How to Pay for College
College acceptance letters are rolling in for the Class of 2030, and the total cost of attendance has never been higher. According to analysis from the College Board, adding it all up (tuition and fees, housing and food, books and supplies, transportation and other expenses), prices range from $30,990 for in-state students attending a public four-year school, to $50,920 for out-of-state students attending a public four-year, and $65,470 for private nonprofit four-year students. No wonder 79 percent of Americans surveyed by Pew Research say “colleges and universities are doing a fair or poor job of keeping tuition costs affordable”.
If your family is staring down those numbers, here is what you need to know to navigate the financial aid process, borrow wisely, and save smarter.
Financial Aid Package: If You Don’t Ask, You Don’t Get
Financial aid packages are notoriously difficult to read and compare. There is no single standard that schools are required to follow when detailing scholarships, grants, and loans, which means families often confuse free money with money that must be repaid. When colleges send award letters, they frequently omit basic details, like the interest rate and the length of time that it will take to repay the loan. That is why every family should call the financial aid office directly to clarify exactly what is a grant or scholarship and what is a loan, and don’t be shy about asking for a better package. A podcast listener recounted this story, which drives home that last point.
“Last spring our daughter was admitted to her first-choice private college, with a price tag of about $66,000. Upon admission she was given about $11,000 merit aid scholarship. We contacted the school and asked if they could do any better and they came back with an additional $15,000 grant. Wow! $26,000 discount!
Amazing, but still too expensive for our family. We didn’t accept or decline, just left the offer on the table. She enrolled at another college, which offered a better package. Soon after, she was admitted to the honors program at the first-choice school and then, out of nowhere, they came back to us with an additional grant/scholarship of $30,000. That sealed the deal, $56,000 out of $66,000!”
Know How Much to Borrow, and When to Stop
After various on again-off again student loan plans over the past decade, learn the lessons of those who came before you. The Education Department data shows that 7.7 million federal student loan borrowers have defaulted on $181 billion of loans and another 3 million were three months late on their payments. A good guideline is for students to keep the total amount borrowed below what you expect to earn in your first year out of school. For parents and grandparents who are helping shoulder the load, total borrowing across all children, including any cosigned loans, should not exceed annual income. Crossing those thresholds can cause financial damage to older generations who may end up sacrificing their own retirement savings for the benefit of the kids.
Consider a 529 Plan
If you are just starting to save for college, a 529 plan is still the gold standard. These state-operated education savings accounts grow tax-free, and withdrawals for qualified education expenses, tuition, fees, books, room and board, are not subject to any federal tax, and generally not state tax either. Some states also offer a deduction for contributions. Up to $35,000 in unused 529 funds can now be rolled into a Roth IRA for the beneficiary, as long as the account has been open for at least 15 years.
The recently introduced Trump Accounts are tax-advantaged investment accounts for kids born between January 1, 2025, and December 31, 2028. The government makes a one-time $1,000 deposit, free money, and parents or employers can contribute up to $5,000 per year until the child turns 18. At 18, beneficiaries become owners and as such, they can keep the account as is and let it grow, or they can withdraw the funds for education, a first-time home purchase, or to start a business. The catch: all withdrawals are taxed as ordinary income. That makes 529 plans the stronger choice for most families focused on education, since 529 withdrawals for qualified expenses are completely tax-free.
Is College Still Worth It?
Federal student loan interest rates for the 2025-2026 academic year are 6.39 percent for undergraduates and 8.94 percent for parent or graduate PLUS loans. Depending on the repayment plan, borrowers can spend 10 to 20 years in debt, often delaying milestones like building an emergency fund, paying off credit cards, or saving for retirement.
So, is college still worth it? Yes, with some important conditions. The median annual wage for recent college graduates aged 22 to 27 is $60,000, according to analysis by the Federal Reserve Bank of New York, compared to $40,000 for high school graduates. But the math works a lot better if you graduate in four years and keep debt at a manageable level. Do that, and a college degree remains a solid long-term financial investment.