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Resources > College Support > How Do Parents Pay for College? A Complete Guide

How Do Parents Pay for College? A Complete Guide

College education has become more expensive than ever—in fact, a recent survey shows that the average tuition at U.S. private colleges grew by about 4% in 2022 to just over $40,000 per year. This makes funding college a huge task for parents and students, but the federal government and colleges provide financial aid like student loans, scholarships, and grants to ease the burden.

If your child is starting college soon, you might be wondering—how do parents pay for college? This guide will detail everything you need to know about financing your child’s education.

What Percent of Parents Pay for College?

With the rising cost of living, even parents who plan to pay a small portion of the college expenses must part with tens of thousands of dollars to see their children through school. This is why most parents are now embracing savings, retirement accounts, and other investments to cover their children’s higher education costs.

According to a recent study, 72% of families pay for a portion of their child’s college tuition using their income and savings. Even so, low-income families still struggle with covering the costs of higher education, and most of them report feeling that financial aid is extremely necessary to help them foot the bill.

What’s the Best Way for Parents To Pay for College?

The initial sticker shock can dampen the joy of your child getting accepted to college, but that doesn’t have to be the case. There are various funding options that can ease your financial burden and help your child realize their higher education goals, including:

  1. Grants and scholarships
  2. College saving plans
  3. Work-study and jobs during school
  4. Federal and private student loans

Grants and Scholarships

The federal government awards free aid to students and families through the U.S. Department of Education based on financial need. Your child won’t have to pay back the aid amount when they qualify for federal aid. To access college grants for your child, follow these steps:

  1. Fill out the Free Application for Federal Student Aid (FAFSA)—Colleges use the FAFSA to determine how much aid your child qualifies for. Make sure to fill it out accurately and include all the required information because any misrepresentation of income can be considered FAFSA fraud and result in your child being denied aid
  2. Submit the application on time—Since some grants are offered on a first-come-first-served basis, fill out and submit the application before the deadline. The FAFSA opens each year in October, and you should fill it out as soon as it’s available to maximize your child’s chances of getting the aid. For your child to continue getting federal aid, make sure to fill out the FAFSA each year they’re in college
  3. Go through the financial aid offer—Once the application is approved, your child will receive a financial aid offer from the colleges that have accepted them stating whether they’re eligible for grants or other types of financial aid. You don’t have to accept every offer

Like grants, scholarships aren’t paid back. While most college grants are need-based, scholarships can be need-based or merit-based. The latter are awarded to students who demonstrate high academic achievement and can be funded by different providers.

College Savings Plans

Saving for college is a wise way of planning for your child’s educational future, and one of the best plans for saving for future college costs is a 529 plan. This savings account allows you to designate funds for college tuition or other related expenses early, and it offers tax benefits when used to pay for qualified education costs.

Besides the tax advantage, owning a 529 plan gives you a financial advantage because it will be reported as an asset on the FAFSA. As such, the distributions are ignored. Although its impact on student eligibility for need-based aid isn’t substantial, it counts to your benefit.

Work-Study and Jobs During School

The Federal Work-Study (FWS) Program can help students pay for some of their college expenses, including:

  • Tuition costs
  • Room
  • Food

Your child has a better chance of qualifying for the program if they’re in financial need, and you can help them apply by first submitting the FAFSA. If your child qualifies, it will be indicated in the financial award letter.

However, qualifying for work-study doesn’t automatically translate to money as your child will have to find work-study jobs on campus and work the stipulated hours to earn the aid. They can also find part-time and summer jobs to help you cover their college expenses.

Federal and Private Student Loans

Both federal and private loans are issued at an interest and must be paid back, but their terms vary. The U.S. government offers federal loans to students at a fixed interest rate that’s generally lower than private loans. There are several types of federal loans:

  • Direct Subsidized—A loan issued to undergraduate students who demonstrate financial need. The interest is paid by the U.S. Department of Education if the student enrolls at least half-time. The loans are need-based, and the student’s eligibility is determined through the FAFSA
  • Direct Unsubsidized— A loan issued to undergraduate or graduate students without considering their financial need. The students pay the full accrued interest
  • Direct PLUS—A loan issued to parents of dependent undergraduate students or to independent graduate students
  • Direct Consolidation Loans—One federal loan that combines all the other federal loans previously taken out

Meanwhile, private student loans are considered the last resort when seeking financial aid because they come with high interest rates, which are either fixed or variable. These loans are mostly provided by:

  • Private lenders
  • Banks
  • Credit unions
  • Corporations
  • Nonprofits

The terms of payments differ across lenders, so you should carefully research them before selecting one to avoid damaging your child’s credit profile.

You and your child will likely have to demonstrate a good credit history to secure some federal and private loans. To help your child establish a strong credit history early in life, you can sign up for services like FreeKick, which builds your child’s credit score while also protecting them from possible identity theft.

FreeKick—Credit Building and Identity Protection

Created by Austin Capital Bank, FreeKick is an FDIC-insured deposit account that provides a comprehensive suite of identity monitoring, credit building, and credit profile monitoring services for the whole family. FreeKick’s identity monitoring services are available for up to two parents and six children aged 0 to 25. To help your college student establish a good credit history, FreeKick provides a parent-sponsored credit building feature for children aged 13 to 25.

Parent-Sponsored Credit Building and Credit Profile Monitoring

Your child needs to build and maintain a good credit score as it will help them get better job opportunities in the future and save them money through lower interest rates on car loans and credit cards. With its credit building feature, FreeKick helps lay a solid financial groundwork for your child from an early age, potentially saving them up to $200,000 throughout their lifetime.

Initiating your child’s credit journey is straightforward with FreeKick. When your child turns 13, you can select the “Activate Credit Building” feature in your account dashboard. Once they become legal adults (age 18 in most states), all they have to do is select the “Activate Credit Reporting” option.

Here’s how the process works:

  1. Create an Account—Go to FreeKick.bank and select a preferred plan depending on your family’s needs and budget
  2. Set It and Forget It—Once you activate credit building, your child’s credit will start automatically building over the next 12 months
  3. Keep Growing—After one year, you can either renew the account for another 12 months and keep building your child’s financial future or close the account and get your full deposit back

Identity Protection Services

Given the alarming statistic that a child’s identity is stolen every 30 seconds, FreeKick provides identity protection for both adults and minors. By registering for a FreeKick account, you gain access to the following features and services:

Services for Adult Children and ParentsServices for Minor Children
Credit profile monitoring
SSN monitoring
Dark web monitoring for personal information
Up to $1 million identity theft insurance
Full-service white-glove concierge credit restoration
Lost wallet protection
Court records monitoring
Change of address monitoring
Non-credit (Payday) loan monitoring
Free FICO® Score monthly
FICO® Score factors
Experian credit report monthly
Credit profile monitoring
SSN monitoring
Dark web monitoring for children’s personal information
Up to $1 million identity theft insurance
Full-service white-glove concierge credit restoration
Sex offender monitoring—based on sponsor parent’s address

FreeKick Pricing

FreeKick plans are designed to fit any budget. Both plans include robust identity monitoring for up to two adult parents and six children, plus credit building for up to six children aged 13 to 25. What’s more, FreeKick deposits are FDIC-insured up to $250,000. Here are the available plans:

FDIC-Insured DepositAnnual Fee
$3,000$0 (Free)
No deposit$149

Build your child’s credit profile to secure their financial future while also protecting your whole family from identity theft—sign up for FreeKick today.