Although you may have been saving in your 529 plan account for years, you could still come up short when it comes time to pay for college. And you're not alone. In fact, the average family's savings and income pays for just 42% of their total higher-education costs, according to "How America Pays for College 2016," a national study by Sallie Mae and Ipsos.
Fortunately, there are other funding sources you can tap, including federal and state governments, educational institutions, community organizations, associations, corporations, and other groups. Some of the aid these entities provide depends on financial need, while other assistance is awarded based on specific criteria, such as the student's grades or intended field of study.
Grants and scholarships
According to Sallie Mae's study, scholarships and grants account for 34% of the total amount paid for higher education. Families look for these types of aid because, unlike loans, grants and scholarships don't need to be repaid. Grants are available from the federal government, your state, and individual educational institutions.
To apply for your state's assistance program, as well as federal grants and other financial aid, start by completing the Free Application for Federal Student Aid (FAFSA). You can submit the FAFSA starting on October 1 of your student's senior year of high school.
Many universities and colleges provide institutional grants and scholarships based on financial need, academic merit, artistic or athletic talent, or other factors. You can learn more on each college's website.
Although you may need to complete a separate application for certain college grants and scholarships, many schools also use the FAFSA to determine their financial aid awards. So even if you don't think you'll qualify for federal aid, you should still fill out the FAFSA.
Federal Work-Study Program
When you complete the FAFSA, you can also apply for the Federal Work-Study Program. This program provides jobs for students with financial need, allowing them to earn money to help pay their higher-education expenses. Pay is based on the federal minimum wage but may vary depending on the skill level required for the job—and it goes directly to the student.
Beyond the aid offered by government organizations and educational institutions, there are many private associations, organizations, and businesses that award scholarships. Check with your high school guidance office for details about local and regional scholarships. You can learn about additional scholarships through College Board's BigFuture and also Fastweb.
Before taking out a student loan, which you'll need to pay back with interest, make sure you've applied for all of the "free money"—scholarships and grants—you're eligible for.
If you've exhausted other forms of financial aid and need to borrow, consider federal or state student loans first, as they usually have lower interest rates and more repayment options than private loans. Need-based student loans for both parents and students are available through the federal financial aid program by completing the FAFSA.
Private loans should be considered a last resort as the interest rates from banks and other financial institutions can be very high.
And remember—the more you save in your 529 plan account now, the less you'll need to borrow when it comes time to pay for college.