Three options for covering college tuition

It’s no surprise that getting a college education is becoming more and more expensive, but here are a few statistics that drive the point home. According to the latest available data from the National Center for Education Statistics:

• For 2024 academic year, the average tuition, fees, room and board at a four-year institution was $26,022 for state residents and 41,897 for out-of-state residents.¹
• Between 2000 and 2022, the percentage of undergraduate students accepting financial aid increased from 70% to 87%.²

With the costs of education continually rising — and more and more students depending on financial aid to help cover those costs — it’s important to understand the three key types of financial aid, some of their pros and cons, and how to start the process of applying for them. 

Scholarships

• Pros: In many ways, scholarships are a great alternative for helping cover college costs. There are lots of paths to qualify for scholarships, from academic performance to economic need, and they don’t need to be paid back.
• Cons: Scholarships have two major downsides. First, there is often lots of competition to get them, and second, not everyone qualifies for them. In the first case, many students find themselves in the middle, where their grades are good but maybe not good enough to stand out in a very crowded field of competitors; in the second case, their parents may make too much money to qualify for many scholarships but not enough to pay for college without going into debt.

Grants

• Pros: Like scholarships, grants are given to a student without any expectation of repayment. They are essentially a “gift” that can help a student lower their out-of-pocket college costs. Grants are often awarded based on financial need, less so on academic performance. This makes them a potential college-funding option for people who wouldn’t be able to afford college without financial help. Grants usually come from the federal government (such as Pell grants), states, or schools or nonprofits.
• Cons: Because grants are usually based on financial need, they may not be an option for a student whose family’s income exceeds certain limits. Also, some grants have conditions. For example, if a student accepts grant funds but then drops out of school, they may have to repay some of the money.

Student loans

• Pros: Student loans are available to almost anyone and can be a good step toward covering college costs. They can also be provided in much higher dollar amounts than scholarships or grants — enough, potentially, to cover the entire cost of an education. Student loans can come from the government (in the form of subsidized or unsubsidized federal loans) or from private sources, such as banks.
• Cons: The name says it all: Loans are just that and must be repaid, with interest. Depending on where a student goes to school and for how long, those loans can be substantial and possibly take decades to pay off. Student loans can also affect credit scores. In addition, private student loans usually lack the protections and repayment options (such as income-driven repayment plans and deferment or forbearance options) that federal student loans can offer. If there’s any possibility that a student may be eligible for scholarships or grants, they may want to try those avenues first.

It all starts with a F.A.F.S.A.

Any student, regardless of income, who wants to be considered for federal, state and school financial aid programs should complete a FAFSA (Free Application for Federal Student Aid) form. The FAFSA is used by the federal government to help a student determine their eligibility for federal financial aid and even which state and school grants and scholarships (and student loans) they may be eligible for.

A student’s FAFSA information can be sent to the schools they choose on their application. Once the schools have this information, they use it to help put together a qualifying student’s financial aid package. While financial aid rarely covers the complete cost of a college education — the average undergraduate financial aid award for the 2024–2025 academic year was $16,3603 — it can go a long way toward helping students reduce their out-of-pocket costs and get the education they’ve dreamed of.