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Let’s break down your top 5 options for how to pay for grad school: scholarships, fellowships, grants, work-study, and loans

5 Strategies: How to Pay for Grad School

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<p>If you are considering going to grad school after college, you may be wondering, “How much does grad school cost?”</p>
<p>Making the decision to attend graduate school is one thing, but <a href="https://www.sparrowfi.com/blog/the-top-5-ways-to-pay-for-graduate-school">paying for it</a> is another issue. Whether you plan to take out graduate student loans, receive a scholarship, or pay out-of-pocket, being aware of the average cost of grad school and how it varies is important.</p>


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<h2 id="h-on-average-how-much-does-grad-school-cost" class="wp-block-heading"><strong>On Average, How Much Does Grad School Cost?</strong></h2>
<p>The average cost of tuition for public grad schools is roughly $30,000 per year, while private grad schools cost around $40,000 per year. However, these figures do not apply to specialized degrees in medicine and law, which usually cost significantly more.</p>
<p>While you are calculating the cost of grad school, be sure to think about the <em>cost of attendance </em>(COA), in addition to the tuition. The COA is the <em>total</em> amount of money you will have to pay to attend grad school, including tuition and other fees like transportation, room and board, school supplies, and more.</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/graduate-student-loan">Compare college graduate student loan rates</a></p>


<h2 id="h-is-grad-school-more-expensive-than-undergrad" class="wp-block-heading"><strong>Is Grad School More Expensive than Undergrad?</strong></h2>
<p>There is no “right” answer to the question of whether grad school is more expensive than undergrad, as the price depends on your field of study, type of degree, and other factors.</p>
<p>Generally, medical, law, and other specialized degrees cost more than an MBA or a Master of Arts. STEM degrees can also be pricier than a degree in humanities or social sciences, given that there may be additional costs in labs, equipment, and other materials.</p>


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<h2 id="h-is-graduate-school-worth-the-price" class="wp-block-heading"><strong>Is Graduate School Worth the Price?</strong></h2>
<p>The question of whether grad school is worth the cost ultimately depends on your personal aspirations and financial standing.</p>
<p>Before making the decision, be sure to carefully weigh the pros and cons. Here are some things to consider:</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/best-graduate-school-student-loans">Best options: graduate student loan lenders</a></p>
<h3><strong>Pros and Cons of Attending Grad School</strong></h3>


<h2 class="wp-block-heading"><strong>How to Pay for Grad School</strong></h2>
<p>As with any degree, there is a certain order you should follow when it comes to how you finance your education.</p>
<p><a href="https://www.sparrowfi.com/blog/best-scholarships-for-graduate-school">Scholarships</a>, fellowships, and <a href="https://www.sparrowfi.com/blog/best-grants-for-graduate-school">grants</a> are all forms of free aid, or gift aid. Typically, scholarships, fellowships, and grants do not need to be paid back, so you’ll want to accept these first.</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/the-top-5-ways-to-pay-for-graduate-school">Learn more about 5 strategies to pay for the cost of grad school</a></p>
<p>After accepting any free money available to you, you should pursue <a href="https://www.sparrowfi.com/blog/what-is-work-study">work-study</a> next. Federal work-study is considered earned money, meaning you have to trade your time to receive it. While not everyone will receive federal work-study, it’s a great option for those who do.</p>
<p>Loans should always come last in the process because they are borrowed money. When you borrow a loan, it’ll typically accrue interest, and by the time you pay it back, you’ll have paid a significant amount in interest.</p>
<p><strong>&gt;&gt; MORE: </strong><a href="https://www.sparrowfi.com/graduate-student-loan">Compare student loan rates: how to pay for the cost of grad school</a></p>


<h2 id="h-closing-thoughts-from-the-nest" class="wp-block-heading"><strong>Closing Thoughts From the Nest</strong></h2>
<p>Attending grad school is a big decision to make. Be sure to reach out to current graduate students, academic mentors, and other role models who have been in your position before.</p>
<p>When it comes to financing the cost of your grad school tuition, be sure to consider all of your options. If you want to <a href="https://www.sparrowfi.com/graduate-student-loan">explore graduate student loans</a>, consider submitting a free form with Sparrow. <a href="https://www.sparrowfi.com/student-loan-info">Sparrow</a> allows you to compare your pre-qualified, private student loan options across 17+ different lenders.</p>
<p> </p>
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<p> </p>
<p><em><a href="http://sparrowfi.com">Sparrow</a> aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.</em></p>

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If you are considering going to grad school after college, you may be wondering, “How much does grad school cost?”

Making the decision to attend graduate school is one thing, but <a href="https://www.sparrowfi.com/blog/the-top-5-ways-to-pay-for-graduate-school">paying for it</a> is another issue. Whether you plan to take out graduate student loans, receive a scholarship, or pay out-of-pocket, being aware of the average cost of grad school and how it varies is important.

<h2 id="h-on-average-how-much-does-grad-school-cost" class="wp-block-heading"><strong>On Average, How Much Does Grad School Cost?</strong></h2>
The average cost of tuition for public grad schools is roughly $30,000 per year, while private grad schools cost around $40,000 per year. However, these figures do not apply to specialized degrees in medicine and law, which usually cost significantly more.

While you are calculating the cost of grad school, be sure to think about the <em>cost of attendance </em>(COA), in addition to the tuition. The COA is the <em>total</em> amount of money you will have to pay to attend grad school, including tuition and other fees like transportation, room and board, school supplies, and more.

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/graduate-student-loan">Compare college graduate student loan rates</a>

<h2 id="h-is-grad-school-more-expensive-than-undergrad" class="wp-block-heading"><strong>Is Grad School More Expensive than Undergrad?</strong></h2>
There is no “right” answer to the question of whether grad school is more expensive than undergrad, as the price depends on your field of study, type of degree, and other factors.

Generally, medical, law, and other specialized degrees cost more than an MBA or a Master of Arts. STEM degrees can also be pricier than a degree in humanities or social sciences, given that there may be additional costs in labs, equipment, and other materials.

If you want to skip pre-qualification and apply directly with a lender, you can do so by clicking <b>Apply</b> below.

<h2 id="h-is-graduate-school-worth-the-price" class="wp-block-heading"><strong>Is Graduate School Worth the Price?</strong></h2>
The question of whether grad school is worth the cost ultimately depends on your personal aspirations and financial standing.

Before making the decision, be sure to carefully weigh the pros and cons. Here are some things to consider:

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/best-graduate-school-student-loans">Best options: graduate student loan lenders</a>
<h3><strong>Pros and Cons of Attending Grad School</strong></h3>

Loss of opportunity to make more money: A majority of undergraduates decide to work in the industry after graduation. Going to grad school may be a potential loss of income that you could have made had you begun working instead. 

Loss of time: Attending grad school can take anywhere from one to three years, in general, which may set you behind in comparison to your peers.

Potential student debt: If you don’t receive any financial aid or gift aid, you may need to take out graduate student loans to afford the cost of attendance. If you have previous debt from your undergraduate education, you may be shouldering even more student loan debt.

Delayed work experience: You may miss out on industry experience if you decide to go to grad school.

More scholarship opportunities: Grad schools are usually more generous with their scholarship offerings than undergraduate programs are. If you take the time to find and apply for scholarships, you may be able to offset the cost of your tuition. 

Career advancement: An advanced degree can unlock career doors for you that may not have been accessible with only a Bachelor’s degree. 

Increased salary: The average salary of an individual with a Master’s degree is higher than the average salary of an individual with a Bachelor’s degree. By going to grad school, you can increase your earning potential.

Specialized study in the field you love: If you’re going to grad school, you are probably going to study something that you love and enjoy. By attending graduate school, you will be able to have an in-depth, specialized study of the field and become an expert.

<h2 class="wp-block-heading"><strong>How to Pay for Grad School</strong></h2>
As with any degree, there is a certain order you should follow when it comes to how you finance your education.

<a href="https://www.sparrowfi.com/blog/best-scholarships-for-graduate-school">Scholarships</a>, fellowships, and <a href="https://www.sparrowfi.com/blog/best-grants-for-graduate-school">grants</a> are all forms of free aid, or gift aid. Typically, scholarships, fellowships, and grants do not need to be paid back, so you’ll want to accept these first.

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/the-top-5-ways-to-pay-for-graduate-school">Learn more about 5 strategies to pay for the cost of grad school</a>

After accepting any free money available to you, you should pursue <a href="https://www.sparrowfi.com/blog/what-is-work-study">work-study</a> next. Federal work-study is considered earned money, meaning you have to trade your time to receive it. While not everyone will receive federal work-study, it’s a great option for those who do.

Loans should always come last in the process because they are borrowed money. When you borrow a loan, it’ll typically accrue interest, and by the time you pay it back, you’ll have paid a significant amount in interest.

<strong>&gt;&gt; MORE: </strong><a href="https://www.sparrowfi.com/graduate-student-loan">Compare student loan rates: how to pay for the cost of grad school</a>

<h2 id="h-closing-thoughts-from-the-nest" class="wp-block-heading"><strong>Closing Thoughts From the Nest</strong></h2>
Attending grad school is a big decision to make. Be sure to reach out to current graduate students, academic mentors, and other role models who have been in your position before.

When it comes to financing the cost of your grad school tuition, be sure to consider all of your options. If you want to <a href="https://www.sparrowfi.com/graduate-student-loan">explore graduate student loans</a>, consider submitting a free form with Sparrow. <a href="https://www.sparrowfi.com/student-loan-info">Sparrow</a> allows you to compare your pre-qualified, private student loan options across 17+ different lenders.

 
<div class="wp-block-spacer" aria-hidden="true"></div>
 

<em><a href="http://sparrowfi.com">Sparrow</a> aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.</em>

The average cost of tuition for grad schools is roughly $30,000 per year, while private grad schools cost around $40,000. Learn more:

How Much Does Grad School Cost?

