Scholarship, grant, loan, work-study, and more — which should you use first to pay for college?
Have you started to think about paying for college? There are a few possible options out there — including loans, scholarships, and money from your family. But how should you prioritize the money you have versus the aid you receive?
Understanding your choices can help you make the right decision for you. Joe Statuto, market relationship manager for Wells Fargo Education Financial Services, helps explain how to think about paying for college — and which options you should exhaust first.
Paying for college
Follow this sequence when determining what funds to use.
First use: Scholarships and grants
Why? Because these types of aid usually do not need to be repaid — it’s essentially free money. Grants are often need-based, while scholarships are usually merit-based.
Second use: Work-study or income from a part-time job
Why? Work-study earnings are not applied directly to your tuition, but you can choose to spend or save them where needed. You can use your income to offset living expenses during the school year, minimizing what you pay for with loans (and then have to pay back).
Third use: Any family contributions
Why? If your family has been saving for your college education, you should use those savings before taking out loans. Look into tuition payment plans offered by your university; these allow you to pay tuition in installments over time, typically interest-free.
Fourth use: Federal student loans
Why? In most cases, the government pays the interest on your loan while you’re in school (it’s subsidized), your interest rate is fixed (meaning it will not increase after graduation), and you’ll be able to enroll in a repayment plan based on your post-graduation salary.
Fifth use: Private student loans
Why? Private loans are offered by lenders, so they may not have flexible repayment terms and fixed interest rates, like federal loans. You may also need to start making payments while you’re in school.
Estimate your education costs, understand the different options to pay for them, and become more financially ready for college with Get College Ready. Go now.