Paying for college when you have no money in savings

The cost of higher education is undoubtedly on the rise. And with the Federal Reserve hiking rates to combat inflation, tuition is expected to increase even more in the coming years. While many students have been relying on President Biden’s debt-relief plan to take care of their existing federal student debt, such forgiveness is looking less likely as the Supreme Court discusses the legality of the program.

However, for those without savings a college degree is still attainable, even if President Biden’s plan doesn’t pass. To potentially save thousands on their diploma, students can maximize financial aid opportunities, pursue alternative degree options and explore their university’s support programs.

Here’s how to pay for a college education without breaking the bank.

Paying for college statistics

Student loan forgiveness lawsuits

President Biden’s student loan debt relief plan has been met with both criticism and support; first being more prominent than the latter as the Supreme Court prepares to vote on the future of mass forgiveness.

In November 2022, the Biden administration hit two primary snags in implementing forgiveness. Two lawsuits were filed against the program, with both cases eventually reaching the desks of the Supreme Court judges following the federal appeals process.

Here’s what we know so far: The court is set to hear oral arguments in late February or early March of 2023. The court will then debate if the cases hold sufficient legal merit to shut down Biden’s plan. If at least one lawsuit is found to have legal standing, 43 million borrowers won’t receive federal loan forgiveness.

Now more than ever, borrower’s shouldn’t rely on potential legislation to cancel their federal loan debt. It’s imperative that students understand the ins and outs of their projected academic expenses and all of their payment options.

How to pay for college with no money saved

Paying for school if you don’t have money saved will take a little more work, but it is possible. Start with these tips to lower your financial obligation.

Apply for scholarships and grants

Scholarships and grants are one way to put money in your pocket if you don’t have college savings. Federal grants, like the Pell Grant and the Federal Supplemental Educational Opportunity Grant (FSEOG), are given to students who demonstrate financial need based on information submitted through the FAFSA.

You may also qualify for state or institutional grants. During the 2020-21 academic year, the average undergraduate qualified for a total of $10,590 in grant aid.

Scholarships, while similar to grants, may vary in eligibility requirements. Scholarships come in a variety of forms, from academic scholarships that require essays and transcripts to extracurricular-based awards that may require video submissions or interviews.

Because many scholarships come from private organizations, you can use a scholarship search engine to filter through the thousands of offerings and apply only for the ones that you qualify for. You should also contact your financial aid office to see if there are institutional scholarships you can stack with private awards.

Request work-study

Federal work-study is a need-based program that gives students part-time job opportunities — typically on campus — to help cut tuition and academic costs. CollegeBoard found that the average undergraduate student received $90 work-study in the 2020-21 academic year. These jobs are university-affiliated, are limited to 20 hours a week and pay at least the minimum wage.

Work-study eligibility is based on factors like your family size, income and financial history. Like other forms of federal aid, work-study jobs are based on your FAFSA information; your school’s financial aid department will determine your eligibility.

Take out student loans

Student loans come in two forms: federal and private. These should be a last resort after other financial aid has been used, but many students still need to take out loans after receiving aid to fill gaps in their funding. Even so, recent data shows that the number of students resorting to loans has been decreasing over the year Federal loans disbursed to undergraduate students declined by 49 percent between 2010-11 and 2021-22.

Federal student loans are administered by the U.S. Department of Education. Undergraduates have access to two types: Direct Subsidized and Direct Unsubsidized Loans. Subsidized loans are need-based and don’t accrue interest until after the grace period is over, while unsubsidized loans accrue interest immediately. Neither type of loan checks your credit, and both open the door to several unique repayment options and forgiveness opportunities.

Unlike federal student loans, private student loans from banks and credit unions can typically cover the full cost of your attendance, and they may be a cheaper option if you or your co-signer have good credit. But with strict eligibility requirements and fewer borrower protections, these loans are usually explored only after students have borrowed the maximum amount from the federal government.

Borrowing too much through student loans is a common mistake — by overextending their borrowing, students risk high monthly payments after graduating and thousands of dollars in interest charges. As a rule of thumb, borrow only as much as you need to cover the academic costs after accounting for scholarships and grants, and maximize federal loans before applying for private.

Cut expenses

As a student, there are several ways to cut costs. Room and board and amenity fees can add thousands of dollars per year to your total cost of attendance, so living in a low-cost apartment off-campus or living with family or friends is a good way to bring those monthly charges down.

You can also apply to become a resident advisor (RA) as soon as your sophomore year. RAs are often high-achieving undergraduates who are given responsibility over the general safety and well-being of residents within on-campus housing. RAs are often granted free room and board and, depending on the school, can also be paid a monthly stipend.

College savings plans

There are a few ways to save for your child’s future college education. A 529 plan is among the most popular education savings plans and allows you to make contributions through investments, like stocks and funds, that are tax-deferred and can grow over time.

There are two types to choose from: education savings plans and prepaid tuition plans. Education savings are the more common option of the two. Account owners can choose their investments, which determine the account growth over time. Withdrawals with these plans can be used for any K-12 and higher education-related expenses.

Prepaid tuition plans are offered by a set number of states and institutions, meaning that the money in the account isn’t guaranteed in every state and may come with institutional restrictions. Prepaid plans are only available for higher education-related expenses, and don’t cover room and board.

There are drawbacks and benefits to each plan and which one you choose ultimately depends on your financial situation and what you need the funds for. Before taking one out, look into the details of each to make sure you’re setting your child — and ultimately yourself — up for financial and academic success.