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Abigail Eun

Financial Wellness

Financial Wellness Archives

Financial Wellness Archives - Sparrow Nest

Welcome to college application season – one of the most exciting and slightly stressful milestones in your life.&nbsp; Though the college application process may seem overwhelming, familiarizing yourself with what it entails, including admission requirements, deadlines, and application timelines, is key to being prepared. Use this college application checklist to guide you at every step &hellip; Continue reading "Preparing for University: A College Application Checklist"

Preparing for University: A College Application Checklist

<p>According to a study done by Fidelity, <a href="https://www.forbes.com/sites/robertfarrington/2021/10/04/when-should-parents-start-saving-for-college/?sh=55f29ec14b77">42%</a> of parents wish they started saving for college earlier. While saving for college can seem like a daunting challenge, we’re here to help.</p>
<p>If you’re wondering <a href="https://www.sparrowfi.com/blog/when-should-parents-start-saving-for-college">when you should start</a> saving for your child’s college education, you’re in the right place. Keep reading to learn about when you should start that college fund, how much money you should save, and what college savings options you have.</p>


<h2 id="h-when-parents-should-start-saving-for-college" class="wp-block-heading"><strong>When Parents Should Start Saving for College</strong></h2>
<p>The cost of college tuition rises annually due to inflation. In fact, between 1980 and 2020, the cost of tuition rose by <a href="https://www.forbes.com/advisor/student-loans/college-tuition-inflation/">169%</a>. So, it’s important that parents start saving for college as <em>early as possible. </em></p>
<p>That said, experts advise that worries about the “<em>when”</em> should not hinder parents from saving <em>now</em>. <a href="https://www.forbes.com/sites/robertfarrington/2021/10/04/when-should-parents-start-saving-for-college/?sh=55f29ec14b77">Annette VanderLinde</a>, the Chief Client Officer for Portfolio Solutions, states that, &#8220;Either there’s too much stress placed upon opening a college savings account right after birth, or regret in not starting a savings account earlier. The key is to just get started and let go of the worry.&#8221;</p>
<p>Whether your child is six or sixteen, you should be looking into options and saving for college as soon as possible.</p>
<p>It is important to note that parents who begin saving later will have to contribute <em>more</em> money than parents who began saving earlier to “catch up.” Parents who begin saving earlier have time and <a href="https://www.sparrowfi.com/blog/simple-vs-compound-interest-what-you-need-to-know">compound interest</a> on their side, meaning that their gains may be substantially larger.</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/when-should-parents-start-saving-for-college">Learn more about when parents should start saving for college</a></p>


<h2 id="h-what-to-do-if-you-re-getting-a-late-start-on-saving" class="wp-block-heading"><strong>What to Do If You’re Getting a Late Start on Saving</strong></h2>
<p>If you are starting late on saving for college, it may be smarter to take on less risk as market fluctuations can be a detrimental player to your college savings goal. Perhaps it would be wiser to look into more safe, secure investments or age-based plans.</p>
<p>If you don’t reach sufficient savings, you should look into the <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">different types of financial aid for college</a>. Additionally, you can use <a href="http://sparrowfi.com/">Sparrow</a> to find the <a href="https://www.sparrowfi.com/parent-student-loan">best parent student loan rates</a> and compare across multiple lenders in minutes.</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/best-parent-loans-for-college">Best parent loans for college</a></p>


<h2 id="h-how-much-parents-should-save-for-college" class="wp-block-heading"><strong>How Much Parents Should Save for College</strong></h2>
<p>While there is no “right” answer to <a href="https://www.sparrowfi.com/blog/how-much-to-save-for-college">how much parents should save for college</a>, here are some general guidelines for how much you should have saved by the time your child enters college.</p>
<p> </p>
<h3 id="h-the-⅓-rule" class="wp-block-heading"><strong>The ⅓ Rule</strong></h3>
<p>The ⅓ rule states that parents should be able to pay for their child’s college in thirds:</p>
<ul>
<li>⅓ of the tuition should be paid by the parents’ <em>income</em></li>
<li>⅓ should be paid by <em>savings</em></li>
<li>⅓ should be paid for by grants, scholarships, and other sources of financial aid.</li>
</ul>
<p>To calculate what ⅓ of tuition may cost when your child enters college, use a college cost projector calculator such as <a href="https://vanguard.wealthmsi.com/collcost.php">Vanguard’s</a>. Then, divide the projected cost by 3 to find the amount you should aim to save.</p>
<p>For example, let’s say that your child was born in 2015. While you don’t know which school your child will attend, you know they will enroll in around 11 years. According to Vanguard, 4 years of college will cost around $167,266 total by that time. So, you’d want to aim to save $55,755.</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">What are the different types of financial aid options?</a></p>

<h3 id="h-the-2k-rule" class="wp-block-heading"><strong>The 2k Rule</strong></h3>
<p>The 2k Rule expects that the cost of tuition will grow 3% above the national inflation rate in a four-year period and that parents will cover 50% of their child’s tuition with savings.</p>
<p>To calculate how much you will need to save to cover 50% of your child’s tuition with +3% to the national inflation rate every four years, take the following steps:</p>
<ol>
<li>Multiply your child’s current age by $2,000. <strong>(Ex. Your child is 16 years old. 16 x 2,000 is 32,000)</strong>.</li>
<li>Calculate how many years left until your child goes to college, and multiply that number by $2,000. <strong>(Ex. Your child is 16 years old and you expect them to go to college in one year. 1 x 2,000 is 2,000.)</strong></li>
<li>Add up the totals from steps one and two to determine roughly how much money you will need to save up to pay for 50% of your child’s tuition by the time they go to college. <strong>(32,000 + 2,000 is 34,000). </strong></li>
</ol>
<p>Fidelity’s <a href="https://www.fidelity.com/misc/college-savings/college_savings.html">college savings calculator</a> can also do the math for you.</p>


Compare personalized student loan rates

<h2 id="h-the-best-way-to-save-for-your-child-s-college" class="wp-block-heading"><strong>The Best Way to Save for Your Child’s College</strong></h2>
<p>As a parent, there are a variety of <a href="https://www.sparrowfi.com/blog/the-best-ways-to-start-saving-for-college">ways to save for your child’s college</a>. Here are a few options to consider:</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/best-parent-loans-for-college">Best parent loans for college</a></p>
<h3 id="h-529-plans" class="wp-block-heading"><strong>529 Plans</strong></h3>
<p>A 529 Plan is a college savings plan that offers both federal and state benefits when you use the money for educational purposes. There are two types of 529 Plans: an educational savings plan and a prepaid tuition plan.</p>
<ul>
<li>Educational Savings Plan: Parents can contribute money to the educational savings plan and choose investment options.</li>
<li>Prepaid Tuition Plan: Parents can pay tuition that is based on the current tuition in advance for a specific university/group of universities.</li>
</ul>


<h3 id="h-mutual-funds" class="wp-block-heading"><strong>Mutual Funds</strong></h3>
<p>Mutual funds are a type of investment fund that allows you to <em>diversify</em> your stock holdings by buying different stock options instead of just one. Your investment portfolio is usually managed by financial advisors, to whom you give your money to. As a parent, this option is a great way to start saving for college.</p>


<h3 id="h-custodial-accounts" class="wp-block-heading"><strong>Custodial Accounts</strong></h3>
<p>Custodial accounts are brokerage accounts that you open for your child and transfer to them once they reach the age of 18, 21, or 25 years old. You can invest in stocks, mutual funds, and bonds with a custodial account.</p>


<h3 id="h-savings-bonds" class="wp-block-heading"><strong>Savings Bonds</strong></h3>
<p>Savings bonds are securities that are backed by the United States Government. They are incredibly safe investments with a 100% money-back guarantee, along with any interest that accrues.</p>


<h3 id="h-roth-iras" class="wp-block-heading"><strong>Roth IRAs</strong></h3>
<p>Roth IRAs are individual retirement accounts that you can put after-tax money into and enjoy tax-free growth and withdrawals. Penalties can be waived if money is withdrawn and used for educational expenses.</p>


<h2 id="h-should-parents-save-for-their-child-s-college" class="wp-block-heading"><strong>Should Parents Save for Their Child’s College?</strong></h2>
<p>Saving for your child’s educational expenses comes with many benefits. For one, it will alleviate the thousands of dollars in debt that your child will have to pay off. If you start early, you will have the power of compound interest and time on your side, allowing you to save more with less. Plus, it is better to save money now rather than borrow later.</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/best-student-loans-for-parents-with-bad-credit">Best student loans for parents with bad credit</a></p>
<p>However, there are certain things that are far more financially beneficial for your family and should take precedence over a college fund, such as:</p>
<ul>
<li><strong>An emergency fund:</strong> Every family needs a rainy day fund for any storms that life throws at you. Whether it is an unexpected medical emergency, a necessary home repair, or an out-of-the-blue expense, you’ll want to be prepared for whatever comes your way.</li>
<li><strong>Paying off high-interest debt:</strong> High-interest debt is notorious for growing exponentially, putting many families in more debt than they expected in a short amount of time. Before your debt becomes a larger problem than it has to be, <a href="https://www.sparrowfi.com/blog/how-to-pay-off-200k-in-student-loans">paying off your high-interest debt</a> should be at the forefront of your financial priorities.</li>
<li><strong>In some cases, a retirement fund:</strong> Retirement can be expensive. According to the <a href="https://en.as.com/latest_news/retirement-in-the-usa-how-much-money-do-i-have-to-save-and-which-states-cost-the-most-n/">World Population Review</a>, you need at least $905,000 in your retirement savings to retire comfortably in 2022. It’s a difficult position to be in, but you’ll have to determine what costs more: the financial burden you may be on your children when you are retired versus the student debt your child will have to shoulder.</li>
</ul>
<p></p>
<p> </p>
<p>Saving for college costs should ultimately depend on <em>your</em> family’s financial situation. For some, it is more beneficial to save money now than to borrow later. For others, spending money to tie up loose ends is far more important than putting the money into a savings account.</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/parent-student-loan">Compare parent loan rates across different lenders</a></p>

<h2 id="h-closing-thoughts-from-the-nest" class="wp-block-heading"><strong>Closing Thoughts from the Nest</strong></h2>
<p>Saving for college as a parent can be a large concern. If your family is in the financial standing to save for college, remember to <em>start saving early</em>. Compound interest and time will be your two financial saviors in the face of college inflation.</p>
<p>Between the college fund options discussed above, be sure to thoroughly research each one to find what’s most suitable for you and your child.</p>
<p>Remember, not all families are in the position to start saving for college, and that is okay. Paying off high-interest debt, saving for your retirement, and adding to your emergency fund are all valid alternatives that will benefit your family in the long run.</p>
<p> </p>
<div class="wp-block-spacer" aria-hidden="true"></div>
<p><em><a href="http://sparrowfi.com">Sparrow</a> aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.</em></p>

According to a study done by Fidelity, <a href="https://www.forbes.com/sites/robertfarrington/2021/10/04/when-should-parents-start-saving-for-college/?sh=55f29ec14b77">42%</a> of parents wish they started saving for college earlier. While saving for college can seem like a daunting challenge, we’re here to help.

If you’re wondering <a href="https://www.sparrowfi.com/blog/when-should-parents-start-saving-for-college">when you should start</a> saving for your child’s college education, you’re in the right place. Keep reading to learn about when you should start that college fund, how much money you should save, and what college savings options you have.

<h3 id="h-mutual-funds" class="wp-block-heading"><strong>Mutual Funds</strong></h3>
Mutual funds are a type of investment fund that allows you to <em>diversify</em> your stock holdings by buying different stock options instead of just one. Your investment portfolio is usually managed by financial advisors, to whom you give your money to. As a parent, this option is a great way to start saving for college.

Earnings are subject to annual income tax.

Capital gains are subject to tax when sold.

Earnings made on mutual funds will be viewed on your child’s FAFSA, affecting financial aid eligibility.

<h3 id="h-custodial-accounts" class="wp-block-heading"><strong>Custodial Accounts</strong></h3>
Custodial accounts are brokerage accounts that you open for your child and transfer to them once they reach the age of 18, 21, or 25 years old. You can invest in stocks, mutual funds, and bonds with a custodial account.

