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

It’s important to first research financial assistance you won’t need to repay before considering student loans, but if you need additional assistance, apply for federal student loans before private loans.

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

You have a choice about how you pay for your education. Understanding your choices can help you make the right decision for your situation.

Scholarships and grants

Grants and scholarships are often 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. The earlier you start, the better you’ll be able to plan ahead, so you 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.

Tuition installment plans can be used to pay tuition over fixed payments. Payment plans generally vary by college or university, but in addition to breaking up the payments, schools do not generally charge interest. They may, however, have up-front fees, late and returned payment fees, or require a larger initial payment than subsequent installments.

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.

TIP: 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.

Federal vs. private student loans

Even after considering the above financial assistance programs, you may still need additional help to pay for college through either federal or private student loans, or a combination of the two.

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 they don’t offer the same protections for consumers.

Here are the key differences between these two types of loans.

Federal Student Loans Private student loans
  • Fixed interest rates, meaning your interest rate will stay the same
  • 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. Available repayment programs vary by lender 

Through federal Direct Loans, you may also qualify for a public service loan forgiveness program if you work full time for a qualifying public service employer and make 120 qualifying monthly payments.

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.