The modern guide to paying for college: 529s, military benefits, and financial aid

Start planning today on how to pay for college.

If it seems like college tuition gets more expensive each year, it’s because it does. The good news is that, even though college costs are expensive, there are ways you can help pay for college. Here are five options to consider as you plan for college tuition.

1. 529 savings plan

A 529 savings plan allows your money to grow tax-deferred, and withdrawals are tax-free if used for qualified expenses. The funds can be used at any accredited institution across the country, and you can change beneficiaries so eligible family members, including you, can use the funds for college costs.

Some 529 plans may even have rewards programs like Upromise Opens in a New Window.‍ ‍ ^{See note 1} This is a free, online cash-back rewards account for college savings.

A 529 plan can also be used for up to $20,000 in annual expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school. 529 plans can also be used to repay student loans, with a $10,000 lifetime maximum per individual.

2. 529 prepaid plan

With this plan, you prepay some or all of your child’s future in-state college tuition, locking in today's tuition rates. But keep in mind that, while your state's plan may be transferable to a private or out-of-state university, the dollar value likely won't go as far as it would at an in-state institution.

3. College scholarships

Thousands of scholarships are available if you take the time to apply. Even small $100 or $200 scholarships can add up. Consider all college scholarship sources, including federal, state, employer, civic organizations, athletic and college-specific scholarships.

4. Post-9/11 GI Bill

Transferring some or all of your unused education benefit to an eligible spouse or your dependent children is one of the best ways to pay for college. Those using the benefit are eligible for a housing stipend which is prorated based on a few factors: the percentage of Post 9/11 GI Bill they're eligible for, how many credits they’re taking and how many hours of class they’re scheduled to attend per week. The bill currently pays all in-state tuition and fees for a public school, while a private or foreign school will have limitations Opens in a New Window.‍ ‍ ^{See note 1}

5. Financial aid and college loans

Unless your child gets a full-ride college scholarship, uses the Post-9/11 GI Bill or attends a service academy, you'll probably need some type of loan to supplement scholarships, grants and 529 plans. You can get a private loan through a bank, credit union or Sallie Mae, or you may be able to get a federal loan.

Federal loans generally have lower interest rates than private loans. Your college graduate may even be able to pay off a federal student loan through certain types of public service. But the amount you can borrow is usually less with a federal loan than a private loan.

Applying for financial aid begins with completing a Free Application for Federal Student Aid. Also known as FAFSA, the application is key to securing financing for college because schools use it to determine your eligibility for federal aid. That’s why it’s important to submit a FAFSA when applications open on Oct. 1 of each year. Even if you aren’t sure yet where you want to go to school, you should go ahead and submit your FAFSA and list any school you are considering. You can add or remove schools later.

You only need to fill out the FAFSA once a year, but college, state and federal deadlines might be different. You need to be sure you file your FAFSA before the earliest deadline Opens in a New Window.‍ ‍ ^{See note 1}

As you explore these options, keep your own financial priorities in mind. Your student can get a loan for college, but you can't get a loan for retirement.