Your child may be subject to the kiddie tax when they receive the account. The tax is on any unearned income they receive that exceeds $2,300 when or before they are 23 years old.

The brokerage account will be viewed as your child’s financial assets on their FAFSA, affecting financial aid distribution.

The account’s value can be removed from your gross estate.

<h3 id="h-savings-bonds" class="wp-block-heading"><strong>Savings Bonds</strong></h3>
Savings bonds are securities that are backed by the United States Government. They are incredibly safe investments with a 100% money-back guarantee, along with any interest that accrues.

$10,000 limit for individuals and $20,000 limit for joint couples annually.

Lower returns compared to other investment options.

<h3 id="h-roth-iras" class="wp-block-heading"><strong>Roth IRAs</strong></h3>
Roth IRAs are individual retirement accounts that you can put after-tax money into and enjoy tax-free growth and withdrawals. Penalties can be waived if money is withdrawn and used for educational expenses.

Maximum annual contribution is $6,000 if you are under 50 years old.

Educational withdrawals will count as untaxed income and reduce your child’s financial aid eligibility.

Only for individuals who earn less than $144,000 or joint individuals who earn less than $214,000 annually.

Offers a wide range of investment options.

Not counted as a parent asset on the FAFSA.

<h2 id="h-should-parents-save-for-their-child-s-college" class="wp-block-heading"><strong>Should Parents Save for Their Child’s College?</strong></h2>
Saving for your child’s educational expenses comes with many benefits. For one, it will alleviate the thousands of dollars in debt that your child will have to pay off. If you start early, you will have the power of compound interest and time on your side, allowing you to save more with less. Plus, it is better to save money now rather than borrow later.

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/best-student-loans-for-parents-with-bad-credit">Best student loans for parents with bad credit</a>

However, there are certain things that are far more financially beneficial for your family and should take precedence over a college fund, such as:
<ul>
 	<li><strong>An emergency fund:</strong> Every family needs a rainy day fund for any storms that life throws at you. Whether it is an unexpected medical emergency, a necessary home repair, or an out-of-the-blue expense, you’ll want to be prepared for whatever comes your way.</li>
 	<li><strong>Paying off high-interest debt:</strong> High-interest debt is notorious for growing exponentially, putting many families in more debt than they expected in a short amount of time. Before your debt becomes a larger problem than it has to be, <a href="https://www.sparrowfi.com/blog/how-to-pay-off-200k-in-student-loans">paying off your high-interest debt</a> should be at the forefront of your financial priorities.</li>
 	<li><strong>In some cases, a retirement fund:</strong> Retirement can be expensive. According to the <a href="https://en.as.com/latest_news/retirement-in-the-usa-how-much-money-do-i-have-to-save-and-which-states-cost-the-most-n/">World Population Review</a>, you need at least $905,000 in your retirement savings to retire comfortably in 2022. It’s a difficult position to be in, but you’ll have to determine what costs more: the financial burden you may be on your children when you are retired versus the student debt your child will have to shoulder.</li>
</ul>


 

Saving for college costs should ultimately depend on <em>your</em> family’s financial situation. For some, it is more beneficial to save money now than to borrow later. For others, spending money to tie up loose ends is far more important than putting the money into a savings account.

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/parent-student-loan">Compare parent loan rates across different lenders</a>

<h2 id="h-closing-thoughts-from-the-nest" class="wp-block-heading"><strong>Closing Thoughts from the Nest</strong></h2>
Saving for college as a parent can be a large concern. If your family is in the financial standing to save for college, remember to <em>start saving early</em>. Compound interest and time will be your two financial saviors in the face of college inflation.

Between the college fund options discussed above, be sure to thoroughly research each one to find what’s most suitable for you and your child.

Remember, not all families are in the position to start saving for college, and that is okay. Paying off high-interest debt, saving for your retirement, and adding to your emergency fund are all valid alternatives that will benefit your family in the long run.

 
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<em><a href="http://sparrowfi.com">Sparrow</a> aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.</em>

<h2 id="h-when-parents-should-start-saving-for-college" class="wp-block-heading"><strong>When Parents Should Start Saving for College</strong></h2>
The cost of college tuition rises annually due to inflation. In fact, between 1980 and 2020, the cost of tuition rose by <a href="https://www.forbes.com/advisor/student-loans/college-tuition-inflation/">169%</a>. So, it’s important that parents start saving for college as <em>early as possible. </em>

That said, experts advise that worries about the “<em>when”</em> should not hinder parents from saving <em>now</em>. <a href="https://www.forbes.com/sites/robertfarrington/2021/10/04/when-should-parents-start-saving-for-college/?sh=55f29ec14b77">Annette VanderLinde</a>, the Chief Client Officer for Portfolio Solutions, states that, "Either there’s too much stress placed upon opening a college savings account right after birth, or regret in not starting a savings account earlier. The key is to just get started and let go of the worry."

Whether your child is six or sixteen, you should be looking into options and saving for college as soon as possible.

It is important to note that parents who begin saving later will have to contribute <em>more</em> money than parents who began saving earlier to “catch up.” Parents who begin saving earlier have time and <a href="https://www.sparrowfi.com/blog/simple-vs-compound-interest-what-you-need-to-know">compound interest</a> on their side, meaning that their gains may be substantially larger.

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/when-should-parents-start-saving-for-college">Learn more about when parents should start saving for college</a>

<h2 id="h-what-to-do-if-you-re-getting-a-late-start-on-saving" class="wp-block-heading"><strong>What to Do If You’re Getting a Late Start on Saving</strong></h2>
If you are starting late on saving for college, it may be smarter to take on less risk as market fluctuations can be a detrimental player to your college savings goal. Perhaps it would be wiser to look into more safe, secure investments or age-based plans.

If you don’t reach sufficient savings, you should look into the <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">different types of financial aid for college</a>. Additionally, you can use <a href="http://sparrowfi.com/">Sparrow</a> to find the <a href="https://www.sparrowfi.com/parent-student-loan">best parent student loan rates</a> and compare across multiple lenders in minutes.

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/best-parent-loans-for-college">Best parent loans for college</a>

<h2 id="h-how-much-parents-should-save-for-college" class="wp-block-heading"><strong>How Much Parents Should Save for College</strong></h2>
While there is no “right” answer to <a href="https://www.sparrowfi.com/blog/how-much-to-save-for-college">how much parents should save for college</a>, here are some general guidelines for how much you should have saved by the time your child enters college.

 
<h3 id="h-the-⅓-rule" class="wp-block-heading"><strong>The ⅓ Rule</strong></h3>
The ⅓ rule states that parents should be able to pay for their child’s college in thirds:
<ul>
 	<li>⅓ of the tuition should be paid by the parents’ <em>income</em></li>
 	<li>⅓ should be paid by <em>savings</em></li>
 	<li>⅓ should be paid for by grants, scholarships, and other sources of financial aid.</li>
</ul>
To calculate what ⅓ of tuition may cost when your child enters college, use a college cost projector calculator such as <a href="https://vanguard.wealthmsi.com/collcost.php">Vanguard’s</a>. Then, divide the projected cost by 3 to find the amount you should aim to save.

For example, let’s say that your child was born in 2015. While you don’t know which school your child will attend, you know they will enroll in around 11 years. According to Vanguard, 4 years of college will cost around $167,266 total by that time. So, you’d want to aim to save $55,755.

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">What are the different types of financial aid options?</a>

<h3 id="h-the-2k-rule" class="wp-block-heading"><strong>The 2k Rule</strong></h3>
The 2k Rule expects that the cost of tuition will grow 3% above the national inflation rate in a four-year period and that parents will cover 50% of their child’s tuition with savings.

To calculate how much you will need to save to cover 50% of your child’s tuition with +3% to the national inflation rate every four years, take the following steps:
<ol>
 	<li>Multiply your child’s current age by $2,000. <strong>(Ex. Your child is 16 years old. 16 x 2,000 is 32,000)</strong>.</li>
 	<li>Calculate how many years left until your child goes to college, and multiply that number by $2,000. <strong>(Ex. Your child is 16 years old and you expect them to go to college in one year. 1 x 2,000 is 2,000.)</strong></li>
 	<li>Add up the totals from steps one and two to determine roughly how much money you will need to save up to pay for 50% of your child’s tuition by the time they go to college. <strong>(32,000 + 2,000 is 34,000). </strong></li>
</ol>
Fidelity’s <a href="https://www.fidelity.com/misc/college-savings/college_savings.html">college savings calculator</a> can also do the math for you.

<h2 id="h-the-best-way-to-save-for-your-child-s-college" class="wp-block-heading"><strong>The Best Way to Save for Your Child’s College</strong></h2>
As a parent, there are a variety of <a href="https://www.sparrowfi.com/blog/the-best-ways-to-start-saving-for-college">ways to save for your child’s college</a>. Here are a few options to consider:

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/best-parent-loans-for-college">Best parent loans for college</a>
<h3 id="h-529-plans" class="wp-block-heading"><strong>529 Plans</strong></h3>
A 529 Plan is a college savings plan that offers both federal and state benefits when you use the money for educational purposes. There are two types of 529 Plans: an educational savings plan and a prepaid tuition plan.
<ul>
 	<li>Educational Savings Plan: Parents can contribute money to the educational savings plan and choose investment options.</li>
 	<li>Prepaid Tuition Plan: Parents can pay tuition that is based on the current tuition in advance for a specific university/group of universities.</li>
</ul>

There will be penalties if the money is used for non-educational purposes.

Limited investment options in comparison to other savings options.

Earnings and withdrawals are tax-free for educational expenses.

Investments can grow up to $500,000 over the life of the account.

When the owner of the 529 Plan is a custodial parent or the dependent student, the total value must be reported as a parent asset on the FAFSA.

The ⅓ saving rule states that parents should be able to pay for their child’s college in thirds... Learn more...

