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How To Help Your Child Finance College: A Step-By-Step Guide

How to Help Your Child Finance College: A Step by Step Guide

Hi, everyone. Today I’m over at Vosa talking about wants versus needs, so please be sure to check out my post there. I am so pleased to welcome Natalie, The Finance Girl. She has prepared a very thorough step-by-step guide on financing your child’s college education. If you would like to guest post at The Heavy Purse, please review our guest post policy and contact us with your idea.

It’s that time of year again! Time to figure out how you’re going to send your child to college. And although I’ve been out of law school for three years, I vividly remember the seven years I spent with my mom determining how I’d pay for college. It was sort of a nightmare. I knew I was responsible for paying for both my undergraduate education and my law school education, but beyond that, I pretty much put on earmuffs (regrettably) and didn’t pay attention to what I was getting myself into.

What I do remember about the financial aid process is that there was a surplus of information regarding the specifics but not a real path to follow regarding the whole process. That’s why I want to share this guide with you, in order to provide a step-by-step guide to helping your child finance college.

1. Look at Your Finances

Before you can help your child finance college, you need to determine what, if anything, you’ll contribute. Look closely at what money you can put toward your child’s education. This may be a yearly contribution, a one-time contribution, or a combination of both. Your contribution may come from a 529 Plan, Coverdell ESA, trusts, liquid savings, investments, or cash flow. (For more on how to save for college, see Shannon’s post, How to Save for Your Child’s College Education.)

2. Research the Cost of College

After you know how much money you can contribute to your child’s education, research the cost of sending your child to college.

College costs include

3. Apply for Financial Aid

After you know what your contribution will be and you know how much your child’s college will cost, you can apply for financial aid to make up the difference.

There are three ways your child can receive financial aid for college:

  1. FAFSA (federal, state, and college aid)
  2. Private scholarships and grants
  3. College-specific aid


The Free Application for Federal Student Aid (FAFSA) is the application your child needs to use to apply for most financial aid, including federal and state grants, work-study awards, and federal loans.

You can apply for FAFSA online here. The first day you can fill out your FAFSA is January 1. Because of varying school deadlines, you may want to apply as close to January 1 as you can. When you apply, you’ll need a lot of information from your taxes, so having that available will be helpful.

After you complete and submit your child’s application, you’ll receive your Student Aid Report (SAR). Review this to ensure the information is complete and accurate. Included in the SAR will be your Expected Family Contribution (EFC). Your EFC is an indicator of your family’s financial strength, and it is used to determine your financial aid award. Your EFC is also sent to your state scholarship agency and the colleges you listed on your child’s FAFSA.

Private Scholarships And Grants

Aside from completing the FAFSA application, your child can apply for private grants and scholarships. Companies, foundations, organizations, and a variety of other agencies award students grants and scholarships. These private grants and scholarships will have their own applications (i.e., they are not part of FAFSA), so you’ll need to search and follow the specific rules and deadlines for each private application.

College-Specific Aid

The college your child plans to attend may offer specific grants and/or scholarships. Contact the school’s counselor to determine available awards, the application process, and deadlines specific to the college.

4. Review your financial aid package

Once you’ve reached this step, you’re ready to see if everything lines up by reviewing your child’s financial aid package. This package includes the total amount of aid offered to him by all sources. Note, the package is not all free money. There may be several things in your award package, including grants, scholarships, loans, and work-study. Also, remember that this financial aid package applies only to the year for which you applied and may be different in subsequent years.


If your financial aid package includes grants: hooray! A grant is an award that does not need to be repaid, and it is usually awarded based on need (example: The Federal Pell Grant).


Scholarships are also included in your child’s financial aid package. A scholarship does not have to be repaid (like a grant), but it is awarded based on merit. Often, scholarships have rules – so pay attention to the specifics. For example, in order to continue to receive the scholarship, your child may be required to maintain a certain GPA.

Student Loans

If your child’s financial aid package includes loans, he will be responsible for repaying the loans, plus interest. Award packages may include a variety of student loans, including Federal Stafford Loans, Federal PLUS Loans, Graduate / Professional PLUS Loans, Perkins Loans, or campus-based loans.

The terms of each loan will vary, so pay close attention to the details. Note the interest rate, whether the rate is fixed, the total cost of the loan, when the loan enters repayment, repayment options, and what you’re likely to repay monthly.

Work Study

Work-study is an award for student employment. It means that your college may help you find a job to earn the expected amount. Payment from work-study is usually spent books and personal expenses.

