How to Pay for College With No Money Saved

If college bills are looming and you don’t have enough money saved, you have plenty of company: Roughly half of families don't have a plan to pay for college before their student enrolls, according to student loan company Sallie Mae.

But you also have options for making a degree more affordable. Here are some ways to pay for college with no savings — and avoid crushing debt.

Borrow loans, but set limits

Start with financial aid that doesn't have to be repaid — like scholarships, grants and work-study — then exhaust federal student loans in the student's name if you don't have money for college, Students typically can borrow up to $5,500 in federal student loans for their first year of college and a total of $31,000 for an undergraduate education.

That likely won't be enough to pay for the typical college education. The average published cost for tuition and fees at a public, four-year college was $10,560 annually for in-state students in 2020-21, according to the College Board. Those costs are higher for out-of-state students and private institutions.

The federal PLUS loan program allows parents to borrow the full price of virtually any college education. That’s rarely a good idea. It’s much smarter to decide before applying for schools how much parents can and want to contribute. In general, parents should limit borrowing to what they can afford to pay off before retirement, while still being able to save for that retirement.

» MORE: Best parent loans for college: parent PLUS and private

Apply to financial 'safety,' 'target' and 'reach' schools

College counselors typically recommend applying for three types of schools, based on the student’s academic credentials: “safety” schools virtually certain to say yes, “target” colleges likely to accept them and “reach” options where acceptance is a long shot.

Families also should also include at least one financial “safety” school — a college with costs they know they can handle — as well as “target” schools that could be affordable and a “reach” school that may surprise them with generous financial aid. The net price calculators available on every college’s site can help identify likely candidates.

Consider alternatives

It’s a lot to ask 17- and 18-year-olds to decide what they want to do for the rest of their lives. Dithering is expensive, though — especially if you don't have much saved to begin with. Most colleges have career counselors who can help students sort through their options, and internships can offer real-world glimpses of future career paths.

Not every career path will require a four-year degree. An alternate education pathway, like an apprenticeship program or coding bootcamp, may be a better fit for some students.

» MORE: Alternatives to college: What are your options?

For those who'll need a four-year degree, a year or two of community college can significantly cut costs — but also may increase a student’s risk of dropping out. Community college may be best for self-motivated types who are determined to get a degree and who can do the legwork in advance to ensure their credits will transfer to the desired four-year institution.

For those who aren’t that motivated or are unsure what they want to study, a gap year may be a good option. They’ll have another year to grow up and get focused, without racking up college expenses. They could even get a job to pay some of those costs.

Trim expenses and tap assets

Here are some additional strategies to help pay for college with no savings:

• Cut discretionary expenses. This can free up money for college bills. The usual suspects: eating out less, buying used instead of new, vacationing cheaply, combing your bills for “leaks” such as memberships or subscriptions you’re not using. If your student is attending college more than 100 miles away and won’t have a car, your auto insurer may give you an away-from-home discount.

• Take advantage of tax breaks. Education tax credits, such as the American Opportunity or Lifetime Learning credit, also may help if you don't have money for college.

• Sell nonretirement investments and other assets. This can help pay for college while possibly increasing financial aid in future years. (While federal financial aid formulas typically ignore retirement funds, money in savings and brokerage accounts reduces need-based aid.) Consult a tax pro first, since asset sales can have tax consequences.

• Don’t pause retirement contributions, however. You can’t get back the tax breaks and company matches you’ll lose, or the future tax-deferred earnings that money could have earned. Retirement is even more expensive than a college education, and few of us can afford to stop saving for that goal.