Parents’ Complete Guide to Saving for College

<p>Now that you’ve been accepted into college, it’s time to figure out how you are going to pay for your education. As you sift through your <a href="https://www.sparrowfi.com/blog/ultimate-guide-to-figuring-out-your-financial-aid-package">financial aid packages</a>, it may be confusing to differentiate between the different types of financial aid you were offered.</p>
<p>In this article, we’ll cover everything you need to know about the <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">different types of financial aid</a> and how you should go about accepting your financial aid package.</p>

<h2 id="h-the-4-types-of-financial-aid" class="wp-block-heading"><strong>The 4 Types of Financial Aid</strong></h2>
<p>There are four key types of financial aid: scholarships, grants, work-study, and loans.</p>
<p> </p>
<h3 id="h-scholarships" class="wp-block-heading"><strong>Scholarships</strong></h3>
<p> </p>
<p><a href="https://www.sparrowfi.com/blog/top-6-college-scholarship-sites">Scholarships</a> are a form of financial aid that is awarded based on academic merit or other achievements. They do <em>not</em> need to be paid back (yay!).</p>
<p>Scholarships are a popular form of financial aid. In fact, <a href="https://www.thinkimpact.com/scholarship-statistics/">58%</a> of families paid for some amount of their college tuition with scholarships in 2020.</p>
<p>Scholarships come in all shapes and sizes. Depending on the organization that is offering the scholarship, scholarships can range from $100 to the entirety of your four-year tuition.</p>
<p>Usually, you have to apply for scholarships by providing general information about yourself, writing an essay to a prompt, and demonstrating why you are the best candidate for the scholarship. However, there are also scholarships that you can apply to with a single click of a button or through other creative means.</p>

<h4 id="h-where-do-scholarships-come-from" class="wp-block-heading"><strong>Where Do Scholarships Come From?</strong></h4>
<p>Scholarships come from a variety of sources, including state governments, private organizations, non-profit organizations, academic institutions, and more.</p>
<p> </p>
<h4 id="h-what-can-i-use-scholarships-for" class="wp-block-heading"><strong>What Can I Use Scholarships For?</strong></h4>
<p>This depends on the type of scholarship you receive. Some scholarships require students to use the money on specific expenses, such as textbooks and school supplies, tuition, or university housing costs. Other scholarships are more flexible and allow the student to use the money on an educational expense they deem fit.</p>
<p> </p>
<h4 id="h-how-do-i-find-scholarships" class="wp-block-heading"><strong>How Do I Find Scholarships?</strong></h4>
<p>There are a variety of ways you can find and apply for scholarships. You can:</p>
<ol>
<li>Reach out to your high school and/or college’s financial aid office and ask for assistance in finding scholarships.</li>
<li>Use <a href="https://www.sparrowfi.com/blog/top-6-college-scholarship-sites">scholarship search engines</a> like Bold, Sallie Mae’s Scholarship Search, or Chegg.</li>
<li>Find organizations that specialize in your academic field of study. For example, if you are on a pre-dental track, find dental organizations and see if they <a href="https://www.sparrowfi.com/blog/scholarships-for-dental-school-how-and-where-to-apply">offer any scholarships</a>.</li>
</ol>

<h3 id="h-grants" class="wp-block-heading"><strong>Grants</strong></h3>
<p>Like scholarships, <a href="https://www.sparrowfi.com/blog/ultimate-guide-to-college-grants">grants</a> do not need to be paid back. However, grants are only issued based on <em>financial need</em>, meaning you must meet a specified financial threshold to be an eligible recipient.</p>
<p>Most likely, federal grants, which are offered by the federal government, will be applied to your financial aid package. Non-federal grants are very similar in nature to scholarships, so this article will focus on the different types of federal grants.</p>
<p> </p>
<h4 id="h-what-types-of-federal-grants-are-there" class="wp-block-heading"><strong>What Types of Federal Grants Are There?</strong></h4>
<p>There are four types of federal grants:</p>
<ol>
<li><a href="https://www.sparrowfi.com/blog/what-is-a-pell-grant">Federal Pell Grants</a></li>
<li><a href="https://studentaid.gov/understand-aid/types/grants/fseog">Federal Supplemental Educational Opportunity Grants (FSEOG)</a></li>
<li><a href="https://studentaid.gov/understand-aid/types/grants/iraq-afghanistan-service">Iran and Afghanistan Service Grants</a></li>
<li><a href="https://studentaid.gov/understand-aid/types/grants/teach">Teacher Education Assistance for College and Higher Education (TEACH) Grants</a></li>
</ol>

<h3 id="h-work-study" class="wp-block-heading"><strong>Work-Study</strong></h3>
<p><a href="https://www.sparrowfi.com/blog/what-is-work-study">Work-study</a> is a federal program that allows undergraduate and graduate students to work on-campus and earn money to pay for their educational expenses. Any money earned from the federal work-study program does not need to be paid back or used towards tuition – the student can use the money how they deem fit.</p>
<p> </p>
<h4 id="h-who-is-eligible-for-work-study" class="wp-block-heading"><strong>Who Is Eligible for Work-Study?</strong></h4>
<p>To be eligible for work-study, you must meet the following requirements:</p>
<ul>
<li>You must be enrolled as a full-time student at an accredited university.</li>
<li>You must have submitted your <a href="https://www.sparrowfi.com/blog/ultimate-fafsa-guide">Free Application for Federal Student Aid</a> for the school year.</li>
<li>You must demonstrate financial need.</li>
</ul>

<h3 id="h-loans" class="wp-block-heading"><strong>Loans</strong></h3>
<p>There are <a href="https://www.sparrowfi.com/blog/whats-the-difference-between-federal-and-private-student-loans">two main types of loans</a>: federal student loans and private student loans. Because loans are borrowed money, they must be paid back with interest.</p>
<p>Accepting loans is a large responsibility – you’ll want to know exactly what you are getting into before you take on any debt.</p>


<h3 id="h-federal-student-loans" class="wp-block-heading"><strong>Federal Student Loans</strong></h3>
<p>Federal loans are a type of loan that is offered by the federal government. Generally, federal student loans are the best option for student borrowers because of their <a href="https://www.sparrowfi.com/blog/how-to-select-the-best-federal-student-loan-repayment-option">varied repayment plans</a>, strong borrower protection, flexible eligibility requirements, and potential for federal <a href="https://www.sparrowfi.com/blog/the-ultimate-guide-to-student-loan-forgiveness">loan forgiveness</a>.</p>
<p>All federal student loans have a <a href="https://www.sparrowfi.com/blog/which-is-better-variable-vs-fixed-interest-rate-student-loans">fixed interest rate</a> that is set by Congress, meaning the interest rate you receive when you originate the loan will remain the same throughout the life of the loan.</p>
<p>Most students are offered a mix of <a href="https://www.sparrowfi.com/blog/the-difference-between-subsidized-and-unsubsidized-loans">unsubsidized and subsidized</a> Federal Direct Loans.</p>


<p>Between unsubsidized and subsidized loans, subsidized loans are clearly the winner. However, you cannot pick and choose between these loans – you must meet a financial requirement to be eligible for subsidized loans.</p>


<h3 id="h-private-student-loans" class="wp-block-heading"><strong>Private Student Loans</strong></h3>
<p>Private student loans are offered by private entities like banks, financial institutions, and other private companies. Private student loan lenders are autonomous, meaning they set interest rates, repayment plans, and borrower protections as they please.</p>
<p>If you are a first-time borrower, it may be difficult to receive a private student loan that has a fair interest rate, or even receive a private student loan at all. You will most likely need to add a <a href="https://www.sparrowfi.com/blog/what-is-a-private-student-loan-cosigner">cosigner</a> that has a strong credit history to your loan to receive better terms.</p>
<p>Generally, experts recommend that you accept federal loans before private loans because federal loans tend to have better interest rates, repayment terms, and borrower protection plans for the borrower.</p>


<h2 id="h-accept-financial-aid-in-this-order" class="wp-block-heading"><strong>Accept Financial Aid in This Order</strong></h2>
<p>If there is one thing to take away from this article, it is FEB — Free, Earned, Borrowed.</p>
<p>You’ll want to accept financial aid in this order, starting with any free money, then earned money, and then borrowed money. Accepting aid this way will help you minimize the amount of debt you incur.</p>
<p> </p>
<h3 id="h-free-money-scholarships-and-grants" class="wp-block-heading"><strong>Free Money: Scholarships and Grants</strong></h3>
<p>Scholarships and grants are essentially free money. They do not need to be paid back, so feel free to take as much as you can get. Any federal grants that you are eligible for will show up on your financial aid package, so you can accept them through your account portal.</p>
<p>On the other hand, you will have to apply for a majority of scholarships, so be sure to do that.</p>

<h3 id="h-earned-money-work-study" class="wp-block-heading"><strong>Earned Money: Work-Study</strong></h3>
<p>Next, you’ll want to accept any work-study that is offered on your financial aid award. While work-study money is earned and is not free, work-study still lowers the amount of money that you will need to borrow.</p>


<h3 id="h-borrowed-money" class="wp-block-heading"><strong>Borrowed Money</strong></h3>
<p>Borrowing money is a large responsibility, given that the amount you owe can spike immensely with <a href="https://www.sparrowfi.com/blog/how-student-loan-interest-actually-works">interest accrual</a>. You’ll want to accept any borrowed money in the following order so that you can graduate with the least amount of debt.</p>
<p> </p>
<h4 id="h-1-federal-subsidized-loans" class="wp-block-heading"><strong>#1: Federal Subsidized Loans</strong></h4>
<p>Federal subsidized loans do not accrue any interest while you are enrolled at least half-time in school, during your <a href="https://www.sparrowfi.com/blog/what-is-a-student-loan-grace-period">grace period</a>, as well as during loan <a href="https://www.sparrowfi.com/blog/forbearance-vs-deferment-vs-forgiveness">deferment</a> periods. Because interest does not capitalize on these loans, federal subsidized loans will be your cheapest loan option.</p>
<p> </p>
<h4 id="h-2-federal-unsubsidized-loans" class="wp-block-heading"><strong>#2: Federal Unsubsidized Loans</strong></h4>
<p>Federal unsubsidized loans accrue interest for the entire life of the loan. However, because the loans are offered by the federal government, they come with a myriad of repayment options, borrower protection plans, potential loan forgiveness, and deferment plans.</p>
<p> </p>
<h4 id="h-3-private-student-loans" class="wp-block-heading"><strong>#3: Private Student Loans</strong></h4>
<p>Private student loans should be accepted last. While you may be able to receive a more competitive interest rate if borrowing with a cosigner, private student loans have more limited <a href="https://www.sparrowfi.com/blog/whats-the-best-repayment-plan-for-private-student-loans">repayment options</a> and are not eligible for loan forgiveness.</p>

<h2 id="h-closing-thoughts-from-the-nest" class="wp-block-heading"><strong>Closing Thoughts From the Nest</strong></h2>
<p>As you navigate through your financial aid packages, remember to accept your financial aid in the following order: <strong>FEB </strong>(Free, Earned, Borrowed). It is a helpful guide for accepting financial aid to take on the least amount of debt possible.</p>
<p>If you are still exploring private student loan options, consider using <a href="https://www.sparrowfi.com/student-loan-info">Sparrow</a>. We offer a quick, <a href="https://www.sparrowfi.com/login">free form</a> that allows you to see which student loans you pre-qualify for across 15+ private lenders.</p>


Now that you’ve been accepted into college, it’s time to figure out how you are going to pay for your education. As you sift through your <a href="https://www.sparrowfi.com/blog/ultimate-guide-to-figuring-out-your-financial-aid-package">financial aid packages</a>, it may be confusing to differentiate between the different types of financial aid you were offered.

In this article, we’ll cover everything you need to know about the <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">different types of financial aid</a> and how you should go about accepting your financial aid package.

Offered to undergraduate and graduate students with no financial requirements.

Only offered to undergraduates who demonstrate financial need.

Accrue interest during the entire life of the loan, whether it is during the school year, grace period, or any deferment period.

