How We Can Pay for a College Education: A Roadmap (Blog Post #5)

In our blog posts to date, we have shown the following:

1. Our level of education, especially whether we choose to attend college and get a college degree, can strongly affect our chances of employment.

2. Our level of education, especially whether we choose to attend college and get a college degree, can strongly affect the amount of money we earn during our careers.

3. In the case of those who choose to go onto college and get a college degree, our field of study can strongly influence the field of work we eventually go into.

4. The field of work we eventually go into can strongly influence how much money we make during our career.

In short, education is the gateway to opportunity. Education provides a proven pathway to developing knowledge and skills, landing job opportunities, having options with regard to one’s career, exercising some control over one’s own career trajectory, and ultimately achieving financial independence and financial stability in one’s life.

College is expensive, very expensive. Consider the following:

(a) “List” price refers to the official price, in this case the price of tuition & fees, that a college publishes. Source: College Board, “Trends in College Pricing and Student Aid 2021”, for the 2021-2022 school year.

And, of course, while a large portion of the total annual cost of going to college, tuition and fees are by no means the only costs. You also have the cost of room and board (i.e., on-campus housing and meals); course materials like textbooks; notebooks and other school supplies; transportation, and other personal expenses to cover. As you can see below, these additional costs push up the total cost of attending college as a full-time student.

Source: College Board, “Trends in College Pricing and Student Aid 2021”, for the 2021-2022 school year.

So what happens if education is the gateway to opportunity yet your family cannot actually afford to pay these insanely high prices of a college education? Of course, there are a ton of families in the exact same boat as you. As a matter of fact, nearly 85% of college students receive financial aid in some form to help cover the cost of their college education and these college students cover over 90% of their total college education costs with such financial aid.[1] The short answer to this question related to affordability, and ultimately accessibility, is: averages are averages, the published “list” price of a college education does not have to be the price you or your family actually pay out-of-pocket, and perhaps the most important overall take-away…… you have options! This blog post focuses on how we can pay for college if our families cannot fully or partially cover its cost.

Averages are averages. What we mean here is that the national average “list” price of tuition and fees to attend a US 4-year in-state public college[2], a US 4-year out-of-state public college[3], or a US private university does NOT represent the “list” price of every US 4-year in-state public college, every US 4-year out-of-state public college, or every US private university. There are “list” price differences within each of these three categories of school. The following are just some, of what are many, examples by individual state. Let’s start with the average published “list” price of tuition & fees for a full-time in-state student, for the 2021-2022 school year, to attend a US 4-year public college:

Source: College Board, “Trends in College Pricing and Student Aid 2021”, for the 2021-2022 school year.

Now let’s look at the average published “list” price of tuition & fees for a full-time out-of-state student, for the 2021-2022 school year, to attend a US 4-year public college:

Source: College Board, “Trends in College Pricing and Student Aid 2021”, for the 2021-2022 school year.

To be clear, none of these published “list” prices are “cheap”. They are most definitely not. That said, the fact is they do vary meaningfully. In sum, getting a college education in some States can be significantly less expensive than in other States.

Secondly, the published “list” price of a college education does NOT have to be the price you or your family actually pay out-of-pocket. This is true with regard to US 4-year in-state public colleges, US 4-year out-of-state public colleges, and US private universities. Why is that? The answer is because financial aid in various forms is available to students and their families. Before we explore the different forms of financial aid that are available, though, let’s first just look at a couple of examples of what the “reported” real average out-of-pocket expense is for students and their families to fund a college education as compared to the “list” prices colleges are publishing. The chart below makes this comparison for both US 4-year in-state public colleges and US private universities.

Source of Data: College Board, “Trends in College Pricing and Student Aid 2021”, for the 2021-2022 school year.

So what do the two gray bars, or the $8,000 and $23,000 approximate amounts, refer to? They each represent, by type of school (and State residency of student in the case of the public college data), the average “reported” amounts of financial aid being granted nationally to students and their families. Once again, none of these “reported” approximate real out-of-pocket expense amounts – i.e., $3,000 and $15,000 -- are small amounts of money. But the fact is they are substantially less than the “list” prices that colleges publish. As a whole (i.e., public, private, in-state, out-of-state), undergraduate public and private college students nationally received -- for the 2020-2021 school year – an average, on a “reported” basis, of ~$15,000 in financial aid to reduce their and their families’ out-of-pocket cost of paying for college.[4]

