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Wealth & Well-Being

Paying for College: 3 Smart Alternatives to Borrowing

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As the cost of college tuition and fees continues to skyrocket, so too does the consumer debt incurred to fund post secondary education. According to Forbes, student loans make up the second highest category of consumer debt, only behind mortgages and ahead of credit card and auto loans. With 44 million borrowers owing in excess of $1.5 trillion in U.S. student debt alone, it’s no stretch to say that countless Americans are caught in a student debt crisis that shows no sign of improving.


Unfortunately, students aren’t the only ones going into debt to fund their education. Many parents are depleting their own retirement savings or incurring personal debt in an effort to send their children to their “dream school.”

Luckily, there are alternatives to borrowing which can save both parents and students from digging themselves into a hole of debt—grants, scholarships, work-study programs, and part-time jobs are all viable ways to contribute to the rising cost of educational expenses.


1) Grants

Grants are need-based monetary gifts distributed to eligible high school graduates and college students for the purpose of funding their college education.

Federal grants, state-level grants, and college grants are awarded to students based on the financial need exhibited by their FAFSA (Federal Assistance for Student Aid) application. The amount for which a student qualifies is calculated based on his or her family’s ability to pay, also referred to as the Expected Family Contribution (EFC). Accordingly, a number of middle and high-income families refrain from applying at all as they assume their income is too high for their student to qualify.

But according to Mark Kantrowitz, publisher and VP of research at savingforcollege.com, millions of dollars in federal and state-level grants are being left on the table each year. In 2015-2016, nearly 6 million students failed to file the FAFSA, and of those, roughly 35% would have qualified for some type of grant. In other words, students who fail to file the FAFSA are potentially missing out on thousands of dollars of “free money” to contribute to their education costs.

Grants, like scholarships, are an ideal source of funds as they give students access to much needed resources now, and save them from high loan repayments in the future.

2) Scholarships

According to the most recent federal statistics, approximately 60% of undergraduates use scholarships to help pay for college. Like grants, scholarships do not have to be repaid.

Scholarships are merit-based* awards bestowed upon highly qualified students by colleges, local organizations, charity groups, and private funding for any number of distinctions:

  • High academic achievement
  • Athletic ability
  • Artistic capabilities
  • Highly developed foreign language skills
  • Technological savvy
  • Extensive volunteer work and community involvement
  • Singing or songwriting
  • Etc.

This list is far from exhaustive. In fact, the U.S. News and World Report cites that billions of dollars are rewarded in scholarship money each year for applicants of countless different capabilities, from metalworking to the culinary arts, nursing to robotics. In our home state, the New Hampshire Charitable Foundation annually awards over $40 million in scholarships and grants, alone.

Local and statewide foundations such as these are a great place to start your search, as they narrow the qualifications down to your specific region. But, popular sites such as Scholarships.com, Chegg.com, and Cappex.com, catalogue the nationwide and worldwide scholarships available and provide details on how to apply.

*Some merit-based scholarships still have a need-based component to them.

3) Work-Study or Part-Time Jobs

Work-study programs are college-led, college-funded jobs on or nearby campus which a student qualifies for only after having filled out and submitted the FAFSA. Wages are paid directly to the student, but the annual amount distributed for work cannot exceed the award amount for the year.

Students are usually notified of their eligibility for work-study in their financial aid package. But, if a student doesn’t qualify for these programs, a part-time job may be the answer to the bridging the gap in expenses.

More often than not, colleges will run closed-loop, student-access only digital hubs where students can look for work with employers seeking specifically to hire college employees. These jobs range from food service to babysitting to proofreading to plant watering, but can be flexible ways for a student to earn money without disrupting his or her academic schedule. Students should inquire with their college’s student services office for information on this type of digital resource.

Essentially, it’s best to avoid accruing excess debt whenever possible. A student who gets through college with the minimal amount borrowed, will be better situated to make smart financial moves in the future, such as financing a family home or saving for retirement.

If you are still unsure about the best way to fund your children’s college education, our Certified Financial Planner™ professionals and Financial Transitionists® would be happy to discuss your options with you. Contact us today for a complimentary Get Acquainted meeting. We look forward to helping you secure a postsecondary education without comprising your overall financial wellbeing.  

Written by Julie Fortin in collaboration with Lexicon Content Development

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