting up. In order to make it through, you must have a plan.

For students attending a public college or university in the state in which they live, tuition averages $7,000 per year. Private colleges run around $37,000 per year, with the highest-price private schools costing more than $50,000 a year. Paying those hefty bills requires a plan that includes an examination of how much you want to pay now versus how much you are willing to finance with loans. Here are a few things to keep in mind as you set out to pay for college:

Cash is king. How much can you really afford to spend over two to four years? Also consider how that cost might affect you or your children over that time.                                                                                      

• Set up a payment plan. Many schools let you set up a monthly payment plan, which spreads the payments over several months rather than just one payment per term.

• Keep saving. Even when you or your children are in school, every dollar you pay up front saves nearly $2 in interest if were to borrow that dollar.

• Stick to a budget: A number of college budgeting tools are available atBankrate, The Federal Direct Loan program web site and FinAid.

Get a scholarship. Scholarships are not just for good students or low income families. There are scholarships for everything from vegans to students with the last name Zolp. It takes time and effort to find them and apply.

• Cast a wide net. Consider scholarships from you hometown, college or workplace. And don't quit trying. Some scholarships are only available to students who are already juniors or seniors in college. Others are available to older students, and some states offer grants for laid-off workers returning to school to retrain.

• Check in. Become best friends with your school's financial aid office. They'll know what's available on campus as well as some less well-know sources.

• Check online. Sites listing scholarships include www.fastweb.com,www.collegeanswer.com, and www.collegeboard.com.

Borrow only as needed. Students who graduated with Bachelor's degrees in 2010 left school with more than $25,000 in student-loan debt, according to Finaid.org.

• Complete the FAFSA. The first step is to complete the Free Application for Federal Student Aid (FAFSA) available online at http://www.fafsa.ed.gov/. It determines your eligibility for Federal Student Aid programs such as Pell Grants, Stafford Loans and PLUS Loans.

• Start with the feds. Always start with federal loans, which are available to both parents and students, before opting for private loans from banks and other lenders. The federal programs offer some of the best interest and repayment terms including opportunities to have the loans forgiven for public service work and payment deferred if there's job loss.

• Then go to the states. Many states also have state lending authorities, which provide loans to students from that state or who attend school in that state. These typically require a co-signer and good credit score.

What not to do when trying to pay for college.

• Don't get in over your head. Figure out ahead of time about how much you'll owe after four years, and don't use credit cards to pay for tuition, books, and other necessary expenses.

• Don't drain retirement savings. It's tempting to raid retirement accounts, but advisers warn against it because you can finance college but no one is willing to lend you money for retirement.

• Don't suppress financial hardship. If something changes at home a job loss, medical event, or another sibling at school contact your financial aid office. You may be eligible for more aid or work study.

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