How Will You Pay for Your Student's Education?

The average private college costs almost $30,000 a year. How can you come up with that kind of money? How can any family?

The answer is, few families do. Only about 20 percent of U.S. undergraduates actually pay a school's sticker price. The rest receive some sort of financial assistance. Here are the major ways to pay for education:

Save for It

A 529 savings or pre-paid tuition plan will save on taxes while you sock away college funds. The problem is that such a large sum of money will take years to accumulate. Even if you start saving early, you'll probably need to supplement.

Receive It as a Gift

To fill the gap, first look for money that doesn't have to be repaid. That means a scholarship or a grant.

• Scholarships are awarded by numerous organizations and individuals, usually on the basis of merit or special qualifications, such as ethnic or religious background or outstanding achievement in some area.
• Grants can come from the college or the federal government. They are usually need-based and their amounts vary. For example, Federal Pell Grants award up to $5,350 a year.

Borrow It

Federal parent and student loan programs offer lower interest rates and easier repayment plans than most private loans. Part of the interest of a college loan is deductible on your tax return. Of course, the downside is that you or your student will have to repay the money. In 2008, the average debt of a new four-year college graduate was almost $20,000.

Work for It

The federal work-study program offers campus-based jobs so students can earn extra money.

Get It for Free

Because of the troubled U.S. economy, scores of fine colleges have recently changed their payment terms to make college more affordable. Stanford offers free tuition to families with incomes under $100,000. Vanderbilt and many others are replacing need-based loans with grants and scholarships. Explore all these exciting new opportunities.