Creative ways to pay for college in an economic downturn

Economic woes needn't mean the end of your child's college plans.

By Robin Levinson, Consulting Educator

Feeling the sting of our failing economy? If you've been diligently saving for your child's education, chances are you're among the millions who have suffered losses from the crashing stock market. In addition, private loans may be more difficult to obtain as banks become choosier about their lending practices. If your child is applying to college, you'll need to come up with the money fast.

The first step is to calculate exactly how much you need. Experiencing sticker shock? Your solution might be as simple as having your child volunteer in a new city. Here are some other creative tips to help you and your teen finance a college education in an economic downturn.

Apply for a Pell Grant

Possibly the only thing good to come out of this economic hullabaloo is the increased federal funding for education financial aid. In the wake of President Barack Obama's economic stimulus plan, the Pell Grant program will receive more than $15 billion in aid, amounting to over $500 more per student.

Enroll in a work-study program

Another good thing about the stimulus plan is that it awards more than $200 million to work-study programs, making them accessible to more students. Encourage your son or daughter to work part-time during the school year to lower his or her tuition costs. As long as the job doesn't interfere with studying, working part-time might boost his or her GPA. Studies show that students who work 10 to 15 hours a week have better grades than their peers without jobs or those who work longer hours. Research suggests it helps them budget their time better and achieve their long-term goals.

Take a "gap year" and earn money

Although your teen may have planned on attending school in the fall, many universities see the benefit in taking a year off. Both Harvard and Princeton actively encourage it, and most institutions will save the student's spot if the deferral is for a good reason.

Programs like City Year and AmeriCorps place student volunteers, ages 17 to 25, in cities across the country and provide scholarship awards when they finish their assignments. Participants receive a $4,575 grant toward their future education or existing loans. They also receive a cell phone, health insurance and a monthly stipend to help them meet their living expenses while they are volunteering. Some colleges even match or augment the award.

Find a benefactor

GradeFund, a new Web site started by two brothers and recent college graduates, helps students find personal and corporate sponsors who agree to contribute a base fee per top grade (usually an A or A-). Sponsorship varies by school, program and corporation, but it's just one of many ways that businesses are giving back to their communities.

Robin Levinson is the content editor for CampusCompare, a Web site that helps college-bound students find the right school.