Importantly, you will notice that I have been repeatedly using the term “reported”. I am doing so for a very specific reason and that has to do with the way this data on financial aid amounts (to students) and real out-of-pocket expense amounts (by students and their families) is being reported by the Federal government’s Department of Education. In short, one can reasonably argue that the reported average amounts of financial aid being granted nationally to students and their families UNDERSTATE the actual amounts of financial aid that are available. In other words, in practice, even greater financial aid on average may actually be available. That is a good thing! And, by extension, because the reported average amounts of financial aid being granted appear to UNDERSTATE the actual amounts of financial aid that are available, the reported estimated real out-of-pocket expenses that are being incurred by students and their families (i.e., $3,000 and $15,000 in the data above) appear to be OVERSTATED. In other words, in practice, the average out-of-pocket expense that is required of students and their families may actually be even lower than the $3,000 and $15,000 amounts quoted in the data above. Again, that is a good thing![5]

As the graphic below shows, financial aid is available to students and their families in several different forms. Individual students and their families commonly tap into SEVERAL of these forms of financial aid, not just one, to cover the full cost of a college education.

Let’s start with grants. Grants are one form of financial aid and generally do NOT need to be repaid. Grants are offered by the Federal government, individual States, and private sources.

Federal grants are offered by the Office of Federal Student Aid (OFSA) at the US Department of Education (DOE). Federal grants include the Federal Pell Grant and the Federal Supplemental Educational Opportunity Grant (FSEOG). These grants are not actually administered by the DOE, though. Instead, they are administered by the financial aid offices of the colleges which participate in the DOE’s Pell Grant and FSEOG programs. In the 2020-2021 school year, there were 6.2 million Pell Grants issued and the average Pell Grant per recipient for the year was ~$4,200.[6] The maximum Pell Grant per recipient in the 2021-2022 school year was ~$6,500[7] and the maximum Pell Grant per recipient for the 2022-2023 school year is ~$6,900.[8] Some colleges also choose to participate in the less well-known Federal Supplemental Educational Opportunity Grant (FSEOG) program, whose individual grants range in amount from $100-$4,000 per year.[9]

To learn more about the Federal Pell Grant and the Federal Supplemental Educational Opportunity Grant (FSEOG) programs, visit https://studentaid.gov/understand-aid/types/grants/pell and https://studentaid.gov/understand-aid/types/grants/fseog.

Individual States are also a source of student financial aid in the form of grants. To learn more about State and local grants that potentially may be available to help cover college education expenses, a good idea is to research a State’s department of education financial aid website and/or contact a State’s department of education to inquire. Here is a link to help you quickly find a State’s department of education financial aid website: https://www.nassgap.org/advocacy-news-history/links-and-resources/.

Scholarships are a second form of financial aid. They can be merit-based or financial need-based and they do NOT need to be repaid. Scholarships may cover the full cost of college tuition or they may cover part of the cost. Colleges themselves are the predominant source of scholarships. Over 85% of college scholarships come from colleges.[10] Scholarships, though, are additionally offered by, for example, individual States; non-profit organizations including foundations; private companies; individuals; religious groups and community organizations; and other types of private groups and organizations. An estimated 5 million public and private scholarships are available annually to college students, accounting for an estimated ~$25 billion of available funding.[11] In the 2020-2021 school year, the estimated average scholarship amount was nearly $7,500.[12]

The Princeton Review publishes a list of the top public and private schools for financial aid. Check out the following lists applicable to the 2020-2021 school year: https://www.princetonreview.com/college-rankings?rankings=top-20-best-schools-for-financial-aid-public-schools and https://www.princetonreview.com/college-rankings?rankings=top-20-best-schools-for-financial-aid-private-schools. To get a quick sense of the largest amounts of financial aid that are available to students directly from public and private college institutions themselves, check out the financial aid infographic at https://www.princetonreview.com/college-rankings/best-value-colleges/financial-aid-infographic?ceid=bvc.

The Princeton Review also publishes a list of what it refers to as the “Best Value Colleges”. The rankings in this list take into account several different criteria, of which one is financial aid provided by the public and private colleges themselves. Among the top 50 public “Best Value Colleges”, the average financial aid package for the 2020-2021 school year was ~$13,000.[13] Among the top 50 private “Best Value Colleges”, the average financial aid package for the 2020-2021 school year was ~$50,000. Just to put these numbers into some perspective, consider the following:

• Nationally, the average “list” price of tuition and fees, for the 2020-2021 school year and for a full-time student, to attend a US 4-year in-state public college was ~$10,600[14];

• Nationally, the average “list” price of tuition and fees, for the 2020-2021 school year and for a full-time student, to attend a US 4-year out-of-state public college was ~$27,200[15]; and

• Nationally, the average “list” price of tuition and fees, for the 2020-2021 school year and for a full-time student, to attend a US private university was ~$37,300. [16]

As you can see from this data, the average financial aid package that was provided for the 2020-2021 school year by specifically the top 50 public “Best Value Colleges” (as ranked by The Princeton Review):

A) actually exceeded the national average “list” price of tuition and fees for a full-time student to attend a US 4-year in-state public college, and

B) amounted to nearly 50% of the national average “list” price of tuition and fees for a full-time student to attend a US 4-year out-of-state public college.