5. Determine your next steps

After reviewing your financial aid package, determine where your contribution is best spent. For example, maybe your child has an academic scholarship so you decide to contribute to his room and board.

The point is to make sure you think about where you want your money to go and allocate it accordingly (in a sense, you’re budgeting here: making sure that every dollar you’re contributing is intentionally spent).

After you know where your contribution is going and what financial aid your child will receive, you need to determine whether there is a gap in cost versus funds. If your contribution combined with the financial aid package is less than the cost of sending your child to college, you’ll need to determine where to get the rest of the money.

Assuming you’ve considered all sources of aid (private grants and scholarships, the college’s awards, and your federal aid package), at this point, your left with private loans.

Private loans

If you have to use private loans to make up the different in your contribution and financial aid, pay close attention to the details of the loan. Often, private loans have variable interest rates, are unsubsidized, do not qualify for income repayment plans, are not dischargeable in bankruptcy, and are not forgiven upon death. Pay attention to the loan’s specific terms regarding the interest rate, whether the rate is variable or fixed, and what repayment plans are available. For example, if you cosign a private loan for your child that has a variable interest rate, you’ll want to be aware of this, so you can make that loan a top priority in repayment.


You may have to cosign for your child to receive a private loan. If you’re going to cosign, plan on repaying the loan. And if your child repays it, awesome – you’re in the clear! The point is to recognize that by cosigning the loan, you’re equally responsible for repayment. If your child does not repay the loan and neither do you, it will be as if you took out the loan for yourself and failed to repay it (envision creditors calling, your credit negatively affected, and your wages being garnished).

6. Communicate!

After all the planning is done, communicate with your child about the cost of college.

If there is one thing I wish I knew before I went to college, it would be the specific cost. I would have looked more closely at taking on the debt, and how it would play a part in my career and life choices. That’s not to say college should be discouraged because of cost. But there should be a clear idea of how much money it will cost over time and monthly.

By understanding the cost of college and having a plan, you and your child can make intentional choices that will minimize confusion and regret, while creating realistic expectations.

Editor’s Note: Thank you Natalie for such a detailed post. Figuring out how to pay for college is a daunting task, which is why it’s so important you take the time to sit down with your children and go through the material together. Natalie makes an excellent point that if you ultimately need to cosign a loan for your child that you should only sign it if you are prepared and able to pay it back yourself. Yes, ideally your child will pay back the loan but if they cannot, you have much more to lose than they do.

Natalie - The Finance GirlMeet Natalie
Natalie Bacon is an attorney and personal finance blogger. You can find her at The Finance Girl blogging about finance and intentional living.

You can connect with Natalie on Twitter, Facebook, and Pinterest.


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May 14, 2014  •  23 Comments  •  Guest Posts

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  1. Wednesday, May 14th, 2014
    Great post, Natalie! This is a great guide for overwhelmed parents who don't know how to start when it comes to financing their kid's college education. Thankfully I won't have to worry about this for quite some time.
    • Thursday, May 15th, 2014
      Isn't that the truth! Like you, it will be a long time before I have to worry about this (and I'll need that much time to recover from going through the process myself!).
  2. Kathy
    Wednesday, May 14th, 2014
    This is a good guide but I would add a few other things that will help save money. 1) When in high school, have the student explore taking advance placement exams. Good scores on these tests earn college credit for certain courses which saves on the amount you end up spending per credit hour. 2) Have your student investigate taking some of the required courses during the summer at a local junior college. The cost per credit hour is usually cheaper at JUCO. You can knock out a couple of requirements like social studies or composition at a much cheaper cost. These courses usually don't interfere with the student's summer jobs because they are often offered many times during the day. Of course you have to confirm with your 4 year institution that the credits will transfer. 3) Have you student go to the best in-state public university you can afford. I don't believe they are inferior to private colleges and are often considered premier schools in certain curriculum.

