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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.
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, a few pesky items remain 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.  

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 easily cover 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.



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