College Budgeting 101: Financing Your Undergraduate Education Without Breaking the Bank

According to the Education Data Initiative’s (EDI) recent report, the average cost of college education in the United States is $38,270 per student annually. This amount includes books, supplies, and living expenses.

Meanwhile, the average cost of tuition has more than doubled in the 21st century, with a compound annual growth rate (CAGR) of 4.11 percent.

The average cost of in-state tuition is $9,750, while out-of-state tuition averages $27,457. At the same time, non-profit university students spend around $58,628 while living on campus per academic year, $38,768 of which is spent on tuition and other fees.

Considering the loss of income and student loan interest, a bachelor’s degree investment can cost more than $500,000.

Because of these costs, many students may break the bank to sustain their college expenses. However, various financing alternatives allow you to fund your undergraduate studies without exhausting out-of-pocket money.

Tips for Financing Your College Education

Here are the tips to make college costs more affordable:

Establish residency in the state of your choice

In-state public universities are typically cheaper than out-of-state public and private universities. If you’re not satisfied with the quality of education in state schools where you live, consider moving to a different state you prefer and establishing residency.

Establishing residency will help you qualify for in-state tuition. However, you must meet the state’s residency qualifications.

Generally, you must establish a minimum of 12 months of physical presence, financial independence, and an intent to stay.

For instance, it can be challenging for students without parents living in California to establish residency before their mid-20s. Besides the 366-day living status before requesting residency, potential students must provide evidence of an intent to stay in California, such as a driver’s license, ownership of property, or steady employment.

If you can wait and meet these terms, you can qualify to attend in-state schools in your preferred state. Choosing an affordable university where you can maximize your budget is also ideal.

Explore available scholarship programs

Scholarships are widely available at local non-profits and the federal level. The good thing about these options is that they are merit-based. You can receive them based on your academic record and other achievements.

For example, you can earn scholarships based on your grade point average, volunteer hours, or standardized test scores. Other programs depend on athletic success, but they are usually tied to playing specific sports in college.

Scholarship coverage varies based on the organization and qualifications. You can secure a $500 or $10,000 scholarship, which could be one-time or renewed annually. Ensure you understand the qualifications to obtain coverage that fits your undergraduate education.

Apply for grants

Grants are based on your monetary needs. You can apply for them at federal, local, and institutional levels.

You can even find grants based on gender, race, sexual orientation, and where you live. Some organizations with scholarships also offer grants for need-based recipients.

However, like scholarships, grants have varying deadlines and requirements. Moreover, there are one-time and renewable options.

If you feel stuck about the grants you might qualify for, broaden your research by including your parents’ occupations, socio-economic background, and race and ethnicity.

Get summer jobs

If you’re a college-bound high schooler, consider the following summer jobs to save funds:

• Tutor – Whether tutoring online or in-person, you can make an hourly wage by helping students in specific subjects.
• Transcriber – If you have fast typing skills, you can earn by transcribing written versions of audio content. You can find this job at transcription companies and freelance transcription jobs.
• Dog walker – If you’re a dog lover, you can earn money from walking dogs.
• Graphic designer – If you have editing and visual conceptualization skills, you can take on this job and design layouts for advertisements, brochures, reports, and magazines.

Consider taking a gap year

A gap year after high school allows you to take a break from studies to work or plan for college. This gap typically lasts one year.

You can use this time to determine what you want to do for college. Also, you can take jobs during this time to save money for college. It will help you finish the year without interruptions and avoid missing growth opportunities.

The ultimate goal of a gap year is to have the clarity of mind and time off to make more informed decisions on your next steps.

Get a job through the federal work-study program

Federal work-study programs enable you to cover your education expenses by earning minimum wage in part-time jobs related to your studies.

Like traditional jobs, these programs are paid weekly, bi-weekly, or monthly throughout employment.

To qualify for work-study, you must file the FAFSA form—Free Application for Federal Student Aid—each year you’re in school. You must demonstrate a financial need and indicate in the form that you’re interested in the work-study program.

However, not all schools participate in the federal work-study aid. You must verify with the financial aid offices at your university of choice to confirm the availability of the program.

Once the availability is verified, apply early because many schools offer aid on a first-come, first-served basis.

Apply for a paid internship

Internships can help you build skills and credentials while in school. Fortunately, many companies offer paid internships. These options will help you cover your undergraduate education costs.

However, paid internships can be challenging to secure, depending on your field.

Visit your preferred school’s career center for information about the available internships. You can also find paid internships through job websites, online forums, and recommendations from family and friends.

Invest in a 529 plan

A qualified tuition plan, the 529 savings plan, is a tax-advantaged account for K-12 private school tuition or qualified college expenses.

This plan has two types: prepaid tuition and education savings. Most states offer at least one.

A prepaid tuition plan lets you buy credits or units at participating colleges.

Meanwhile, an education savings plan lets you put funds in an investment portfolio. Then, you can withdraw the money to cover qualified education expenses.

Remember that if you use the funds toward non-qualified expenses, you’ll face tax penalties.

Tackle college-level studies with the Advanced Placement (AP) program

Advanced Placement (AP) programs are courses you take during high school. When you pass the tests associated with these courses, you can skip some courses, allowing you to enroll in college faster.

With the high college credits you earn in AP exams—typically four and five—you can skip introductory courses, fulfill prerequisites, or accelerate your progress toward graduation.

However, you must verify if your chosen school offers college credits for high AP scores. This information can be found on admissions and department websites.

Take out a student loan when necessary

After exhausting your funds, or if you think your savings and student aid are insufficient, you can use student loans to fill the gaps. You have two options: federal and private student aid.

Federal loans have Direct, Direct PLUS, and Health Professions options.

• Direct (Subsidized and Unsubsidized)
  • Subsidized – The U.S. government will cover the interest throughout the loan period, provided that you meet the requirements.
  • Unsubsidized – You’ll pay the interest throughout the loan period. You must also present evidence of monetary setbacks.
• Direct PLUS (Parent PLUS)
  • Parent PLUS – If you are dependent, your parents or guardians can use this option to fund your college education.
• Health Professions – Health Professions Students Loans or HPSL are eligible for dentistry, optometry, pharmacy, podiatric medicine, and veterinary medicine degrees.

Meanwhile, private student loans are non-federal aid from banks, credit unions, and other private lenders. In these programs, the rates primarily depend on your credit history.

But before you apply for a student loan, take note of the following steps:

Federal student loan application process

• Submit the FAFSA form: The deadline for submission for the academic year 2024 to 2025 is June 30, 2025, at 11:59 p.m. Central Time. Some states follow this deadline, but others may have different deadlines. So, review the submission guidelines before submitting.
• Review your SAR: After submitting the FAFSA form, you’ll receive your Student Aid Report (SAR). This document may take up to three weeks to arrive. Thoroughly review this report to determine whether you need a private loan.

Private student loan application process

If taking out a private student loan, explore the offers and rates. Other inclusions to compare include:

• Co-signer release
• Discounts
• Repayment conditions
• Perks, e.g., reduction of principal balance for on-time graduation

After finalizing your private lender, prepare and submit the requirements. Once approved, your lender will send the money directly to your university. The school will then use the funds for your tuition and other fees and disburse the remaining amount.

Make Wise College Investments

College can be challenging to afford financially. However, these strategies can help make the costs more manageable.

The goal is to make wise investment choices to ensure a sustainable college education without breaking the bank. You must plan early, remain focused, and seek out various solutions.

At the same time, you can seek guidance from family, friends, and a financial advisor (if feasible) to maximize your budget and savings.