Do not accrue interest if the student is enrolled at least half-time during the school period, during the grace period (six months after you graduate), and during any period of loan deferment.

Between unsubsidized and subsidized loans, subsidized loans are clearly the winner. However, you cannot pick and choose between these loans – you must meet a financial requirement to be eligible for subsidized loans.

<h3 id="h-private-student-loans" class="wp-block-heading"><strong>Private Student Loans</strong></h3>
Private student loans are offered by private entities like banks, financial institutions, and other private companies. Private student loan lenders are autonomous, meaning they set interest rates, repayment plans, and borrower protections as they please.

If you are a first-time borrower, it may be difficult to receive a private student loan that has a fair interest rate, or even receive a private student loan at all. You will most likely need to add a <a href="https://www.sparrowfi.com/blog/what-is-a-private-student-loan-cosigner">cosigner</a> that has a strong credit history to your loan to receive better terms.

Generally, experts recommend that you accept federal loans before private loans because federal loans tend to have better interest rates, repayment terms, and borrower protection plans for the borrower.

<h2 id="h-accept-financial-aid-in-this-order" class="wp-block-heading"><strong>Accept Financial Aid in This Order</strong></h2>
If there is one thing to take away from this article, it is FEB — Free, Earned, Borrowed.

You’ll want to accept financial aid in this order, starting with any free money, then earned money, and then borrowed money. Accepting aid this way will help you minimize the amount of debt you incur.

 
<h3 id="h-free-money-scholarships-and-grants" class="wp-block-heading"><strong>Free Money: Scholarships and Grants</strong></h3>
Scholarships and grants are essentially free money. They do not need to be paid back, so feel free to take as much as you can get. Any federal grants that you are eligible for will show up on your financial aid package, so you can accept them through your account portal.

On the other hand, you will have to apply for a majority of scholarships, so be sure to do that.

<h3 id="h-earned-money-work-study" class="wp-block-heading"><strong>Earned Money: Work-Study</strong></h3>
Next, you’ll want to accept any work-study that is offered on your financial aid award. While work-study money is earned and is not free, work-study still lowers the amount of money that you will need to borrow.

<h3 id="h-borrowed-money" class="wp-block-heading"><strong>Borrowed Money</strong></h3>
Borrowing money is a large responsibility, given that the amount you owe can spike immensely with <a href="https://www.sparrowfi.com/blog/how-student-loan-interest-actually-works">interest accrual</a>. You’ll want to accept any borrowed money in the following order so that you can graduate with the least amount of debt.

 
<h4 id="h-1-federal-subsidized-loans" class="wp-block-heading"><strong>#1: Federal Subsidized Loans</strong></h4>
Federal subsidized loans do not accrue any interest while you are enrolled at least half-time in school, during your <a href="https://www.sparrowfi.com/blog/what-is-a-student-loan-grace-period">grace period</a>, as well as during loan <a href="https://www.sparrowfi.com/blog/forbearance-vs-deferment-vs-forgiveness">deferment</a> periods. Because interest does not capitalize on these loans, federal subsidized loans will be your cheapest loan option.

 
<h4 id="h-2-federal-unsubsidized-loans" class="wp-block-heading"><strong>#2: Federal Unsubsidized Loans</strong></h4>
Federal unsubsidized loans accrue interest for the entire life of the loan. However, because the loans are offered by the federal government, they come with a myriad of repayment options, borrower protection plans, potential loan forgiveness, and deferment plans.

 
<h4 id="h-3-private-student-loans" class="wp-block-heading"><strong>#3: Private Student Loans</strong></h4>
Private student loans should be accepted last. While you may be able to receive a more competitive interest rate if borrowing with a cosigner, private student loans have more limited <a href="https://www.sparrowfi.com/blog/whats-the-best-repayment-plan-for-private-student-loans">repayment options</a> and are not eligible for loan forgiveness.

<h2 id="h-closing-thoughts-from-the-nest" class="wp-block-heading"><strong>Closing Thoughts From the Nest</strong></h2>
As you navigate through your financial aid packages, remember to accept your financial aid in the following order: <strong>FEB </strong>(Free, Earned, Borrowed). It is a helpful guide for accepting financial aid to take on the least amount of debt possible.

If you are still exploring private student loan options, consider using <a href="https://www.sparrowfi.com/student-loan-info">Sparrow</a>. We offer a quick, <a href="https://www.sparrowfi.com/login">free form</a> that allows you to see which student loans you pre-qualify for across 15+ private lenders.

<h2 id="h-the-4-types-of-financial-aid" class="wp-block-heading"><strong>The 4 Types of Financial Aid</strong></h2>
There are four key types of financial aid: scholarships, grants, work-study, and loans.

 
<h3 id="h-scholarships" class="wp-block-heading"><strong>Scholarships</strong></h3>
 

<a href="https://www.sparrowfi.com/blog/top-6-college-scholarship-sites">Scholarships</a> are a form of financial aid that is awarded based on academic merit or other achievements. They do <em>not</em> need to be paid back (yay!).

Scholarships are a popular form of financial aid. In fact, <a href="https://www.thinkimpact.com/scholarship-statistics/">58%</a> of families paid for some amount of their college tuition with scholarships in 2020.

Scholarships come in all shapes and sizes. Depending on the organization that is offering the scholarship, scholarships can range from $100 to the entirety of your four-year tuition.

Usually, you have to apply for scholarships by providing general information about yourself, writing an essay to a prompt, and demonstrating why you are the best candidate for the scholarship. However, there are also scholarships that you can apply to with a single click of a button or through other creative means.

<h4 id="h-where-do-scholarships-come-from" class="wp-block-heading"><strong>Where Do Scholarships Come From?</strong></h4>
Scholarships come from a variety of sources, including state governments, private organizations, non-profit organizations, academic institutions, and more.

 
<h4 id="h-what-can-i-use-scholarships-for" class="wp-block-heading"><strong>What Can I Use Scholarships For?</strong></h4>
This depends on the type of scholarship you receive. Some scholarships require students to use the money on specific expenses, such as textbooks and school supplies, tuition, or university housing costs. Other scholarships are more flexible and allow the student to use the money on an educational expense they deem fit.

 
<h4 id="h-how-do-i-find-scholarships" class="wp-block-heading"><strong>How Do I Find Scholarships?</strong></h4>
There are a variety of ways you can find and apply for scholarships. You can:
<ol>
 	<li>Reach out to your high school and/or college’s financial aid office and ask for assistance in finding scholarships.</li>
 	<li>Use <a href="https://www.sparrowfi.com/blog/top-6-college-scholarship-sites">scholarship search engines</a> like Bold, Sallie Mae’s Scholarship Search, or Chegg.</li>
 	<li>Find organizations that specialize in your academic field of study. For example, if you are on a pre-dental track, find dental organizations and see if they <a href="https://www.sparrowfi.com/blog/scholarships-for-dental-school-how-and-where-to-apply">offer any scholarships</a>.</li>
</ol>

<h3 id="h-grants" class="wp-block-heading"><strong>Grants</strong></h3>
Like scholarships, <a href="https://www.sparrowfi.com/blog/ultimate-guide-to-college-grants">grants</a> do not need to be paid back. However, grants are only issued based on <em>financial need</em>, meaning you must meet a specified financial threshold to be an eligible recipient.

Most likely, federal grants, which are offered by the federal government, will be applied to your financial aid package. Non-federal grants are very similar in nature to scholarships, so this article will focus on the different types of federal grants.

 
<h4 id="h-what-types-of-federal-grants-are-there" class="wp-block-heading"><strong>What Types of Federal Grants Are There?</strong></h4>
There are four types of federal grants:
<ol>
 	<li><a href="https://www.sparrowfi.com/blog/what-is-a-pell-grant">Federal Pell Grants</a></li>
 	<li><a href="https://studentaid.gov/understand-aid/types/grants/fseog">Federal Supplemental Educational Opportunity Grants (FSEOG)</a></li>
 	<li><a href="https://studentaid.gov/understand-aid/types/grants/iraq-afghanistan-service">Iran and Afghanistan Service Grants</a></li>
 	<li><a href="https://studentaid.gov/understand-aid/types/grants/teach">Teacher Education Assistance for College and Higher Education (TEACH) Grants</a></li>
</ol>

<h3 id="h-work-study" class="wp-block-heading"><strong>Work-Study</strong></h3>
<a href="https://www.sparrowfi.com/blog/what-is-work-study">Work-study</a> is a federal program that allows undergraduate and graduate students to work on-campus and earn money to pay for their educational expenses. Any money earned from the federal work-study program does not need to be paid back or used towards tuition – the student can use the money how they deem fit.

 
<h4 id="h-who-is-eligible-for-work-study" class="wp-block-heading"><strong>Who Is Eligible for Work-Study?</strong></h4>
To be eligible for work-study, you must meet the following requirements:
<ul>
 	<li>You must be enrolled as a full-time student at an accredited university.</li>
 	<li>You must have submitted your <a href="https://www.sparrowfi.com/blog/ultimate-fafsa-guide">Free Application for Federal Student Aid</a> for the school year.</li>
 	<li>You must demonstrate financial need.</li>
</ul>

<h3 id="h-loans" class="wp-block-heading"><strong>Loans</strong></h3>
There are <a href="https://www.sparrowfi.com/blog/whats-the-difference-between-federal-and-private-student-loans">two main types of loans</a>: federal student loans and private student loans. Because loans are borrowed money, they must be paid back with interest.

Accepting loans is a large responsibility – you’ll want to know exactly what you are getting into before you take on any debt.

<h3 id="h-federal-student-loans" class="wp-block-heading"><strong>Federal Student Loans</strong></h3>
Federal loans are a type of loan that is offered by the federal government. Generally, federal student loans are the best option for student borrowers because of their <a href="https://www.sparrowfi.com/blog/how-to-select-the-best-federal-student-loan-repayment-option">varied repayment plans</a>, strong borrower protection, flexible eligibility requirements, and potential for federal <a href="https://www.sparrowfi.com/blog/the-ultimate-guide-to-student-loan-forgiveness">loan forgiveness</a>.

All federal student loans have a <a href="https://www.sparrowfi.com/blog/which-is-better-variable-vs-fixed-interest-rate-student-loans">fixed interest rate</a> that is set by Congress, meaning the interest rate you receive when you originate the loan will remain the same throughout the life of the loan.

Most students are offered a mix of <a href="https://www.sparrowfi.com/blog/the-difference-between-subsidized-and-unsubsidized-loans">unsubsidized and subsidized</a> Federal Direct Loans.

Now that you’ve been accepted into college, it’s time to figure out how you are going to pay for your education. As you sift through your financial aid packages, it may be confusing to differentiate between the different types of financial aid you were offered.  In this article, we’ll cover everything you need to know &hellip; Continue reading "Which Type of Financial Aid Should You Accept First?"

Which Type of Financial Aid Should You Accept First?

