A college degree can be a strong investment in your career. Tuition and fees for public and private universities in 2025–26 averaged $11,950 and $45,000, respectively.1 The average college graduate earned about $1,740 per week in 2025.2
As you figure out how to pay for college , remember to include room and board, books, supplies, and other expenses. There are many programs available to help cover these costs.
Whether you are returning to school or paying for your child’s education, it can help to review your options. Here are common strategies to consider.
529 Plans
If you have several years before college, a 529 plan may help you build savings. Investments do not guarantee growth, and you could lose some or all of your initial contribution.
- Contribution Limit: Up to $19,000 per person in 2026 without gift taxes3
- Income Limits: None, according to the IRS4
Each state offers its own plan. You are not limited to your state’s program, though some states offer incentives.
Types of 529 Plans
Savings Plans
With a 529 savings plan, you set aside money and invest it in options such as stocks, bonds, and mutual funds. While the funds remain in the account, you will not owe taxes on any gains.
When you use the money for qualified education expenses like tuition, room and board, and books, withdrawals are also tax-free. Depending on your state, you may qualify for a state income tax deduction. However, there is no federal tax deduction for 529 contributions.
You must use the funds for qualified education expenses. If not, you may owe income tax and a 10% penalty on earnings.
Prepaid Tuition Plans
With a 529 prepaid tuition plan, you purchase credits at today’s tuition rates.5 This can help you avoid future price increases. Each plan lists eligible schools, and you can pay in a lump sum or through installments.
If the student attends a different school, the funds are not lost. Many prepaid plans allow you to apply the value toward other colleges, but the rules vary by state.
Coverdell Accounts
Coverdell accounts are another option for saving for education expenses. They offer similar tax benefits to 529 plans, including tax-deferred growth and tax-free withdrawals for qualified expenses.
However, Coverdell accounts have lower contribution limits. You can contribute up to $2,000 per year. There are also income limits. According to the IRS, you can contribute only if you are single with a gross income of $110,000 or less, or married filing jointly with an income of $220,000 or less.6
Federal Student Financial Aid
There are two main types of federal financial aid:
- Grants: Money you do not have to repay
- Loans: Money you must repay
To apply, complete the Free Application for Federal Student Aid (FAFSA). This form shares details about your family’s finances so the federal government can determine your eligibility.7
You can check deadlines on the U.S. Department of Education website. Applying early can help you access more funding since some programs have limited funds.
You can also send your FAFSA results to:
- Your state’s financial aid office
- The schools you are applying to
Even if you think you may not qualify, the application is free, so it may still be worth completing.
Subsidized & Unsubsidized Loans
These are federal loans available to undergraduate, graduate, and professional students.
| Loan Type | Requirement |
|---|---|
| Subsidized | Based on financial need |
| Unsubsidized | No financial need required |
Federal loans may offer a few advantages:
- Easier to qualify for compared to private loans
- No payments required while you are in school
- Options to delay payments after graduation, such as hardship deferment
If possible, making payments while in school can reduce how much you owe later.
Parent PLUS Loans
Parents can borrow through the Parent Loan for Undergraduate Students (PLUS) program.8 These loans are made in parents' names, and they will be financially responsible for paying off the debt, not the student.
Before borrowing, consider how this may affect other goals, such as retirement. After graduation, the student may be able to refinance the loan and take over payments.
Federal Loan Limits
Federal loans have borrowing limits based on your status and year in school.9
| Student Type | Annual Limit | Total Limit |
|---|---|---|
| Dependent Undergraduate | $5,500 to $7,500 | $31,000 |
| Independent Undergraduate | $9,500 to $12,500 | $57,500 |
| Graduate Students | Up to $20,500 | $138,500 |
Limits are set by the U.S. Department of Education and may vary based on your situation.
Private Loans
If you are unable to get enough federal aid to pay for college, you may consider applying for private loans.
You are not guaranteed to qualify for a private loan. Lenders review your credit score and income to decide how likely you are to repay the loan. You may also need a cosigner, such as a parent, to qualify. These loans do not offer the same benefits as federal loans. For example, a lender may not allow you to pause payments, even if you lose your job.
The interest rate on a private loan depends on your credit profile and overall finances. Rates may be higher or lower than those for federal loans.
Scholarships
A scholarship provides money to help cover college expenses, and you do not have to repay it. Scholarships can come from your school, the government, charities, nonprofits, businesses, and other organizations. Many are based on academic performance, but there are other ways to qualify, including:
- Sports
- Your church or another religious organization
- Your job or a parent’s employer
- Local businesses and community groups
- Diversity and outreach programs
- Participation in events, such as a local speech competition
To get started early, consider applying for scholarships before you apply to college. After you enroll, you can continue to search for and apply for additional opportunities.
Final Thoughts
Planning for college costs often involves combining several strategies, from savings accounts to financial aid and scholarships. Starting early and understanding your options can help you make more informed decisions and manage future expenses. By using a mix of these tools, you can build a more flexible approach to paying for education.
Sources
- Trends in College Pricing: Highlights. https://research.collegeboard.org/trends/college-pricing/highlights.
- Median weekly earnings of full‐time wage and salary workers by certification and licensing status and selected characteristics. https://www.bls.gov/cps/cpsaat54.htm.
- Frequently Asked Questions on Gift Taxes. https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes.
- Tax Benefits for Education. https://www.irs.gov/pub/irs-pdf/p970.pdf.
- 529 Plans. https://www.finra.org/investors/investing/investment-accounts/college-savings-accounts/529-plans.
- Topic no. 310, Coverdell education savings accounts. https://www.irs.gov/taxtopics/tc310.
- FAFSA® Deadlines. https://studentaid.gov/apply-for-aid/fafsa/fafsa-deadlines.
- Direct PLUS Loans are federal loans that graduate or professional students and parents of dependent undergraduate students can use to help pay for college or career school. https://studentaid.gov/understand-aid/types/loans/plus.
- The U.S. Department of Education offers low-interest loans to eligible students to help cover the cost of college or career school. https://studentaid.gov/understand-aid/types/loans/subsidized-unsubsidized.
