College Planning

Paying for College Out-of-Pocket

After securing funding for tuition, there may still be expenses that need to be covered. This article discusses some points to consider when deciding to pay out of pocket or accept student loans.

Paying for College Out of Pocket

Should You Pay for College Out of Pocket?

You've just been accepted to your preferred college or university. And to help cover the cost of tuition and/or room and board, you've secured grants and scholarships. But unfortunately, there remains a few pesky items that your financial aid package won't cover. You have two options: accept student loans or pay out of pocket. Here are a few things to consider.

Where will the money come from?

If the money comes from your personal savings or your parents' personal savings, or your predictable income or your parents' predictable income, or even a gift from a relative, then you already know the answer to this question. But before you pay that first college bill, ensure that the financial support of others doesn't come with strings attached. For example, your parents may be perfectly willing to cover your extra expenses, but do they fully expect you to live at home and commute while you attend college? Is that a sacrifice you'd be willing to make?

Will working so you can afford to pay out pocket interfere with your academic goals?

Many students work 10-20 hours a week to help pay their bills, gain work experience, and earn a little pocket money. But if you need to earn a several thousand dollars per semester, you may find yourself in the position of needing to work full-time. Juggling a full-time workload and a full-time academic load will be a challenge, but it's not impossible. It's up to you to decide whether you can handle both. You can always consider cutting back to a part-time course load and staying enrolled for an extra year or two.

If you're a parent who intends to pay for your child's education out of pocket, will you need to pick up extra hours at work? What personal sacrifices will you have to make in order to ensure that those bills are paid? If you're borrowing some of the cash from your retirement funds, how easy will it be to replace that money later? It's extremely important to thoroughly think through opting to pay out of pocket, instead of with student loans.

What's the most affordable way to pay?

Many colleges and universities offer alternative payment plan options, so instead of being hit with a hefty bill once every semester, you can make payments quarterly or even monthly. If you plan to pay out of pocket, and you're not sitting on a large sums that you can withdraw from savings or other investment accounts, monthly payments are probably your best bet.

What sort of return can you predict on your (or your child's) career investment?

If you've already picked a major, it's important to do your research concerning possible career choices and the salaries they pay. If your chosen field is computer engineering, for example, the future salary of a competent computer engineer could justify the amount you pay out of pocket for college today. If you're going into communications or liberal arts, however, your future salary as a journalist or gallery owner may not justify the cost of a pricey, out-of-state private liberal arts college education.

It's important to put things like this into perspective now, so that you don't regret how you spent your money later. This is something every student should weigh carefully, regardless of where they enroll or how they intend to pay for college.

If you're not sure that paying out of pocket is right for you, but you don't feel you have all the facts about how student loans work or how to apply for student loans, you can find more information in our Protective Learning Center.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Companies and organizations linked from Learning Center articles have no affiliation with Protective Life or its subsidiaries.

Pay for College Out of Pocket

Paying for college out of pocket requires some thought and consideration. Should you take out a student loan, borrow money from a relative, take a part-time or full-time job, or just make payments? When it comes to paying for college, be sure to weigh all of your options. For more information, visit our learning center.

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