paying for college

If you’re headed to college next fall, you might be enjoying a bit of a break after the slog of applying to schools and the stress of deciding which one you’ll attend. Congrats—you deserve it!

And if you're the parent of a graduating high school senior, you must also be pretty relieved that the college-application process is behind you and your child.

But another challenge awaits you both: Figuring out how to pay for the school you've chosen.

Let's say you've selected a college that’s a good financial fit as well as one that has the desired academics and campus atmosphere. But many students and their families don’t start thinking seriously about how they’re going to pay for college until they accept a school’s admission offer.

More on Paying For College

That can be a problem, because the deadline to pay for the fall semester is usually in August. “You shouldn’t wait till you get the bill to figure out how you’re going to cover it all,” says Cyndy McDonald, president of GuidedPath, which provides tools and consulting services to college planning counselors.

If you need to delay payment because you run into problems with your financial aid or have to scramble to line up loans, you may not be able to register for classes and could miss out on important courses that fill up fast.

Even if you’re only using savings and income to cover the costs, there are smart ways to tap those resources. Making a payment plan now also gives you time to do things that could reduce the amount you have to pay out of pocket for college, says McDonald. 

Tips to Remember

Stay on top of communications. Future first-year students need to check their school email continually even after committing to a college and accepting the financial aid package. You could be selected for verification of your financial aid information and have extra paperwork to complete before the money is released to your college.

Schools usually send an email about when the bill is due with a link to an online portal where you can view the statement and pay online.

Note that school communications go to the student, not parents, so if you're a parent paying the bill, make sure you know the deadline. You can also have your student sign a waiver that gives you permission to get email communications and view financial aid and billing statements online.

Understand what you owe. Your bill will show the cost of tuition, room and board, and fees for such things as student activities, and subtract credits for financial aid, such as scholarships, loans, and grants. Whatever is left is what you owe.

If you plan to take out a loan, you’ll need to sign a master promissory note pledging to repay it and complete loan counseling online or in-person to understand the terms and conditions. If you haven’t done that, loan credits may not appear on your bill.

Don't expect to see work-study credits there; students are paid for that directly. Look for out for unnecessary charges. The bill may include services you don't need and can change or waive, such as an expensive meal plan (there may be a less costly option) and health insurance. (Staying on your parent's plan could be cheaper than going with the school's insurance plan.)

If you borrow, choose federal loans. Federally backed loans come with consumer protections like flexible repayment plans and deferment or loan-forgiveness options if you meet certain conditions. You don’t have to start paying a federal loan back until six months after you leave full-time school. And depending on your financial situation, the government may pay the interest on your loan while you’re in school.

Interest rates on federal students loans, which are based on 10-year Treasury notes, have been climbing the past few years along with Federal Reserve rate hikes. For the 2018-2019 academic year, rates on undergraduate loans jumped to 5.04 percent, up from 4.45 percent for 2017-2018 and 3.76 percent the previous year. Parent PLUS loans, which are also federally backed, were 7.59 percent fixed, up from 7 percent and 5.31 percent, respectively. 

But the outlook is better for the coming academic year. Earlier this month the Federal Reserve changed course and said there would be no more rate increases in 2019. That means that when the Department of Education officially announces new student loan rates, which are set July 1, another big increase is unlikely.

Private loans often try to hook borrowers with lower interest rates, but those rates are variable rather than fixed like federal loans, so they could rise. Also, private loans come with stricter terms and fewer, if any, debt-relief options if you can’t afford your payments. Most private loans also require a co-signer.

Only borrow what you need. Federal loan money is paid directly to the school to cover your tuition, room, board and fees. What’s left over will be sent to you. It’s tempting to use that money for other expenses. There’s no requirement that the money be spent on school.

Do a budget based on projected expenses and only borrow what you need to cover costs, not the entire amount you’re eligible for, says Jodi Okun, president of College Financial Aid Advisors, which helps families navigate the financial-aid process.

If you end up with money left at the end of the semester, there are no penalties for early repayment, says Okun. If you can swing it, consider making payments on any loans you take while you’re in school.

Be smart about tapping a 529. Use this money only for qualified expenses, such as tuition, fees, books, supplies, and computers. Money from a 529 can also go toward room and board expenses, including off-campus housing, for students who are enrolled at least half-time at school.

Other expenses, such as transportation and insurance, aren't typically covered. If you’re unsure whether an expense qualifies, check with your 529 plan provider.

Sign up for an installment plan. Rather than paying the college a lump sum, payments may be more manageable if you spread them out. Most schools offer payment plans with no interest, though there may be a small fee to set it up or finance charges if you fall behind. 

The most common program spreads payments out in monthly installments. Other colleges have deferred payment plans in which you make three or four equal payments during the semester.

If your school doesn’t offer a payment plan directly, you may be able to set up one through a third party, such as Higher One or Tuition Management Systems.

Want More Advice? Watch This Video

Paying for college isn't easy. Consumer Reports' financial expert, Donna Rosato, gives our "Consumer 101" TV show host, Jack Rico, tips on how to maximize aid when paying for higher education.