    I hope you don't think I'm trying to hijack your post. Just wanted to add things we learned from personal experience.
    • Thursday, May 15th, 2014
      Saving ahead of time is the best way to go! Then hopefully a lot of this financial aid isn't needed. Great points to add in regards to planning ahead.
  3. Wednesday, May 14th, 2014
    Great guide Natalie! I think the cosigning point is a big one as the last thing you want is to have both parent and child saddled with student loan debt they're unable to manage. I'd also add looking for ways to minimize some of the initial cost like going to a community college the first two years, or going to a local university and living at home...assuming those are options of course. :)
    • Thursday, May 15th, 2014
      Yes, going to a community college for two years can undoubtedly lower costs. And looking into that will at least be a comparison in terms of the long-term financial cost for both the child and the parent.
  4. Wednesday, May 14th, 2014
    These are great points Natalie! I think the biggest piece of advice I could give is to make sure that if financing is involved that everyone (parents and child) understand exactly what will be taken out and how it will be repaid. 65% of people say they never knew what they were signing up for when they take out loans.
    • Thursday, May 15th, 2014
      That is absolutely the most important part of the whole process: knowing exactly how much you're taking out. It's shocking that 65% don't have a clue; however, after going through the process I understand how it happens. There really isn't a lot that is required of you to do prior to signing and committing to the loans. And most people know the income expectation is higher for college grads, so they don't think twice. Hopefully, this guide helps parents and children learn and understand what they're getting into ahead of time. That way, they can make intentional decisions that they don't regret!
  5. Wednesday, May 14th, 2014
    Our state offers a 20 percent tax credit on the first 5K we contribute to a 529 each year. That makes saving in one a no-brainer. We also add our kid's Christmas and birthday money to the money we save for them. They haven't complained yet, and it all adds up!
    • Thursday, May 15th, 2014
      My step-siblings also save all their children's monetary gifts from the holidays and put it into college savings! I think it's such a smart way to add a little over time. Saving ahead of time is obviously the way to go.
  6. Wednesday, May 14th, 2014
    Very informative post. My co-workers have kids going to college and the tuition is really exorbitant these days. Parents really need to start planning early. Thankfully my son is not even one yet so I have time.
    • Thursday, May 15th, 2014
      The earlier you start, the better! Lots of time is a good thing.
  7. Wednesday, May 14th, 2014
    I think it's also important to consider return on investment. I came from a well to do town where going to a boutique school was a big thing for undergrad. But in retrospect, I could have had a very similar experience going to my state school for A LOT less money.
    • Thursday, May 15th, 2014
      I am in a similar situation, Stefanie. I went to Wittenberg (a small private liberal arts school) and paid off $60k in student loans just from my time during undergrad. Since I knew I planned to attend law school, it would've been financially smarter to attend a state school and avoid the undergrad debt.
  8. Wednesday, May 14th, 2014
    While I don't have kids yet, I think a lot about how much we'll be able to assist them with paying for college. I hope by the time I have kids ready to go to college, maybe there will have been some reform in college expenses. Not that I'm holding my breath : )
    • Thursday, May 15th, 2014
      I think similarly, Liz! Some states make it easier. I know my friend in Georgia was able to get his tuition paid for during undergrad by going to a state school and maintaining a certain gpa. It would be awesome if more states adopted something like that!
  9. Thursday, May 15th, 2014
    A great outline Natalie! For parents who are looking to help their kids with college, it's so important to start as early as possible. Once the debt is gone and retirement is being funded, college savings/investing should be the next step.
    • Thursday, May 15th, 2014
      Yep - that is the way to go! Obviously, saving for your kids college education comes after you're out of debt, but if you can plan ahead and swing it, you're providing them with such a great opportunity to start life education-debt free. Since I have some time before kids, I'm hoping to get there!
  10. Friday, May 16th, 2014
    This is a very great tip Natalie! My daughter is still seven years old and next year we would start to put up a saving for her college tuition fee. As long as we can, we do hope that we can pay her full tuition fees in the future.
  11. Friday, May 16th, 2014
    This is a great guide! Very thorough and well done. I love that you covered getting aid and grants. We are using 529s for my children's education, but I hope they get scholarships and grants. I wouldn't feel bad taking a penalty for that. Great post!
  12. Sunday, May 18th, 2014
    Hello Natalie,

    You have some awesome points. Your first point initially struck me because as parents we sometime over stretch our budget simply because we love our children and want to help them, even if we cannot afford it. We need to be sure about our finances before we commit to anything.

    Personally I know a lot of people who have had great success using FAFSA. You have to of course have all your documents in order but it is a great resource.

    Thank you for sharing.
  13. Tuesday, May 20th, 2014
    Hi Natalie,

    So nice to meet you. Thanks so much for sharing all this information. I have one teen on his way to college and one going next year.

    I have to say my son isn't as prepared and since this is new to me this post will definitely be my guide this year and next :).

    I know my son applied for FAFSA and got his information and now I know what my next step will be.

    Our last resort will be to apply for student loans ugh, even cringing at the thought. Definitely passing this along!

    Happy Tuesday ladies!
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan