Paying for College: 4 College Financing Options to Explore

5 minute read

College represents a major financial commitment, but earning a degree is widely considered a wise investment with benefits that typically outweigh the costs.

Paying for higher education usually involves a collaborative effort among students and parents, utilizing a combination of strategies: personal savings, federal and state financial aid, scholarships, and student loans. The key to managing college expenses effectively is to understand and utilize all available financing options.

Here are four primary options for funding a college education.

1. Use Free Money First: Grants & Scholarships

The best place to start is with free money that does not need to be repaid.

• Start with FAFSA: Filling out the Free Application for Federal Student Aid (FAFSA) is essential. The FAFSA determines your eligibility for federal Pell Grants, state aid, work-study programs, and federal student loans.
• Scholarships: Researching scholarships should be a top priority. Many are merit-based, but others are awarded based on financial need, skills, or other criteria. Use CFNC Scholarship Search for North Carolina-specific opportunities. 

2. Save Money for College

Family contributions and personal savings play a vital role in funding education.

• Family Contributions and Savings: Many families use dedicated education savings accounts. An NC 529 Account offers tax-free earnings on qualified education expenses, and friends and family can contribute as gifts.
• Part-Time Work: Students can contribute to their education costs through summer jobs and part-time work during the school year, which helps fund expenses.
• Work-Study Programs: Federal Work-Study provides part-time jobs for eligible students with financial need, allowing them to earn money to help pay for educational expenses.

3. Keep Your Options Open

Strategic planning regarding school choices can significantly impact affordability.

• Explore Diverse Schools: When building your college list, include a mix of public, private, in-state options, and local community colleges. This variety provides financial flexibility.
• Compare Financial Aid Packages: After acceptance letters and financial aid award letters arrive, compare the expenses and assistance offered by each school to make the best financial choice.
• Community College: Community colleges provide a cost-effective way to complete general education requirements. Look for articulation agreements that ensure credits transfer smoothly to a four-year institution. The North Carolina Community College System (NCCCS) established the Comprehensive Articulation Agreement (CAA) to facilitate the transfer of credits between the state's community colleges and its public universities. The agreement ensures a smooth transition for students who complete their associate degree and wish to pursue a bachelor's degree within the University of North Carolina System.

4. Compare Student Loan Options

If a gap remains after exploring the options above, student loans may be necessary. Loans can be federal (from the government) or private (from banks, credit unions, and non-profits).

• Federal Parent PLUS Loans: These loans are offered to parents by the U.S. Department of Education and allow borrowing up to the full cost of attendance. However, their interest rates and terms may not always be the most competitive compared to other options. Beginning July 1, 2026, new Parent PLUS loans will have annual borrowing capped at $20,000 per student, with a total lifetime limit of $65,000 per student. These new loans will only be eligible for the new Standard Repayment Plan and will not qualify for income-driven repayment options.
• Private and Alternative Student Loans: Private and alternative student loans are non-federal education loans provided by private entities such as banks, credit unions, and state-based agencies. They are designed to cover the gap between the total cost of attendance and the amount covered by federal financial aid, grants, and scholarships.

Consider working with a non-profit lender like the NC Assist Loan program. Non-profit lenders prioritize helping students afford college while keeping costs low. The NC Assist Loan program provides fixed-rate loans designed for individuals with a North Carolina connection.

• NC Student Assist Loan: This loan is intended for undergraduate and graduate students. Students must meet credit requirements or have a creditworthy co-signer (a qualified relative). Repayment of principal and interest typically begins six months after the student graduates or drops below half-time enrollment.
• NC Parent Assist Loan: This loan is offered to parents of undergraduate students and repayment typically begins shortly after the final loan disbursement for the academic year.
• NC Assist Grad Loan: This loan helps cover the costs of a master's, doctorate, or other postgraduate degree. The aggregate (lifetime) loan limit is $200,000 and applies to the total amount borrowed through the program for both undergraduate and graduate studies. The amount you can borrow annually is determined by your school's total cost of attendance minus any other financial aid you receive.

Loans offer:

• Competitive, fixed interest rates.
• No application, origination, or prepayment fees.
• A 0.25% interest rate discount for enrolling in auto-draft payments.
• The ability to cover the total cost of attendance minus any other financial aid received.

Eligibility for loans extends to North Carolina residents attending in-state or out-of-state schools, and to out-of-state residents attending eligible North Carolina institutions.