How to Send Your Kid to College Without Breaking the Bank

Your kids are planning ahead for college. While this is probably a very exciting moment, you should also consider what’s the right way to go about it financially.

College prices have gone up since many of us have left the collegiate world. In the 2024–25 academic year, families reported spending an average of $30,837 on college, up from $28,409 the prior year, according to Sallie Mae’s annual study. This may be more challenging than you thought. Even kids who do work hard to earn money and get scholarships, grants, and government loans may come up short.

Like most parents, you want your kids to reach their goals, and some goals require a college education. The question is, what’s the ideal way to fund it? Should you pay all or part of their bill? Should you use money you have on hand or take out a loan? How about co-signing on a private loan with your child? Or is it better to just offer your kids advice and send them on their way?

Here are the three main ways you can help your child plan for college, and what you should consider before deciding what’s right for your family:

Directly Pay for College

If you have funds available, you may want to pay some or all of your kids’ tuition.

Pros: This is the most straightforward way to help your kids go to college and avoid the hassles of applying for student loans. If you have cash in a savings account or other nest egg, you pay the bill and it’s done. Neither you nor your kids are in debt or need to worry about payments, and your credit score doesn’t take a hit.

You can also use tax‑advantaged tools: withdrawals from a 529 plan are federally tax‑free if used for qualified education expenses; and tuition you pay directly to the college qualifies for the unlimited federal gift‑tax exclusion (note: room and board and most non‑tuition costs don’t qualify).

If you take out a loan in your name, you may have an easier time qualifying or getting a lower interest rate than your kids would. That could include home‑equity or personal loans. However, home‑equity borrowing uses your home as collateral, so failure to repay can put your house at risk.

Cons: If you take out a personal loan or home‑equity loan, you start making payments immediately. There is no automatic deferral, as with some student loans. By contrast, federal Parent PLUS loans don’t have a grace period, but you can request a deferment while your child is in school and for six months afterward; interest continues to accrue.

Also, it’s human nature to value something more when a person has to work for it, or when they have more at stake. If you pay the entire college bill and your child doesn’t meet your scholastic expectations, what then? In addition, you should consider whether you can really afford to pay the bill yourself. You should be making headway on your own retirement funding and have an emergency fund before you drain your accounts to pay for your kids’ college. After all, your children can get college loans, but there’s no such thing as a retirement loan.

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Co-Sign a Loan

Once your child has exhausted the possibilities of scholarships, grants and federal student loans, they may turn to private student loans. Most students don’t qualify for private student or other loans at low rates on their own. Students who have just graduated from high school generally don’t have the income and credit scores lenders require. However, if you co‑sign, lenders will usually be able to offer a loan—promising that if your child doesn’t pay as promised, you will. In practice, most private undergraduate loans are cosigned (about 93%).

Pros: Co‑signing can help your child get a private loan that he or she wouldn’t have qualified for alone. If the payments are made as agreed, the loan in good standing can bolster your credit score.

Cons: You must make the loan payments if your child doesn’t. Rather than “transferring” to you, the liability already applies to you as the cosigner; late or missed payments hurt both parties’ credit. If your child files for bankruptcy, discharge (which is rare for student debt) generally does not release the cosigner’s obligation. If the student borrower dies, federal law requires holders of private education loans to release the cosigner for loans issued after Nov. 20, 2018; disability discharge varies by lender.

Even if your child does not default, your credit is affected by the fact that you cosigned on a loan. The credit check for the loan application will create a small, temporary dip in your score—for most people a single hard inquiry reduces FICO® Scores by fewer than five points. The co‑signed loan will also show as debt on your credit reports and can raise your debt‑to‑income ratio that lenders assess. Note: credit utilization (the revolving “debt‑to‑available‑credit” ratio) does not include installment loans like student loans. And if the loan goes into default, your score will suffer.

Offer Advice

Whether you can afford to help your kids financially or not, your advice can help.

You might advise students to get as many college credits as possible before heading off to college; for example, by taking college‑level classes during high school. That way they can also develop skills and interests that could help them get scholarships and grants. Policies for awarding credit or placement vary by college—use each school’s AP/credit policy tools and ask about dual‑enrollment transfer rules.

When your child is ready for college, they may consider taking credits at a community college before they transfer to another college (some states authorize community colleges to offer select four‑year degrees). Recommend that they compare tuition prices and other costs before they choose a college. The ideal college is not necessarily the most expensive one, and prices vary widely.

Finally, help your child explore different ways to pay for college—from working and saving ahead, to applying for grants, scholarships, and federal and private financing. Encourage them to complete the FAFSA®, which many states and schools use to award aid, and to watch federal, state, and institutional deadlines.

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