And, as you can see from this data, the average financial aid package that was provided for the 2020-2021 school year by specifically the top 50 private “Best Value Colleges” (as ranked by The Princeton Review) actually exceeded the national average “list” price of tuition and fees for a full-time student to attend a private US university.

The key take-away here is that the financial aid packages which both public and private colleges are providing today to students and their families can be incredibly robust and therefore worth serious investigation and consideration regardless of your family’s household income and savings.

To learn more about college scholarships and grants, from both private and public sources, that potentially may be available to you, contact the financial aid offices of individual colleges; ask your high school college guidance counselor; use the US Department of Labor’s scholarship search tool (https://www.careeronestop.org/toolkit/training/find-scholarships.aspx); use Sallie Mae’s scholarship search tool (https://www.salliemae.com/college-planning/tools/scholarship-search/); use the College Board’s scholarship search tool (https://bigfuture.collegeboard.org/pay-for-college/scholarship-search); use Fastweb’s scholarship search tool (https://www.fastweb.com/college-scholarships); use US News & World Report’s scholarship search tool (https://www.usnews.com/education/scholarships/search); use Chegg’s scholarship search tool (https://www.chegg.com/scholarships); research your State’s department of education financial aid website (here is a link to help you quickly find a state’s department of education financial aid website: https://www.nassgap.org/advocacy-news-history/links-and-resources/) and/or contact your State’s department of education to inquire; check out the non-profit organizations referred to in Charity Navigator’s Education category and under the Cause “Scholarship and Financial Assistance” (https://www.charitynavigator.org/index.cfm?bay=search.results&cgid=3&cuid=37);

and try to research the websites of, and/or contact, non-profit organizations, private companies, religious groups and community organizations, and other types of private groups and organizations to see if you can identify any additional sources of college scholarships and grants.

Grants and scholarships from both public and private sources play a big role in funding college educations. Over three-quarters of full-time undergraduate college students receive at least one grant or scholarship.[17] Moreover, these grants and scholarships collectively end up covering on average ~25% of recipients’ college expenses on an annual basis.[18]

Like grants and scholarships, student loans -- especially Federal student loans -- also play a big role in funding college educations. In general ~ one-third of college students use student loans to help cover their annual college expenses, student loans cover on average an estimated ~20% of college students’ annual college education expenses, and college students on average borrow in excess of $30,000 (overall, not per year) to attend college.[19]

Unlike grants and scholarships, though, loans involve borrowing money. And because you would be borrowing money, you are expected to repay the amount of the loan and pay interest on the loan. A student can take out a Federal student loan. Or a student can take out a private student loan. Federal student loans are loans from the US Federal Government’s Department of Education (DOE) and these account for the overwhelming majority, over 90%, of all US student loans.[20] For the 2020-2021 school year, the average Federal student loan for a full-time college student amounted to ~$3,800.[21] The maximum annual Federal student loan amount an undergraduate college student can borrow, though, is in the range of $5,500-$12,500.[22] Private student loans account for the less than 10% balance of US student loans[23] and are loans from the private sector, like consumer banks, credit unions, and commercial banks that lend to consumers. For specifically the 2020-2021 school year, an estimated ~40% of college students took out a Federal student loan or a private student loan.[24] The size of the average private student loan for the year was an estimated ~$6,200.[25]

To learn more about applying for a Federal student loan, visit https://studentaid.gov/help-center/answers/article/how-to-get-federal-student-loan.

To learn more about private student loans that may be available, research the websites of, and/or contact, common sources of private student loans. These include consumer banks, credit unions, and commercial banks that lend to consumers. Key sources of private student loans include Sallie Mae, Citizens Bank, PNC Bank, and Discover Bank.

As with all loans, since they involve the assumption of debt by the borrower, it is critically important to carefully and thoroughly understand, consider, and compare and contrast the quality and reputation of lenders; the terms and conditions of the loans; and the total amount of debt you assume.

A fourth way to fund your college education is through the financial support of your family, and that may include your family taking out a loan or using an existing loan of theirs to help cover the cost of your college education. An estimated 20% of families end up borrowing money (for example, through a line of credit of some kind) to pay for a child’s college education, and financial support from one’s family – whether through income, savings including in some cases retirement savings, and/or borrowings -- ends up covering on average ~40% of a college student’s annual educational expenses.[26] This ~40% excludes any College Savings Plan a college student’s family may have previously set up. It is additionally worth noting that there also is a Federal loan option, called “Direct PLUS Loans”, available to parents of college undergraduate students who remain “dependents” (i.e., reliant on their parent for financial support). The Direct PLUS Loans can help pay for a college student’s education expenses that are not covered by other sources of financial aid. In the 2020-2021 school year, an estimated ~10% of families used Direct PLUS loans and the estimated average size of those loans was ~$7,800.[27]

To learn more about Federal Direct PLUS Loans, visit https://studentaid.gov/understand-aid/types/loans/plus.

In the event that your family set up a College Savings Plan for you, that can be a fifth way to fund your college education. States offer what are called “529 Plans”, which are investment accounts that receive favorable tax treatment and are designed to be a savings tool that ultimately can be used to cover a beneficiary's education expenses. The funds in these State-sponsored plans, which are offered to out-of-state residents as well, can be withdrawn without any taxable consequence to cover nearly any type of college expense. In addition to 529 Plans, there are College Savings Plans called “Coverdell Education Savings Accounts” which can be opened at mutual fund companies, brokerage firms, and some banks. Again, these involve investment accounts that receive favorable tax treatment and are designed to be a savings tool that ultimately can be used to cover a beneficiary's education expenses. The funds in these accounts can be withdrawn without any taxable consequence to cover nearly any type of college expense. College Savings Plans end up covering on average ~10% of beneficiaries’ annual college expenses.[28] An estimated ~35% of US families use a College Savings Plan to help cover college educational expenses.[29]

To learn more about the 529 Plans of individual States, check out https://www.forbes.com/advisor/student-loans/compare-529-plans-by-state/.

To learn more about Coverdell Education Savings Accounts, here is one quick guide: https://www.bankrate.com/loans/student-loans/unspent-coverdell-esa-options-limited/.

A sixth way to fund your college education is through doing a sponsored Work-Study program. Sponsored work-study programs involve working part-time, typically 10-20 hours per week, while you are a student. Such part-time jobs may be on-campus (typically working for one’s school) or off-campus (working for a non-profit organization, a government agency, or a for-profit organization) and allow one to earn money while one is enrolled in school. This money can, in turn, be used to help pay for one’s college education expenses. Colleges choose to participate in Work-Study Programs. The most common college Work-Study Program is the Federal Work-Study Program sponsored by the US Department of Education (DOE). ~580,000 college students participated in the DOE’s Federal Work-Study Program in the 2020-2021 school year.[30] Some States also sponsor college Work-Study Programs. Approximately 10% of full-time college students are involved in a Work-Study program and work-study students earn on average ~$1,800 per school year.[31]

Colleges choose to participate in Work-Study Programs and the programs are administered by the schools which participate in them. To find out whether a Work-Study Program is an option available to you, contact the financial aid offices of the individual colleges you are potentially interested in.

A seventh potential way to help fund your college education is through Federal education tax credits and tax deductions. These are granted by the US Federal Government’s Internal Revenue Service (IRS). In the event a college student has to pay Federal taxes because he or she has taxable income (e.g., from a Work-Study program), the IRS allows that student to reduce the amount of their taxable income using education tax credits. By reducing the amount of his or her taxable income, the college student can effectively pay less in taxes to the IRS and, in turn, use more of the income he or she earned to cover his or her college education expenses. In addition, the IRS permits college students (and their families subject to income limits) to deduct, up to a certain limit, student loan interest expense from annual taxable income they may have. Finally, while neither a tax credit nor a tax deduction, families should note that the IRS allows penalty-free early withdrawals from individual retirement accounts (IRAs) to help pay for tuition and other college expenses of one’s child or grandchild.

To take advantage of potential Federal education tax credits and tax deductions that may be available to you and/or your family, or for your family to further explore the potential use of an individual retirement account (IRA) to help pay for your college education expenses, it makes sense to consult a professional accountant.

Now that we have walked you through the many options that are available to you and your family to help cover the cost of a college education, it makes sense to briefly return to the issue we highlighted above about the financial aid data that is being reported by the Federal government (we have cited some of that data above). The specific forms of financial aid that appear to be included in the US government’s reported calculations of financial aid per student are the following: grants and scholarships from both public and private sources, including colleges themselves (regardless of whether the colleges were reimbursed with Federal, State, or Local government monies); financial aid via Federal loans; and financial aid through the US DOE’s Federal Work-Study Program.[32] What does NOT appear to be included in the US government’s reported calculations of financial aid per student are the financial support of a student’s family (see above for details on potential options available to family members to help out), College Savings Plans (see above for details), private student loans (see above for details), and Federal education tax credits and tax deductions that may be available to a student and/or his or her family (see above for details). To reiterate, this nuance in the government’s reported data is very important because of its implication: those forms of financial aid that are NOT being included in the government’s reported calculations of financial aid per student can be thought of as representing potential ADDITIONAL forms of financial aid that are available to college students and their families to help cover remaining out-of-pocket costs of one’s college education.

Finally, you can find on many college websites what are called “net price calculators”. These calculators allow you to get a quick sense of what it likely would really cost you to attend a given college. Each college, of course, is different, so it makes sense to use these net price calculators to get estimates for several different schools rather than for just one or two schools. That way, you can make comparisons. Very importantly, though, if you are going to use a net price calculator, just make sure you understand what forms of financial aid are included in the calculations and what forms of financial aid are not included. Those forms of financial aid that are NOT being included in the calculations of a net price calculator can be thought of as representing potential ADDITIONAL forms of financial aid that are available to college students and their families to help cover remaining out-of-pocket costs of one’s college education.

A college education is achievable. As the gateway to opportunity and ultimately to financial independence and financial stability, let’s do everything in our power to make it happen.

I would love to hear from you. Any ideas, experiences, thoughts, comments and questions….please do share.

Copyright © 2025 Paving Our Path, Inc. All Rights Reserved.

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[1] EducationData.org, https://educationdata.org/how-do-people-pay-for-college#:~:text=84%25%20of%20students%20receive%20some,federal%20and%20state%20government%20aid. [2] “In-State” means the student is a resident of the State in which his or her college is based. [3] “Out-of-State” means the student is NOT a resident of the State in which his or her college is based. [4] College Board, “Trends in College Pricing and Student Aid 2021”.

[5] The underlying sources of the data on student financial aid amounts, which in turn produce the estimated real out-of-pocket expense amounts that we are citing, is the Integrated Postsecondary Education Data System (IPEDS) and the US Department of Education’s National Center for Education Statistics (NCES). While we have not yet walked through the many forms of financial aid that are available to college students and their families, it is important to recognize that not all of these forms of financial aid appear to actually be included in the IPEDS-NCES calculations of financial aid per student. Later on in this blog post we will note, so that you are aware, which specific forms of financial aid appear to be included in the US government’s reported data and which specific forms do not appear to be included. But this nuance in the government’s reported data is very important because of its implication: those forms of financial aid that are NOT being included in the IPEDS-NCES calculations of financial aid per student can be thought of as representing potential ADDITIONAL forms of financial aid that are available to college students and their families to help cover remaining out-of-pocket costs of one’s college education. Those “remaining costs” in the context of this discussion can be thought of as the “reported” real out-of-pocket expense amounts (i.e., $3,000 and $15,000 in the data above).

[6] See footnote #4. [7] See footnote #4. [8] https://studentaid.gov/understand-aid/types/grants/pell. [9] https://studentaid.gov/understand-aid/types/grants/fseog. [10] See footnote #1. [11] See footnote #1. [12] Sallie Mae, “How America Pays for College 2021”. [13] The Princeton Review, https://www.princetonreview.com/press/best-value-colleges-2022. [14] College Board, “Trends in College Pricing and Student Aid 2021”, for the 2020-2021 school year. [15] See footnote #14. [16] See footnote #14. [17] See footnote #1. [18] See footnote #1. [19] See footnote #1. [20] https://www.nerdwallet.com/article/loans/student-loans/student-loan-debt. [21] See footnote #4. [22] The US Dept of Education, https://studentaid.gov/understand-aid/types/loans. [23] See footnote #20. [24] Sallie Mae, “How America Pays for College 2021”; https://educationdata.org/how-do-people-pay-for-college#:~:text=84%25%20of%20students%20receive%20some,federal%20and%20state%20government%20aid. [25] See footnote #12. [26] See footnote #1. [27] See footnote #12. [28] See footnote #1. [29] See footnote #12. [30] See footnote #4. [31] See footnote #1. [32] https://nces.ed.gov/ipeds/use-the-data/survey-components/12/student-financial-aid; https://www.airweb.org/docs/default-source/ipeds-tutorials/sfa-types-of-aid.pdf?sfvrsn=585f5f3c_2.