Which Type of Financial Aid Should You Accept First? Sparrow Nest

<p>College is expensive, but that doesn’t mean you should accept every last bit of financial aid. Now I know, that probably sounds counterintuitive. <em>I mean, who wouldn’t use all the offered financial aid?!</em><br />
However, there are many instances where financial aid can actually be detrimental rather than helpful, so knowing when to decline certain financial aid options is very important. The general rule is to borrow only what you need for direct educational expenses (things like rent, tuition, books, etc.). Avoid wasting financial aid on non-educational items, as that could lead to greater issues in the long run.</p>
<p>To know whether you should accept the aid offered to you, it’s important to understand the <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">different types of financial aid</a> available to you. Here’s what you should know.</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">What are the different types of financial aid?</a></p>


<h2 id="h-what-is-considered-financial-aid" class="wp-block-heading"><strong>What is Considered Financial Aid?</strong></h2>
<p>Financial aid can be anything from <a href="https://www.sparrowfi.com/blog/ultimate-guide-to-college-grants">grants</a>, <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">scholarships</a>, <a href="https://www.sparrowfi.com/blog/what-is-work-study">work-study</a> jobs, loans, and even aid from local or state sources. Essentially, financial aid is provided to students to help you focus on what’s important —your education. Using financial aid for other expenses can make for a sticky situation.</p>


<h2 id="h-do-i-have-to-accept-all-of-my-financial-aid" class="wp-block-heading"><strong>Do I Have to Accept All of My Financial Aid?</strong></h2>
<p>Absolutely not! In fact, many financial aid experts recommend that you only accept what you really need.</p>
<p>While accepting <a href="https://www.sparrowfi.com/blog/top-6-college-scholarship-sites">scholarships</a> and grants is often harmless, you should be careful about how much you accept in student loans. While borrowing money is often necessary for many students, borrowing more than you need can wind up costing you a lot more in the long run. This happens as the cost of borrowing money is compounded by the <a href="https://www.sparrowfi.com/blog/how-student-loan-interest-actually-works">interest rate</a> of the loan.</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/what-is-the-average-student-loan-interest-rate">What is the average student loan interest rate?</a></p>
<p>Estimating your <a href="https://www.sparrowfi.com/blog/budget-for-college-graduates-that-actually-works">budget and expenses</a> to determine the amount of money you will need to borrow is the best way to only borrow what is needed.</p>


<h2 id="h-accept-aid-in-this-order" class="wp-block-heading"><strong>Accept Aid in This Order</strong></h2>
<p>As mentioned before, financial aid comes in various forms: grants, scholarships, work-study jobs, and loans. If you want to save money,  however, you should accept aid intentionally and in this order:</p>
<ol>
<li><a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">Scholarships and grants</a>. <em>If it is free money, take it.</em></li>
<li><a href="https://www.sparrowfi.com/blog/what-is-work-study">Work-study</a>. <em>Any earned money should come second.</em></li>
<li><a href="https://www.sparrowfi.com/blog/who-is-eligible-for-a-student-loan-what-you-need-to-qualify">Federal student loans</a>, followed by <a href="http://sparrowfi.com">private student loans</a>. <em>Borrowed money should always come last.</em></li>
</ol>
<p></p>
<p> </p>
<p>Because scholarships and grants are practically free money, you should always try to use those first before looking at other options. One thing to note is that many scholarships and grants have conditions you must meet to either be eligible for or to continue receiving the funds over the course of your education. Thus, although there may not be financial terms like a loan, it is imperative that you understand the criteria for this financial aid option.</p>
<p>A work-study program is quite simple. You work for the money, so you don’t pay it back. This means you will have to spend time both working and studying. While it may be a bit more to juggle, there have been <a href="https://www.sbstatesman.com/2019/10/27/working-while-attending-college-improves-time-management/">studies</a> that show students who have a part-time job and study are better at managing their time.</p>
<p>Federal <a href="https://www.sparrowfi.com/blog/types-of-student-loans-which-one-is-right-for-me">student loans</a> and even <a href="https://www.sparrowfi.com/blog/best-private-student-loans-of-2022">private student loans</a> should come last. With loans, you will have to pay the money back, plus <a href="https://www.sparrowfi.com/blog/what-is-the-average-student-loan-interest-rate">interest</a>. Depending on the type of student loans, you may receive a <a href="https://www.sparrowfi.com/blog/the-difference-between-subsidized-and-unsubsidized-loans">subsidized loan</a> meaning interest won’t start accumulating until you leave school. So, if you have the option, choose a subsidized loan before an unsubsidized loan.</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="http://sparrowfi.com">Find the best student loan rates</a></p>

<h2 id="h-know-when-to-decline-certain-financial-aid" class="wp-block-heading"><strong>Know When to Decline Certain Financial Aid</strong></h2>
<p>With the basics of financial aid covered, let’s look at specific instances where it is favorable to decline certain financial aid.</p>
<p> </p>
<h3 id="h-you-are-paying-out-of-pocket" class="wp-block-heading"><strong>You Are Paying Out of Pocket</strong></h3>
<p>If you intend to pay out of pocket for school, you don’t actually need to accept the loans in your financial aid package. Instead, you should look for more “free money” options, like scholarships and grants.</p>

<h3 id="h-you-can-find-aid-with-more-favorable-terms-elsewhere" class="wp-block-heading"><strong>You Can Find Aid With More Favorable Terms Elsewhere</strong></h3>
<p>If you do decide to borrow a loan, you should look for the <a href="https://www.sparrowfi.com/blog/best-private-lenders-for-student-loans">best lender</a> that is offering the most favorable terms. For example, <a href="https://www.sparrowfi.com/blog/what-are-plus-loans">Parent PLUS Loans</a> often have higher interest rates. Therefore, you may actually be able to find lower interest rates with private loan lenders. In this case, you may want to consider all your options before accepting the PLUS loan.</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/everything-you-need-to-know-about-parent-plus-loans">Parent PLUS loans: Everything you need to know</a></p>


<h2 id="h-is-it-okay-to-accept-all-of-it" class="wp-block-heading"><strong>Is It Okay to Accept All of It?</strong></h2>
<p>Now that we’ve gone over when to decline certain financial aid and how to sort through all the different options, let’s go back to the original question. <em>Do you have to accept all financial aid?</em></p>
<p>No, you don’t have to accept all of the financial aid offered to you. However, it is still very important to note that <strong>it is okay to accept all of it</strong>. If you believe the financial aid options are favorable to your circumstances, then it is totally fine to accept it. Just make sure you do your research and have all your questions answered before rushing into something.</p>
<p><strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">What is the best type of financial aid?</a></p>


<h2 id="h-final-words" class="wp-block-heading"><strong>Final Words</strong></h2>
<p>Knowing when to accept and decline financial aid is very tricky. However, with the right guidance and due diligence, you can optimize your decisions and make the most out of your financial situation.</p>
<p>Don’t be afraid to say no to financial aid, and remember that although some aid may <em>seem</em> like free money, you should always research the terms of everything offered to you. Take your time to find the best options that will put you in a better position, both financially and mentally.</p>
<p> </p>
<div class="wp-block-spacer" aria-hidden="true"></div>
<p><em><a href="http://sparrowfi.com">Sparrow</a> aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Whil</em></p>

College is expensive, but that doesn’t mean you should accept every last bit of financial aid. Now I know, that probably sounds counterintuitive. <em>I mean, who wouldn’t use all the offered financial aid?!</em>
However, there are many instances where financial aid can actually be detrimental rather than helpful, so knowing when to decline certain financial aid options is very important. The general rule is to borrow only what you need for direct educational expenses (things like rent, tuition, books, etc.). Avoid wasting financial aid on non-educational items, as that could lead to greater issues in the long run.

To know whether you should accept the aid offered to you, it’s important to understand the <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">different types of financial aid</a> available to you. Here’s what you should know.

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">What are the different types of financial aid?</a>

<h2 id="h-final-words" class="wp-block-heading"><strong>Final Words</strong></h2>
Knowing when to accept and decline financial aid is very tricky. However, with the right guidance and due diligence, you can optimize your decisions and make the most out of your financial situation.

Don’t be afraid to say no to financial aid, and remember that although some aid may <em>seem</em> like free money, you should always research the terms of everything offered to you. Take your time to find the best options that will put you in a better position, both financially and mentally.

 
<div class="wp-block-spacer" aria-hidden="true"></div>
<em><a href="http://sparrowfi.com">Sparrow</a> aims to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Whil</em>

<h2 id="h-what-is-considered-financial-aid" class="wp-block-heading"><strong>What is Considered Financial Aid?</strong></h2>
Financial aid can be anything from <a href="https://www.sparrowfi.com/blog/ultimate-guide-to-college-grants">grants</a>, <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">scholarships</a>, <a href="https://www.sparrowfi.com/blog/what-is-work-study">work-study</a> jobs, loans, and even aid from local or state sources. Essentially, financial aid is provided to students to help you focus on what’s important —your education. Using financial aid for other expenses can make for a sticky situation.

<h2 id="h-do-i-have-to-accept-all-of-my-financial-aid" class="wp-block-heading"><strong>Do I Have to Accept All of My Financial Aid?</strong></h2>
Absolutely not! In fact, many financial aid experts recommend that you only accept what you really need.

While accepting <a href="https://www.sparrowfi.com/blog/top-6-college-scholarship-sites">scholarships</a> and grants is often harmless, you should be careful about how much you accept in student loans. While borrowing money is often necessary for many students, borrowing more than you need can wind up costing you a lot more in the long run. This happens as the cost of borrowing money is compounded by the <a href="https://www.sparrowfi.com/blog/how-student-loan-interest-actually-works">interest rate</a> of the loan.

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/what-is-the-average-student-loan-interest-rate">What is the average student loan interest rate?</a>

Estimating your <a href="https://www.sparrowfi.com/blog/budget-for-college-graduates-that-actually-works">budget and expenses</a> to determine the amount of money you will need to borrow is the best way to only borrow what is needed.

<h2 id="h-accept-aid-in-this-order" class="wp-block-heading"><strong>Accept Aid in This Order</strong></h2>
As mentioned before, financial aid comes in various forms: grants, scholarships, work-study jobs, and loans. If you want to save money,  however, you should accept aid intentionally and in this order:
<ol>
 	<li><a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">Scholarships and grants</a>. <em>If it is free money, take it.</em></li>
 	<li><a href="https://www.sparrowfi.com/blog/what-is-work-study">Work-study</a>. <em>Any earned money should come second.</em></li>
 	<li><a href="https://www.sparrowfi.com/blog/who-is-eligible-for-a-student-loan-what-you-need-to-qualify">Federal student loans</a>, followed by <a href="http://sparrowfi.com">private student loans</a>. <em>Borrowed money should always come last.</em></li>
</ol>


 

Because scholarships and grants are practically free money, you should always try to use those first before looking at other options. One thing to note is that many scholarships and grants have conditions you must meet to either be eligible for or to continue receiving the funds over the course of your education. Thus, although there may not be financial terms like a loan, it is imperative that you understand the criteria for this financial aid option.

