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How to Send Your Kid to College Without Breaking the Bank
May 26, 2026
May 26, 2026
You're staring at a tuition bill that's bigger than some car loans — and you're not alone. 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 "How America Pays for College" study. The good news: you have more options than you think. Whether you pay directly, cosign a private loan, or simply guide your child toward smarter choices, the right strategy depends on your family's finances — and it starts with knowing what's on the table.
If you're weighing parent student loans, tapping savings, or helping your kid chase scholarships, BestMoney's student loans comparison page can help you evaluate options side by side. Below, we break down three proven approaches to funding college without putting your own financial future at risk.
If you have funds available, you may want to pay some or all of your kids' tuition.
Pros: Paying outright is a 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.
A note on FAFSA eligibility: If your family income is higher — say $150,000 or more — you may wonder whether it's even worth filing the FAFSA. The answer is yes. The FAFSA uses the Student Aid Index (SAI) formula to determine aid eligibility, not a hard income cutoff. Higher-income families may qualify for fewer need-based grants, but filing still unlocks access to federal student loans and some institutional aid. It's always worth submitting.
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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 cosign, 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 (the vast majority of private undergraduate loans are cosigned). If you're exploring parent student loans, cosigning is one of the most common paths.
Pros: Cosigning 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 cosigned 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.
One important detail many parents overlook: most private lenders offer a cosigner release option. After a set period of on-time payments — typically 12 to 48 months — the primary borrower (your child) can apply to have you removed from the loan. To qualify, the borrower usually needs to demonstrate sufficient income and a solid credit history on their own.
Not every lender offers this feature, and requirements vary, so it's worth checking the cosigner release policy before you sign. If keeping your credit exposure short-term is a priority, look for lenders with release timelines on the shorter end. And if your child eventually wants to lower their rate, they can explore whether it makes sense to refinance student loans down the road.
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 page 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 right 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.
Before move-in day, sit down together for a budgeting conversation. Walk through monthly expenses — housing, food, textbooks, transportation — so your child has a realistic picture of what college life costs beyond tuition. Even a rough spending plan can help them avoid credit card debt and unnecessary borrowing during the school year. For more on getting financially ready, see our tips on how to prepare for the new school year.
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Yes. As noted above, there's no hard income cutoff — the FAFSA uses the Student Aid Index (SAI) formula to determine eligibility. Higher-income families may qualify for fewer need-based grants, but filing still unlocks federal student loans and some institutional aid. If your child takes out federal loans, they may later qualify for income-driven repayment plans that cap monthly payments based on earnings.
Yes. Unlike federal loans, which are tied to the FAFSA cycle and your school's financial aid calendar, private student loans can generally be applied for year-round. Approval depends on the borrower's (or cosigner's) creditworthiness and income. You can compare private student loan options to find a lender that fits your timeline.
The 50/30/20 rule is a budgeting framework that allocates 50% of after-tax income to needs (rent, groceries, tuition payments), 30% to wants (dining out, entertainment), and 20% to savings or debt repayment. It's a practical starting point for students managing their own money for the first time.
The right way to help your children pay for college depends on your family's circumstances and needs. Using one or a combination of these options — paying directly, cosigning a loan, or offering guidance — you can help your children go to college without jeopardizing your own retirement and financial security.
The most important steps: prioritize free money first (grants, scholarships, and federal aid), understand the repayment terms and credit effects before borrowing or cosigning, and verify current rules with official sources each year. If you're comparing parent student loans or refinancing options, BestMoney's comparison page can help you see rates and features side by side — so you can make a confident decision without the guesswork.
Want to do some more research? Feel free to check out the rest of our articles and lender comparison chart.
Sally Herigstad is a personal finance writer at BestMoney.com, specializing in student loans. She has been writing about personal finance since 1998 and is the author of Help! I Can’t Pay My Bills. A licensed real estate broker in Washington state and a retired CPA, Sally combines decades of experience with practical insights to help readers navigate financial challenges.
