US: After high school · 5 min read
How do I pay for college?
How families pay for college in the US: the Pell Grant, state and college grants, scholarships, work-study, federal loans at 6.52%, 529 plans and borrowing to avoid.
The short answer
Pay for college in this order: free money first (the Pell Grant up to $7,395, state grants, the college's own grants and outside scholarships), then money you earn (work-study, summer jobs, part-time work), then federal student loans in your own name (capped at $5,500 to $7,500 a year for dependent undergraduates, at 6.52% for 2026-27), and only then parent or private borrowing, if at all. Choosing a college whose net price your family can cover with the first three layers is the single biggest decision; the average in-state public university costs a few thousand in net tuition after grants, while some private colleges cost $50,000 a year after aid. The debt that causes trouble is almost always parent PLUS or private loans taken to close a gap that a cheaper school wouldn't have had.
Key takeaways
- Order of operations: grants and scholarships, then earnings, then federal loans in your name, then parent or private loans last and reluctantly.
- File the FAFSA early every year. It's the gateway to Pell, state grants, college grants, work-study and federal loans.
- Federal undergraduate loans are capped at $27,000 to $31,000 over four years for dependent students. If a school needs more than that, it's a signal.
- A cheaper school with the same major and outcomes is the best financial aid there is.
On this pageThe layers, in order
The layers, in order
| Layer | Source | Typical amount | Notes |
|---|---|---|---|
| 1. Federal grants | Pell Grant via FAFSA | Up to $7,395 for 2026-27 | No repayment; based on need |
| 2. State grants | Your state's aid program via FAFSA | Hundreds to several thousand | Often first come, first served |
| 3. College grants and scholarships | The college's own aid | Zero to full tuition | The largest source of aid at most private colleges |
| 4. Outside scholarships | Local organizations, employers, national programs | $500 to $5,000 typically | Local ones have better odds |
| 5. Earnings | Work-study, part-time and summer jobs | $3,000 to $8,000 a year | Keep under 20 hours a week in term |
| 6. Federal student loans | Direct Subsidized and Unsubsidized | $5,500 to $7,500 a year | 6.52% for 2026-27; repay from six months after leaving |
| 7. Parent PLUS or private loans | Parents or banks | Whatever the gap is | Last resort; over 9% for PLUS; consider a cheaper school instead |
Choosing the school is the biggest lever
Families spend months on scholarship applications worth $1,000 and minutes on the choice between a $14,000 net price and a $34,000 one. The College Board puts average net tuition at public four-year colleges after grants in the low thousands, with room and board the larger cost; private colleges vary from generous to ruinous. Run every school's net price calculator and apply to two financial safety schools you'd be happy to attend. State university degrees lead to the same jobs as most private ones, at a fraction of the debt.
Tax-advantaged help
- 529 plans: savings grow tax-free for education; grandparents can contribute, and recent rules let unused money roll to a Roth IRA within limits.
- American Opportunity Tax Credit: up to $2,500 a year for four years of undergraduate costs, for families under the income limits.
- Employer tuition assistance: up to $5,250 a year tax-free from many employers, including part-time retail and logistics jobs that recruit students on this benefit.
- Military benefits: ROTC scholarships, the GI Bill and state tuition waivers for National Guard members.
The borrowing rule of thumb
Keep total student debt at graduation below your expected first-year salary for your major. For most majors that means staying within the federal undergraduate limits. If a school's offer requires more, ask the aid office for a review if your circumstances changed, appeal with a competing offer, or choose a different school. Debt in a parent's name counts too.
Illustrative example: the appeal and the second choice
A student's first-choice private college offers a package leaving $28,000 a year to pay. Her second choice, a public university, leaves $11,000. She sends the public offer to the private college's aid office and asks them to reconsider. They add $6,000. The gap is still $11,000 a year, which would mean parent loans. She chooses the public university, works ten hours a week in the library, and graduates owing $16,000 in federal loans and nothing else.
Questions people ask
- How much can I borrow in federal student loans?
- Dependent undergraduates can borrow $5,500 in year one, $6,500 in year two and $7,500 in years three and four, up to $31,000 total, with part of that subsidized based on need. Independent students can borrow more. The interest rate for loans disbursed between July 1, 2026 and June 30, 2027 is 6.52%, fixed for life. Repayment starts six months after you leave school.
- How do I find scholarships?
- Start with the colleges themselves, which give far more scholarship money than outside sources, usually automatically from your application. Then your state's grant programs, your high school counselor's list of local awards, your parents' employers and unions, and free national databases. Local scholarships with 20 applicants beat national ones with 20,000. Never pay to apply or to search.
- Should my parents take out a Parent PLUS loan?
- Rarely, and only after exhausting the other options. Parent PLUS loans now carry a rate above 9%, are capped at $20,000 a year and $65,000 total for new borrowers, and are the parents' debt, not yours. A gap that needs PLUS borrowing every year is usually a sign the school is too expensive for your family, and a cheaper school with the same degree is the better fix.
- Can I work my way through college?
- Partly. Ten to fifteen hours a week during the semester and full time in summer can cover living costs and books at a public university; it can't cover private tuition. Federal work-study jobs are on campus and flexible. Students working more than twenty hours a week graduate at lower rates, so the better move is a cheaper school than more hours.
Exercises are practice, not evidence of career fit or a qualification. How to read our guides and report a correction.
Sources
- Apply for aid with the FAFSA form · Federal Student Aid, US Department of Education
- Federal Pell Grants · Federal Student Aid, US Department of Education
- Federal student loans: subsidized and unsubsidized · Federal Student Aid, US Department of Education
- Trends in College Pricing and Student Aid 2025 · College Board
How this page is written
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