What to consider when financing college

When it comes to pursuing a degree, there are many aspects to consider, especially if you’re an adult already committed to a job and supporting a family. Creating a healthy school-work-life balance is important, and one part of that is assessing your financial obligations with as much information as possible. Here’s where to start.  

Christine Conway, the director of financial initiatives at UOPX, sees one consistent barrier when it comes to financing college: People aren’t lacking ambition — they’re lacking information. “The biggest concern students have is simply that they don’t have the money,” she says. “They know school will cost something, and they know they’ll probably borrow, but they don’t understand how to plan for paying it back.”

Students can create a list of questions before they enroll so they better understand grants, scholarships, loans and tuition reimbursement, as well as how each affects short- and long-term costs. After all, the decisions students make before starting school can potentially shape their financial well-being long after they graduate.

Proactively approaching the topic of financing college can help students:

• Understand their total program cost
• Identify free or low-cost funding sources
• Avoid unnecessary loans
• Discover employer tuition benefits
• Build a repayment plan that fits their real-life circumstances

According to Conway, a common question college students ask about financing college is: What financial support is available that I’m not required to repay? The answer begins with grants, which are awarded based on financial need and typically do not require repayment. The Federal Pell Grant is the largest source of need-based aid for adult learners. To determine eligibility, students must complete and submit the Free Application for Federal Student Aid (FAFSA^®) form.

“The FAFSA is the starting point,” Conway explains. “That’s how we see what need a student has.”

Eligibility is tied to factors like income, family size and dependency status. Unlike scholarships, grants typically don’t require essays or external applications. But they must be applied for annually. Filing the FAFSA form each year is essential, even if you think you won’t qualify.

Like grants, scholarships are an attractive option for financing college because they typically don’t need to be repaid. However, they can be tied to factors beyond financial need. They may be merit-based, identity-based, employer-sponsored or related to your program or background.

Applying for scholarships may take added work, as each one must be researched and applied for individually. But it can be well worth the effort. “Scholarships usually don’t come along with the FAFSA,” Conway says. “But if you’re eligible and receive one, applying those funds to your educational program will lower the amount you need to borrow or pay out of pocket.”

Loans are another option for financing college, but they can represent long-term financial commitments. Federal and private loans differ in terms of interest rates and repayment protections, all of which should be considered. Federal student loans fall into two categories:

• Awarded based on financial need
• Interest covered by the federal government while you’re enrolled
• Lower overall borrowing cost over time

• Not need-based
• Immediate accrual of Interest
• Available to most students regardless of income

Students often believe they must show hardship to receive federal loans, but that isn’t the case. “Your income can affect which loans you’re eligible for,” Conway says. “But you don’t need to show financial need to receive unsubsidized loans.”

Private loans are credit-driven and may require a co-signer. They may come with:

• Higher interest rates
• Variable terms
• Limited repayment protections

“Private loans can often be more expensive and usually have fewer options for repayment,” Conway says. This doesn’t mean private loans should be written off as an option for financing college, but — like all the loans noted above — you need to have a solid budget plan for repaying those student loans after graduation.

Depending on where they work, adult learners may have another opportunity to consider, and that is whether their company has a tuition benefit program. These programs could allow employees to receive partial, or sometimes full, coverage for approved coursework and degrees. 

Some employers reimburse you after you complete the course. Others may pay the university directly. Check your benefits or with HR to see if your employer may offer this benefit. Or approach your human resources director directly. There may be an opportunity that isn’t explicitly stated.

Another overlooked option for financing college, notes Conway, is Prior Learning Assessment (PLA). When available, PLA evaluates an individual’s professional or real-world experience and awards academic credit. For military students especially, PLA could apply service training or certifications toward degree requirements.

An exam or written submission may be required along with a processing fee, but this investment of time and money can offer the following benefits through:

• Shortening the degree path
• Reducing overall tuition costs
• Limiting total loan borrowing
• Recognizing the work an individual has already mastered