Paying for college: A study guide for parents and students

College is an exciting time in a young adult’s life. Moving out. Meeting new people. Learning, maybe.

But college is also an expensive time in a young adult’s life. 

There are plenty of routes you can take to save money on your college education like taking Advanced Placement (AP) courses in high school or choosing (or at least starting in) community college. But if a four-year degree is in your future, you’re likely going to have to deal with tuition bills at some point. And early preparation will make things much easier when the time comes.

So, where do you begin? We’re here to help with the financial options available to you.

Start with savings

PARENTS: If you have a child who’s not yet college age, now is the time to set up a 529 savings account if you haven’t already. A 529 Plan is a tax-advantaged investment account that earns a higher compound interest rate than a savings account, allowing parents to make a bigger dent in tuition — especially those who get an early start.

Not only are contributions to a 529 Plan tax-deferred but the interest you earn on your savings generally isn’t taxed if you use it for qualified educational expenses such as tuition, fees, books, or room and board. Plus, many states, including Oregon, offer a tax credit or deduction for investing in their state-sponsored 529 Plan.

And while “the sooner the better” applies to nearly all savings plans, just because you didn’t run straight from the hospital to your nearest OCCU branch doesn’t mean it’s too late to build your child’s college fund.

STUDENTS: Maybe you’ve even graduated to an Ignite Savings account to earn more on your savings.

But as you get older and take on an after-school or summer job, it’s important to put aside plenty for your future. Not all of it — you work hard for that money, and you deserve to enjoy spending it, too. A Remarkable Checking account allows you to earn interest when you use your debit card, so you’re saving while you’re spending.

So when your check goes straight into your checking account, take advantage of automatic deposits, and put a healthy amount of it into a high-interest money market account before you have a chance to miss it. You’ll save painlessly and earn more for doing so.

Find financial aid, search for scholarships

If you’re able to win scholarships or grants, they’ll be the first line of defense against student debt.

PARENTS: Think about what aspects of your background could be useful to the scholarship process. Income, of course, will come into play for the FAFSA as well as other applications, but need-based scholarships aren’t the only kind out there. Here are some other questions to consider:

• Where did you go to college? (Or is your child a first-generation college student?)
• Were you in the military?
• Are you part of any organizations that offer scholarships?
• Does your employer offer tuition assistance for the children of employees?

STUDENTS: We just asked your parents a lot of questions, but as far as the scholarships are concerned, a lot of the heavy lifting is on you. Don’t stress! Talk with your parents, meet with your counselors, do the research. You can even ask our team at OCCU — we’re a financial partner too.

But first, apply for FAFSA. (OK, maybe you were hoping we’d say “coffee” or “tacos” here — make sure to grab those too if it helps.) FAFSA not only opens the door to federal funding, but many colleges also use it to award scholarship money. While school-awarded scholarships don’t count as federal assistance, some people still consider them part of a student’s overall financial aid package.

Additionally, the FAFSA interest rate is fixed and lower than some private loans. Repayment is deferred until after you’re done with schooling. And, most importantly for some of you, there are loan forgiveness programs for people who work in public service or in education.

Next, consider your extracurriculars — there are scholarships for nearly every interest group under the sun. Think about what you’re involved in:

• Do you volunteer?
• Have you completed community service hours?
• Are there any local service organizations that offer scholarships (Kiwanis, for example, or a Rotary Club)?

There are myriad scholarships floating around out there — you just need to find the ones that fit you and your situation. And then you need to apply for them. It can get tedious. But hopefully it will pay off in the end.

And we’re sure it goes without saying but keep those grades up. There are a lot of academic scholarships out there for the taking, and a solid GPA will help you when you start applying to schools as well.

Secure student loans

Listen, college is expensive. Don’t let that bring you down. Borrowing money is a common route for students to take to pay for their education.

There’s a wealth of borrowing options for students, most of them falling under the category of financial aid (specifically Federal Student Aid) or student loans (federal or private loans). Here’s a helpful explanation of the difference between them. Applying for FAFSA, as mentioned above, will help you determine your eligibility.

If you can get a federal student loan, do that. But if you still have gaps in your financial aid, you have the option to fill them with private student loans.

Private student loans come in all types. Some have deferment options. Some stick you with fees. Some advertise a too-good-to-be-true interest rate that’s only available to people with sky-high credit scores. But one thing they all have in common is fine print, so read it and make sure you know exactly what you’re getting. Some questions to ask:

• Are there loan origination or repayment fees?
• What kind of repayment plan is available?
• Can you defer your payments if you hit a rough patch?

PARENTS: Be upfront with your kids about your income, the contributions you can make, and your willingness to take on loans or cosign on their loans to fund their education. (Federal PLUS loans are an option, and depending on your credit, you may get a better rate on a private loan.) 

Think of it as an opportunity to sit down with your kids and have an honest discussion about household expenses and how you manage your money, if you haven’t already. Talk to them about how your home economics or family budget can apply to their lives in and out of college. If loans are in the cards, continue that financial discussion to include how to manage student loan debt, which tends to stick around for a while, depending on how long you study and what career path you take.

STUDENTS: If you find yourself taking the private loan route to fill some of the gaps left by your savings and federal aid, know that there are still ways to reduce the amount of debt you go into to finish that degree.

If you’re fresh out of high school, you may not have the credit score needed to secure the best rate. Ask your parents if they’re willing to cosign. It’s a big ask — if you default on your payments, your cosigner will be held responsible — so be certain you’re ready to take on that amount of responsibility.

And as you shop around, keep in mind that credit unions tend to offer lower interest rates and better terms than national banks. Because OCCU is not-for-profit, we have leeway to help you out when you need it, with benefits like repayment flexibility. You can find more perks of securing your loan through OCCU here.

You got this

Unless you’re going through it, it’s easy to forget how overwhelming this part of life is. As a high schooler, you’re simply trying to get through your classes, while at the same time participating in extracurriculars, applying to colleges, working part-time, maintaining a social life, and trying to navigate the muddy waters of financial aid so you can start your career with as little debt as possible.

It’s a lot, right?

But it’s also a time of endless possibilities. A time to figure out who you are, what you want to do and how you want to do it. As an OCCU member, we’re standing behind you with services and expertise to help you build your savings, to finance your studies and to thrive.

And we can’t wait to see what you do.