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It’s graduation season, which brings to mind paying for college. If you’re a parent, wrapping your mind around the cost of college can send tremors down your back. Unless you’re wealthy, the high cost of postsecondary education often creates a financial burden the entire family must bear.

Paying for College The Stats

The Education Data Initiative found that the average cost of college for a student in the United States is $35,551, including school materials and living expenses. The average nonprofit university student spends $54,501 a year, with $37,641 of it on tuition and fees. If you’ve just fallen out of your chair, we understand.

I wish I had a quick and easy “to do” that ends with a cash windfall for all parents facing this potential financial hardship. The reality is you must educate yourself on the topic, save, and apply for scholarships, grants, and federal loans as soon as your student is eligible. There is no easy way to afford college, but there are ways to trim down the cost.

Savings for College

Start saving as soon as your bundle of joy arrives! This can be in the form of a high-yield savings account. Cash on hand to cover tuition will help address this debt load; however, a savings account won’t build much on its own as even the highest-yield accounts are still pretty low.

Using a 529 Plan when Paying for College

A great saving option you should start early is a 529 Plan. This investment account can grow free from federal income tax. Withdrawing is tax and penalty-free for qualified education expenses. There are several myths floating around 529 Plans, which may be why so many people dismiss them as an option. We’d like to dispel a couple of them:

Myth: 529 Plans can only be used for college or graduate school tuition and fees.

Truth: 529 Plans were created by the government to encourage parents to save for college but, in the past few years, the list has expanded to include elementary or secondary schools, two-year colleges, vocational schools, and trade schools that are participating in the U.S. Department of Education’s Federal Student Aid program. Check the Federal School Code List to find qualified institutions.

Myth: 529s can hurt financial aid.

Truth: The truth is a bit more complex. On the Free Application for Federal Student Aid (FAFSA), a 529 Plan is considered an asset for a student and can reduce aid eligibility by up to 20 percent. For parent 529 Plan owners, the first $10,000 won’t be counted in the Expected Family Contribution (EFC) calculation. Only a maximum of 5.64 percent of parental assets are counted. Grandparents, relatives, or otherwise can own a 529 Plan for some special student in their life and it will not affect the student’s FAFSA.

To further educate yourself and to debunk any additional 529 Plan myths, check out CNBC’s article, The Biggest Misconceptions about Using 529 Plans to Save for College” by Cheryl Winokur Munk.

If you’re convinced to start a 529 Plan, find the right one by visiting The Best 529 Plans by Statefrom savingforcollege.com. NJBest is the garden state’s 529 Plan. When first introduced, the plan was given less than favorable reviews. A recent provision has improved its status by allowing NJ taxpayers to deduct 529 Plan contributions of up to $10,000 per year from state-taxable income for households with an annual income of $200,000 or less. You are not required to use a plan from your state. Go to the above-mentioned site and conduct a side-by-side comparison to see which plan is best for your family.

Paying for College with Federal Aid

To file for Federal Aid, you must first secure a federal student aid ID (FSA ID) from fsaid.ed.gov. Students and parents should get their own FSA ID and keep the information private.

Even if you think you will not qualify for financial aid, fill out the Free Application for Federal Student Aid. The FAFSA determines a student’s eligibility for need-based aid, work-study options, and the Federal Pell Grant. If your student doesn’t qualify for need-based aid, filling out the FAFSA could still lead to merit aid or recruitment scholarships depending on the school they’ll be attending.

Apply to College Early

Students should file the FAFSA on or not long after October 1 of the calendar year before the academic year of enrollment. There is a reward for being the early bird. Students who file within the first couple of months, tend to get double the grants. File FAFSA for every year you attend college.

Help with FAFSA

The U.S. Department of Education offers free help in filing the FAFSA through its Federal Student Aid Information Center. You can call 1-800-4-FED-AID (1-800-433-3243). Good news is on the horizon for future enrollees. The Department of Education will be releasing a new streamlined FAFSA application by December of this year.

Paying for College with Grants and Scholarships

Grants are public funds that are usually awarded to undergraduate students who have a financial need. Some, however, are merit-based. The first step in applying for grants is to fill out the FAFSA to see if you are eligible. If you are eligible, you can visit HESSA (the Higher Education Student Assistance Authority) for resources regarding grant opportunities in New Jersey.

Federal Pell Grants come from the U.S. Department of Education and are usually awarded to undergraduate students who have an exceptional financial need. The maximum award varies by year. For the 2023-2024 school year, the maximum award is $7,395.

Scholarships come in many forms and amounts and are not need-based. They too are free money that doesn’t need to be repaid. You can apply for as many as you like to increase your chances of winning one. Be sure to weed out any scholarship “offers” that ask for money as these are most likely scams. To find the right scholarship fit, use the U.S. Department of Labor’s free online tool – careeronestop.com.

All grants and scholarships begin with filling out the FAFSA. You should only apply for those that you qualify for and be sure to follow the directions. If your student receives private scholarships, your financial aid can be affected through Scholarship Displacement.

College Loans

Once you’ve exhausted all of the above, consider loans. Fill out the FAFSA to access federal parent and student loans, which offer lower interest rates and better repayment terms than private loans.  

Once you’ve accepted a school, you’ll learn how much aid you are being offered. You can figure out how much you need to borrow with a private loan, if necessary. Private loans cannot be deferred and are provided through a lender like a bank or credit union – with interest. If you have to go this route, be sure to know the terms of the agreement, and any associated fees, and calculate how long you or your child will be paying it off.

Tax Benefits – Internal Revenue Service

Do not forget these breaks come tax season. Your modified adjusted gross income plays a role in being able to claim these credits. Visit the links below for a breakdown.

The American Opportunity Tax Credit or AOTC is a tax credit for qualified education expenses for an eligible student for the first four years of higher education.

The Lifetime Learning Tax Credit or LLTC is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution.

Depending on what state you live in and the 529 Plan you’ve chosen, you may be able to deduct your state income tax. Look for this possibility when researching 529 Plans.


Parents don’t want to ask their children to compromise. We want our kids to have the same experience or better than we had. The threat of great debt may require a compromise or two. Here are some additional ways to cut costs:

  • Earn college credits in high school
  • Dedicate yourself to winning academic, sports, or creative scholarships
  • Get your degree from a community college
  • Go to community college and transfer after two years
  • Live at home while attending school (huge savings)
  • Work while going to school
  • Buy used textbooks
  • Make fewer trips home, ride share

The Pressure of Prestige

One of the biggest topics that families should address before applying to schools is the pressure of prestige that could come with more debt than your family can handle. It will be difficult for your child to hear fellow students flaunt acceptances to prestigious schools. The question is if you choose prestige over affordability, will that mountain of debt be worth it? Marshall Hargrave’s article “Is University Prestige Really That Important?” offers a great read on the topic. Hargrave calls out some very successful people who went to state schools as undergrads. Check it out!

Have an open conversation with your children about inflation, the rising cost of paying for college, the potential for debt, and the notion that maybe it isn’t where you go but what you put into your education that matters.