What’s the best way to pay for college? No secret there. Start early, invest often and let the twin engines of the stock market and compound interest deliver big returns over a long period of time. Or if you’re a millionaire, walk over to your desk, pull out your checkbook and write a check. Either way, you’ve got it covered. But if you’re not fortunate enough to be able to employ one of these strategies, fear not. Look into the options below and boost your own college-planning efforts.

Financial aid

Take the time to explore potential aid options and don’t assume you aren’t eligible. In addition to grants, scholarships and work-study programs, student and parent loans are offered at favorable rates and repayment schedules. These include the federal Parent Loan for Undergraduate Students (PLUS). Most financial aid comes through the U.S. Department of Education, and nearly 70 percent of money given comes in the form of loans. Your first step should be to fill out a Free Application for Federal Student Aid (FAFSA) form. Visit the FAFSA Web site or call (800) 4-FED-AID for an application. For more information on the FAFSA, check out How to Complete the FAFSA. To read more on financial aid options, look at How Financial Aid Works. To help determine your estimated family contribution, check out our calculator to determine your expected family contribution.


Your child doesn’t have to be valedictorian or quarterback to receive a scholarship. Many are based on a particular school, a field of study or career path, or even ethnic background. Many corporations, foundations, professional and service organizations, and community groups offer scholarships, too. Check out the College Board’s Scholarship Search. Also, the Internet and public library are great resources for further research. Talk to your child’s high school or college guidance counselor for help and start as early as possible to improve your odds. For more information on this topic, read Where the Scholarships Are.

Tax breaks

You may be eligible for tax deductions and credits toward tuition, fees, costs and student-loan interest. Keep in mind, however, that tax credits operate more like rebates than discounts. They’re made available once you’ve paid tuition-they’re not applied directly to tuition bills. Read more in Tuition Tax Credits.

The Hope Scholarship tax credit for college tuition offers up to $1,500 a year for the first two taxable years a student is enrolled in college. Because it’s a tax credit, not simply a deduction, the government will in effect match your contributions dollar-for-dollar for the first $1,000 and match 50 percent of the next $1,000 spent on tuition and fees during the first two years of school. If you no longer qualify for the Hope credit, the Lifetime Learning credit provides a maximum annual credit of $2,000 per family for tuition and fees.

Borrowing from your retirement plan

In many cases, an employee can borrow from his or her retirement plan in the form of a loan. Is this a good idea? Frankly, no. If you withdraw funds early from a Traditional or Roth IRA, you’ll open the door to stiff IRS fees and penalties. Plus, you’ll be taking away money that was fueling your retirement savings portfolio. To read more on this topic, check out Borrowing from Your 401(k): Think Twice.

Community college

Given the high price of both public and private four-year colleges, many students take advantage of the community college system by attending for two years and then transferring to a four-year college to receive their degrees. This can be a substantial savings, especially if your child lives at home for the first two years of college.

Postcollege employment

In certain career fields, such as nursing and teaching, students may have their loans forgiven or tuition paid in exchange for committing to a period of work in a specified place upon graduation. College advisors can provide more information on these kinds of programs.

ROTC/armed forces

For students who commit to military service after finishing school, the benefits range from partial to full payment of undergraduate and graduate costs. You can find more information on various military careers and the educational benefits available at Military.com and the Veterans Benefits Administration Web site.

Affinity programs

Savings clubs such as Upromise work like frequent-flier programs. You get points for purchasing goods and services from participating merchants. These points are translated into money that’s invested in a state-sponsored college savings plan. Because merchants pay to participate in the program, there is currently no charge to enroll. To learn more, read “Savings Clubs Can Supplement a College Fund.”