A work-study program is quite simple. You work for the money, so you don’t pay it back. This means you will have to spend time both working and studying. While it may be a bit more to juggle, there have been <a href="https://www.sbstatesman.com/2019/10/27/working-while-attending-college-improves-time-management/">studies</a> that show students who have a part-time job and study are better at managing their time.

Federal <a href="https://www.sparrowfi.com/blog/types-of-student-loans-which-one-is-right-for-me">student loans</a> and even <a href="https://www.sparrowfi.com/blog/best-private-student-loans-of-2022">private student loans</a> should come last. With loans, you will have to pay the money back, plus <a href="https://www.sparrowfi.com/blog/what-is-the-average-student-loan-interest-rate">interest</a>. Depending on the type of student loans, you may receive a <a href="https://www.sparrowfi.com/blog/the-difference-between-subsidized-and-unsubsidized-loans">subsidized loan</a> meaning interest won’t start accumulating until you leave school. So, if you have the option, choose a subsidized loan before an unsubsidized loan.

<strong>&gt;&gt; MORE:</strong> <a href="http://sparrowfi.com">Find the best student loan rates</a>

<h2 id="h-know-when-to-decline-certain-financial-aid" class="wp-block-heading"><strong>Know When to Decline Certain Financial Aid</strong></h2>
With the basics of financial aid covered, let’s look at specific instances where it is favorable to decline certain financial aid.

 
<h3 id="h-you-are-paying-out-of-pocket" class="wp-block-heading"><strong>You Are Paying Out of Pocket</strong></h3>
If you intend to pay out of pocket for school, you don’t actually need to accept the loans in your financial aid package. Instead, you should look for more “free money” options, like scholarships and grants.

<h3 id="h-you-can-find-aid-with-more-favorable-terms-elsewhere" class="wp-block-heading"><strong>You Can Find Aid With More Favorable Terms Elsewhere</strong></h3>
If you do decide to borrow a loan, you should look for the <a href="https://www.sparrowfi.com/blog/best-private-lenders-for-student-loans">best lender</a> that is offering the most favorable terms. For example, <a href="https://www.sparrowfi.com/blog/what-are-plus-loans">Parent PLUS Loans</a> often have higher interest rates. Therefore, you may actually be able to find lower interest rates with private loan lenders. In this case, you may want to consider all your options before accepting the PLUS loan.

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/everything-you-need-to-know-about-parent-plus-loans">Parent PLUS loans: Everything you need to know</a>

<h2 id="h-is-it-okay-to-accept-all-of-it" class="wp-block-heading"><strong>Is It Okay to Accept All of It?</strong></h2>
Now that we’ve gone over when to decline certain financial aid and how to sort through all the different options, let’s go back to the original question. <em>Do you have to accept all financial aid?</em>

No, you don’t have to accept all of the financial aid offered to you. However, it is still very important to note that <strong>it is okay to accept all of it</strong>. If you believe the financial aid options are favorable to your circumstances, then it is totally fine to accept it. Just make sure you do your research and have all your questions answered before rushing into something.

<strong>&gt;&gt; MORE:</strong> <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">What is the best type of financial aid?</a>

College is expensive, but that doesn’t mean you should accept every last bit of financial aid. Now I know, that probably sounds counterintuitive. I mean, who wouldn’t use all the offered financial aid?! However, there are many instances where financial aid can actually be detrimental rather than helpful, so knowing when to decline certain financial &hellip; Continue reading "Should I Accept All of the Financial Aid Offered to Me?"

Should I Accept All of the Financial Aid Offered to Me?

https://wordpress.sparrowfi.com/wp-content/uploads/2022/08/avatar_user_8_1660321886-96x96.jpg

Aaditya Shah

<p>Many people don’t talk about the different pathways that you can take after high school graduation, except the traditional four-year college route. <strong>Going to trade school is a viable option to consider if attending college is not for you.</strong> You may be wondering, &#8216;<em>what is trade school&#8217;</em> and &#8216;<em>is trade school free?</em>&#8216;</p>
<p>Trade school has a shorter time commitment, is less expensive, and teaches you specialized skills for direct entry into the career field of your choice after graduation.</p>
<p>Because going to trade school is a lesser-known option, many students have no idea what trade school is, how they can apply, and what they can do with it.</p>


<h2 id="h-what-is-trade-school" class="wp-block-heading"><strong>What is Trade School?</strong></h2>
<p>Trade school, also known as career, technical, or vocational school, is a specialized institution that provides students the skills, hands-on training, and education necessary to work in a specific “trade” or occupation right after graduation.</p>
<p>These occupations are typically hands-on careers, like cosmetology, plumbing, welding, carpentry, and automobile repair.</p>
<p>For most trade schools, a high school diploma or GED is necessary to attend.</p>


<h2><strong>Trade School vs. College</strong></h2>


<h2 id="h-pros-and-cons-of-trade-school" class="wp-block-heading"><strong>Pros and Cons of Trade School</strong></h2>
<p>Consider the pros and cons of attending trade school carefully before making your decision.</p>


<h2 id="h-is-trade-school-the-right-choice-for-me" class="wp-block-heading"><strong>Is Trade School the Right Choice for Me?</strong></h2>
<p>Here are some questions you should ask yourself when deciding whether or not trade school is the right choice for you:</p>
<ol>
<li>Do I know what I would specialize in? Do I want to specialize in it? Why?</li>
<li>Do I want to start working right after graduation?</li>
<li>Can I see myself dedicating time and effort to this career, or will I get sick of it quickly?</li>
<li>Is there a demand for this job in the market?</li>
<li>Will this career allow me to be financially stable?</li>
</ol>


<h2 id="h-how-to-pay-for-trade-school" class="wp-block-heading"><strong>How to Pay for Trade School</strong></h2>
<p>While the cost of trade school is relatively cheaper than a four-year college, you’ll want to be informed of the options you have for financing your education. While trade school can cost just a few thousand dollars, pricier trade schools can cost up to $17,000 per year.</p>
<p>Public trade schools are usually cheaper than private trade schools, so be sure to compare tuition and additional fees between schools to avoid paying more than you need to.</p>
<p>&gt;&gt; <strong>MORE</strong>: <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">What are the 4 types of financial aid for students</a></p>


<h3 id="h-scholarships-grants" class="wp-block-heading"><strong>Scholarships &amp; Grants</strong></h3>
<p>Scholarships and grants are both forms of gift aid, meaning they do not need to be repaid. They are great ways to defray the cost of tuition, and there are many options available for trade school students.</p>
<p>For example, the <a href="https://scholarshipamerica.org/scholarship/dewalt-trades-scholarship/">DEWALT Trades Scholarship</a> offers 20 scholarships of $10,000 for incoming trade students who intend to pursue full-time study. The <a href="https://porch.com/resources/scholarships">Porch Skilled Trade &amp; Technology Scholarships</a> award $2,000 to eligible students.</p>
<p>You can find more scholarships and grants for trade school students by using <a href="https://www.sparrowfi.com/blog/top-6-college-scholarship-sites">scholarship search engines</a>.</p>


<h3 id="h-federal-student-loans" class="wp-block-heading"><strong>Federal Student Loans</strong></h3>
<p>The federal government offers student loans for students pursuing postsecondary education. To find out which loans you qualify for, you will have to submit the <a href="https://fafsa.ed.gov/">Free Application for Federal Student Aid</a> (FAFSA).</p>
<p>The FAFSA opens on October 1st and closes on June 30th every year. Be sure to take note of these dates, and submit your FAFSA as soon as possible to qualify for as much aid as you can get.</p>
<p>You should prioritize federal student loans over private student loans, as federal student loans generally have lower interest rates, flexible repayment options, and borrower protection plans.</p>
<p><strong>&gt;&gt; MORE: </strong><a href="https://www.sparrowfi.com/blog/most-common-fafsa-errors-to-avoid-when-applying">Most common errors to avoid when filling out the FAFSA application</a></p>


<h3 id="h-private-student-loans" class="wp-block-heading"><strong>Private Student Loans</strong></h3>
<p>If scholarships, grants, and federal financial aid don’t cover the cost of tuition for you, consider getting a private student loan.</p>
<p>Private student loans are offered by private organizations that set their own interest rates, repayment options, and borrower protection terms.</p>
<p>Because private student loans operate individually and are not all partnered with the same trade schools, it can be challenging to find what private loans you qualify for with different trade schools.</p>
<p><a href="https://www.sparrowfi.com/student-loan-info">Sparrow</a> can help. If you submit a <a href="https://www.sparrowfi.com/sign-up">free form</a> with us, you can see what private student loan options you have with the trade school of your choice. Here are a few of our top picks for student loans for trade school:</p>
<p><strong>&gt;&gt; MORE: </strong><a href="https://www.sparrowfi.com/blog/best-private-student-loans-of-2022">Best private student loans of 2023</a></p>


<h3 id="h-sallie-mae-s-smart-option-student-loan-for-career-training" class="wp-block-heading"><a href="https://www.sparrowfi.com/blog/sallie-mae-private-student-loans-review">Sallie Mae’s Smart Option Student Loan for Career Training</a></h3>
<p>Sallie Mae is one of Sparrow’s lending partners that offers competitive interest rates, multiple repayment options, and no origination fee or prepayment penalty. <a href="https://www.salliemae.com/landing/student-loans/?MPID=1000002017&amp;dtd_cell=SMLRSOPAAGAGAGOTADG0919N010011">Sallie Mae</a> is one of the largest private student loan companies that lend to undergraduate, graduate, MBA, law, medical, dental, and career training program students.</p>
<p><strong>&gt;&gt; MORE: </strong><a href="https://www.sparrowfi.com/blog/sallie-mae-private-student-loans-review">Sallie Mae student loans review</a></p>


Pre-qualify

<h3 id="h-college-ave-career-loans" class="wp-block-heading"><a href="https://www.sparrowfi.com/blog/college-ave-student-loans-review">College Ave Career Loans</a></h3>
<p>College Ave is an online student lender that aims to simplify, clarify, and personalize the student loan borrowing experience. <a href="https://www.collegeavestudentloans.com/application/?SC=CAIS01&amp;ACT=US&amp;utm_campaign=affiliate%20ongoing&amp;utm_source=sparrow&amp;utm_medium=aggregator&amp;utm_content=apply&amp;brand=college%20ave&amp;product=inschool&amp;p_aff=sparrow&amp;goal=acquisition&amp;agg_ref_id=affiliate-000-000">College Ave</a> is known for its competitive interest rates, strong customer experience, and for allowing its customers to choose their own loan terms.</p>


<h3 id="h-ascent-career-and-bootcamp-loans" class="wp-block-heading"><a href="https://www.sparrowfi.com/blog/ascent-student-loan-review">Ascent Career and Bootcamp Loans</a></h3>
<p>Ascent is a private student loan lender that does not require cosigners or have any application fees. They offer both outcomes-based and credit-based loans, making <a href="https://www.ascentfunding.com/college-loans/sparrow/?utm_source=partner&amp;utm_medium=sparrowfi_rev_learn_subid--affiliate-000-000">Ascent</a> an extremely attractive lender for first-time borrowers and students with no credit history.</p>


<h2 id="h-closing-thoughts-from-the-nest" class="wp-block-heading"><strong>Closing Thoughts From the Nest</strong></h2>
<p>With the skilled labor shortage, going to trade school is a great option if you’re looking for an affordable education and to be employed quickly.</p>
<p>Be sure to thoroughly research trade school programs before making a selection; many trade schools differ in reputability, curriculum, student support services, accreditation, and cost. Remember that if a trade school is not accredited, you will be unable to receive federal financial aid.</p>
<p> </p>
<div class="wp-block-spacer" aria-hidden="true"></div>
<p> </p>
<p><em data-rich-text-format-boundary="true">Sparrow&#8217;s goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.</em></p>

Many people don’t talk about the different pathways that you can take after high school graduation, except the traditional four-year college route. <strong>Going to trade school is a viable option to consider if attending college is not for you.</strong> You may be wondering, '<em>what is trade school'</em> and '<em>is trade school free?</em>'

Trade school has a shorter time commitment, is less expensive, and teaches you specialized skills for direct entry into the career field of your choice after graduation.

