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What are the different ways to pay for college or graduate school?

Financing a college education is a significant investment, and there are a number of options that may help you after college.

You have choices about how to pay for college. Understanding your options can help you make the right decision for your situation. It’s important to first research how you can pay for college without loans. But if you need additional assistance, it’s generally best to apply for grants, scholarships, and then federal student loans before private loans. Any of these options can be used along with funds from independent higher education savings or a 529 savings plan, an investment account typically sponsored by states for families to save money on future educational costs.

Grants and scholarships

Grants and scholarships are a type of financial aid that doesn’t have to be repaid. Grants are often need-based, while scholarships are usually merit-based.

Start by researching available scholarships and grants and applying for as many as you can. Start early so you can plan ahead and know what other forms of financial assistance you’ll need.

Tuition payment plans

Tuition payment plans, also called tuition installment plans, are short-term payment plans that split your college bills into equal monthly payments.

Payment plans generally vary by college or university, but in addition to breaking up the payments, schools usually don’t charge interest. They may, however, have up-front fees or require a larger initial payment than subsequent installments. The CFPB has observed varied and sometimes inconsistent disclosure of terms, forced enrollment, high late fees, and consumer right waivers among some tuition payment plan products. Be sure to read the terms and conditions and fully understand them before choosing a tuition payment plan.

Work study

Federal work study programs provide part-time jobs for undergraduate and graduate students to help pay for their education expenses. Work study programs are available through your college or university and are based on your school’s funding level, the availability when you apply, and your financial need.

Ask your financial aid office about the options for getting paid for work-study. At most schools, work-study money cannot be used to cover direct costs (like tuition, on-campus housing, and meal plans), because you must pay those bills before you earn the work-study funds.

Income share agreements

Income share agreements (ISAs) are a type of private education loan where you receive money to pay for your education and you promise to make future payments based on a percentage of your income. This means that the higher your salary, the higher your ISA payment. Payment is complete once you have repaid a defined amount, or you have reached a maximum number of payments. Because an ISA may pose unique risks to borrowers and can often cost more over the life of the loan than traditional student loan products, it is best to max out your federal student loans (if available) and other options—such as scholarships and grants—before you enter into an ISA. If you’re considering taking on more than one ISA, keep in mind that each one requires a percentage of your income, so you’re committing an additional percentage of your income with each new agreement. Further, if you already have student loan obligations, you will be required to pay those in addition to paying a percentage of your income under the terms of your ISA contract, which may lead to excessive debt. Be sure to read the terms and conditions carefully and fully understand them before opting for an ISA. ISAs are generally subject to federal consumer financial laws.

Federal vs. private student loans

Even after considering other financial assistance programs, you may still need additional help to pay for college through federal or private student loans.

Federal student loans are made and guaranteed by the Department of Education, including Direct subsidized loans, Direct unsubsidized loans, and PLUS loans. Private student loans, however, are provided by banks, credit unions, and other private lenders–with varying rates and terms–and don’t offer the same protections for consumers.

Key differences between federal and private student loans

Federal Student Loans Private student loans
  • Fixed interest rates, meaning your interest rate will stay the same over time
  • Income-driven repayment plans base the amount you owe each month on your income
  • If you experience financial hardships, federal loans allow you to temporarily reduce or postpone payments
  • For Direct subsidized loans, the federal government will subsidize–pay the interest on–your federal student loan while you are in school
  • Some have variable interest rates, meaning your payments can change and increase over time if your interest rate changes
  • Repayment terms are generally not as flexible as federal student loans and vary by lender
  • Private loans may or may not have forbearance options that allow you to reduce or postpone your payments

Through federal Direct loans, you may also qualify for Public Service Loan Forgiveness (PSLF) if you work full time for a qualifying public service employer and make 120 qualifying monthly payments. Some income-driven repayment plans, only available for federal student loans, offer forgiveness on remaining loan balances after 10, 20, or 25 years of repayment. Teachers have other forgiveness opportunities under the Teacher Loan Forgiveness Program . If you’re a teacher, learn more about forgiveness options. Again, it’s best to exhaust all of your other options, including applying for the maximum federal student loans you’re eligible for, before shopping for a private student loan.