Because going to trade school is a lesser-known option, many students have no idea what trade school is, how they can apply, and what they can do with it.

<h3 id="h-scholarships-grants" class="wp-block-heading"><strong>Scholarships &amp; Grants</strong></h3>
Scholarships and grants are both forms of gift aid, meaning they do not need to be repaid. They are great ways to defray the cost of tuition, and there are many options available for trade school students.

For example, the <a href="https://scholarshipamerica.org/scholarship/dewalt-trades-scholarship/">DEWALT Trades Scholarship</a> offers 20 scholarships of $10,000 for incoming trade students who intend to pursue full-time study. The <a href="https://porch.com/resources/scholarships">Porch Skilled Trade &amp; Technology Scholarships</a> award $2,000 to eligible students.

You can find more scholarships and grants for trade school students by using <a href="https://www.sparrowfi.com/blog/top-6-college-scholarship-sites">scholarship search engines</a>.

<h3 id="h-federal-student-loans" class="wp-block-heading"><strong>Federal Student Loans</strong></h3>
The federal government offers student loans for students pursuing postsecondary education. To find out which loans you qualify for, you will have to submit the <a href="https://fafsa.ed.gov/">Free Application for Federal Student Aid</a> (FAFSA).

The FAFSA opens on October 1st and closes on June 30th every year. Be sure to take note of these dates, and submit your FAFSA as soon as possible to qualify for as much aid as you can get.

You should prioritize federal student loans over private student loans, as federal student loans generally have lower interest rates, flexible repayment options, and borrower protection plans.

<strong>&gt;&gt; MORE: </strong><a href="https://www.sparrowfi.com/blog/most-common-fafsa-errors-to-avoid-when-applying">Most common errors to avoid when filling out the FAFSA application</a>

<h3 id="h-private-student-loans" class="wp-block-heading"><strong>Private Student Loans</strong></h3>
If scholarships, grants, and federal financial aid don’t cover the cost of tuition for you, consider getting a private student loan.

Private student loans are offered by private organizations that set their own interest rates, repayment options, and borrower protection terms.

Because private student loans operate individually and are not all partnered with the same trade schools, it can be challenging to find what private loans you qualify for with different trade schools.

<a href="https://www.sparrowfi.com/student-loan-info">Sparrow</a> can help. If you submit a <a href="https://www.sparrowfi.com/sign-up">free form</a> with us, you can see what private student loan options you have with the trade school of your choice. Here are a few of our top picks for student loans for trade school:

<strong>&gt;&gt; MORE: </strong><a href="https://www.sparrowfi.com/blog/best-private-student-loans-of-2022">Best private student loans of 2023</a>

<h3 id="h-sallie-mae-s-smart-option-student-loan-for-career-training" class="wp-block-heading"><a href="https://www.sparrowfi.com/blog/sallie-mae-private-student-loans-review">Sallie Mae’s Smart Option Student Loan for Career Training</a></h3>
Sallie Mae is one of Sparrow’s lending partners that offers competitive interest rates, multiple repayment options, and no origination fee or prepayment penalty. <a href="https://www.salliemae.com/landing/student-loans/?MPID=1000002017&amp;dtd_cell=SMLRSOPAAGAGAGOTADG0919N010011">Sallie Mae</a> is one of the largest private student loan companies that lend to undergraduate, graduate, MBA, law, medical, dental, and career training program students.

<strong>&gt;&gt; MORE: </strong><a href="https://www.sparrowfi.com/blog/sallie-mae-private-student-loans-review">Sallie Mae student loans review</a>

<h3 id="h-college-ave-career-loans" class="wp-block-heading"><a href="https://www.sparrowfi.com/blog/college-ave-student-loans-review">College Ave Career Loans</a></h3>
College Ave is an online student lender that aims to simplify, clarify, and personalize the student loan borrowing experience. <a href="https://www.collegeavestudentloans.com/application/?SC=CAIS01&amp;ACT=US&amp;utm_campaign=affiliate%20ongoing&amp;utm_source=sparrow&amp;utm_medium=aggregator&amp;utm_content=apply&amp;brand=college%20ave&amp;product=inschool&amp;p_aff=sparrow&amp;goal=acquisition&amp;agg_ref_id=affiliate-000-000">College Ave</a> is known for its competitive interest rates, strong customer experience, and for allowing its customers to choose their own loan terms.

<h3 id="h-ascent-career-and-bootcamp-loans" class="wp-block-heading"><a href="https://www.sparrowfi.com/blog/ascent-student-loan-review">Ascent Career and Bootcamp Loans</a></h3>
Ascent is a private student loan lender that does not require cosigners or have any application fees. They offer both outcomes-based and credit-based loans, making <a href="https://www.ascentfunding.com/college-loans/sparrow/?utm_source=partner&amp;utm_medium=sparrowfi_rev_learn_subid--affiliate-000-000">Ascent</a> an extremely attractive lender for first-time borrowers and students with no credit history.

<h2 id="h-closing-thoughts-from-the-nest" class="wp-block-heading"><strong>Closing Thoughts From the Nest</strong></h2>
With the skilled labor shortage, going to trade school is a great option if you’re looking for an affordable education and to be employed quickly.

Be sure to thoroughly research trade school programs before making a selection; many trade schools differ in reputability, curriculum, student support services, accreditation, and cost. Remember that if a trade school is not accredited, you will be unable to receive federal financial aid.

 
<div class="wp-block-spacer" aria-hidden="true"></div>
 

<em data-rich-text-format-boundary="true">Sparrow's goal is to give you the tools and confidence you need to improve your finances. Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.</em>

<h2 id="h-what-is-trade-school" class="wp-block-heading"><strong>What is Trade School?</strong></h2>
Trade school, also known as career, technical, or vocational school, is a specialized institution that provides students the skills, hands-on training, and education necessary to work in a specific “trade” or occupation right after graduation.

These occupations are typically hands-on careers, like cosmetology, plumbing, welding, carpentry, and automobile repair.

For most trade schools, a high school diploma or GED is necessary to attend.

<h2><strong>Trade School vs. College</strong></h2>

Specialized education; will only take courses necessary to their specified field

Generalized education; must take General Education courses like math, science, and English along with any major requirements

<strong>Average Cost of Tuition Per Year</strong>

$38,185 for private schools, $22,698 for public, out-of-state schools, and $10,338 for public, in-state schools for the 2021-22 school year

High-paying jobs after college generally make more in salary than high-paying trade jobs

Very strong; skilled labor workers are in high demand and have slimmer chances of being replaced by job automation

Depends on the situation; job security can fluctuate based on economic crises, demand for work, etc.

Rarely flexible; you are specializing in one trade

Very flexible; students learn flexible skills that are applicable outside of their major

<h2 id="h-pros-and-cons-of-trade-school" class="wp-block-heading"><strong>Pros and Cons of Trade School</strong></h2>
Consider the pros and cons of attending trade school carefully before making your decision.

Varying Reputability and Quality: When you’re researching prospective trade schools, be sure to dive deep into the student assistance programs, completion rates, and job placement statistics of the school. Trade schools vary in reputability and quality, and you don’t want to attend a trade school that won’t provide you with the necessary skills and assistance to earn your trade certificate and be employed after graduation.

Accreditation: Not all trade schools are properly accredited, meaning that these schools do not qualify for federal financial aid. If you do not attend an accredited trade school, you will most likely have to pay out of pocket or turn to private lenders.

Limited Career Selection/Flexibility: Because you’ll be learning the technical skills necessary for one specific industry, it will be difficult to secure jobs outside of your specialized field. For example, if you attend a trade school for HVAC (Heating, Ventilation, and Air Conditioning), it will be near impossible to obtain a job in plumbing or cosmetology without going back to school.

Time: Trade school only takes a maximum of two years, which is half the time you spend at a traditional four-year college. Once you’ve graduated, you can find employment almost immediately. If you’re looking for a relatively short time commitment and quick employment, trade school might be the best option for you.

Money: On average, trade school is less expensive than a four-year college. Because trade schools are anywhere between eight months and two years, you’ll be paying for a shorter period of time as opposed to if you went to a four-year institution. Plus, if you’re eligible for financial aid or employer-paid tuition reimbursement, you might even attend for little-to-no cost.

Specialized Education: You don’t need to take any general education courses, like math, English, or science, at trade school. All your education will be centered around the field that you are specializing in, and you’ll receive focused, hands-on training.

Career Assistance: Most trade schools help their graduating students secure jobs within their specialized industries. Generally, trade schools offer skilled trades-focused career fairs, early employment assistance, and a wide network of employers.

<h2 id="h-is-trade-school-the-right-choice-for-me" class="wp-block-heading"><strong>Is Trade School the Right Choice for Me?</strong></h2>
Here are some questions you should ask yourself when deciding whether or not trade school is the right choice for you:
<ol>
 	<li>Do I know what I would specialize in? Do I want to specialize in it? Why?</li>
 	<li>Do I want to start working right after graduation?</li>
 	<li>Can I see myself dedicating time and effort to this career, or will I get sick of it quickly?</li>
 	<li>Is there a demand for this job in the market?</li>
 	<li>Will this career allow me to be financially stable?</li>
</ol>

<h2 id="h-how-to-pay-for-trade-school" class="wp-block-heading"><strong>How to Pay for Trade School</strong></h2>
While the cost of trade school is relatively cheaper than a four-year college, you’ll want to be informed of the options you have for financing your education. While trade school can cost just a few thousand dollars, pricier trade schools can cost up to $17,000 per year.

Public trade schools are usually cheaper than private trade schools, so be sure to compare tuition and additional fees between schools to avoid paying more than you need to.

&gt;&gt; <strong>MORE</strong>: <a href="https://www.sparrowfi.com/blog/the-4-types-of-financial-aid-scholarships-grants-work-study-and-loans">What are the 4 types of financial aid for students</a>

On average, trade school is less expensive than a four-year college. However, trade school is not necessarily free. Learn more now:

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