A College Education Minus the Debt

Fully funding a college education without debt is no simple task. It’s no secret that the cost of a four-year degree has soared. But do you realize how much it has risen?

According to Education Data Initiative, the average cost of college tuition and fees at four-year public schools has risen 179% over the last 20 years. It’s an average annual increase of 9.0%.

The average cost of tuition and fees at private four-year schools has risen 124% over the same period for an average annual increase of 6.2%.

That is an increase from an annual cost of $3,349 to $9,349 for a public university and $14,616 to $32,769 for a private school.

The statistics are sobering, and students are piling up unmanageable debts to secure a degree.

But there are ways to reduce out-of-pocket expenses and avoid or at least minimize the need to take on debt.

Be savvy about financial aid

First, let’s review financial aid. This can be an important way to reduce costs, depending on the school.

Complete the Free Application for Federal Student Aid now. The FAFSA application period for the 2022-23 school year began on October 1, 2021. The FAFSA deadline for this school year is June 30, 2023. 

Yes, it seems counterintuitive, but the deadline is next year. Nonetheless, get the form in as soon as you can. Grants are awarded on a first-come first-served basis, and there isn’t an unlimited pot of money available.

If your child is a senior in high school this year and their first year in college begins next year, try to submit when the starting gate opens on October 1, 2022.

One other thing to keep in mind: Many colleges have individual deadlines. As with the federal deadline, earlier is better.

Apply for scholarships and consider focusing on local scholarships, as there is usually less competition than for national scholarships.

“The absolute first place to visit for local scholarships is your school counselor’s office or the school’s website, ” says Jan Smith, a financial literacy expert at Educational Credit Management Corporation (ECMC), a nonprofit organization that aids student loan borrowers. “Many businesses want to help out students and will approach the school counselor for getting the word out about scholarships” available in their hometown.

Other places where your kids may uncover funds include community organizations, local businesses, your employer or union, city, county and state governments, and churches and religious organizations. 

A family’s financial situation can change. Since FAFSA uses last year’s tax returns, you can request an appeal if your situation has greatly shifted. Speak with the financial aid office and ask them to ‘reconsider’ based on your unique situation.

Don’t rule out so-called ‘no-loan’ schools. A university that is a no-loan school aids students in a way that they can avoid student loans through scholarships, grants and work-study programs. Some colleges may assist all students, others look at family income and needs, or focus on in-state students. One or more schools on your child’s preferred list may be a no-loan college. Inquire about the type of support they offer. What you don’t know can and will hurt you, financially. 


Saving for college

As with all saving, the sooner you start saving for your children’s college, the better off you’ll be. And there are several advantaged ways to save for education purposes. This isn’t an all-encompassing list, but I’ll touch on the high points.

529 plans are popular and offer tax benefits when funds are used for qualified education expenses. Earnings and withdrawals are tax-free when you use the money for college. 

Be aware that withdrawals from accounts owned by someone other than the student or their parent must be added back to the student’s income on the following year’s FAFSA and can reduce aid eligibility by as much as 50% of the amount of the distribution.


The Coverdell ESA allows for tax-free earnings and withdrawals for qualified educational expenses; however, only married couples earning less than $220,000 or individuals earning less than $110,000 can contribute.

The maximum limit to contribute is $2,000 per year. The value of a Coverdell is counted as a parent asset on the FAFSA. Assets of parents are assessed at a lower rate than student’s assets, so the reduction in financial aid is reduced.


Custodial accounts (UGMA/UTMA) are another option. Funds deposited into these accounts are not limited to college and become the property of the child when he or she reaches 18 or 21 (most states), depending on the state. Will your child have the maturity to manage a windfall at a young age?

There are additional drawbacks, including the potential for tax liabilities on earnings and capital gains. Also, custodial accounts are counted as student assets on the FAFSA, which may reduce a student’s aid package.


I know that college saving can seem daunting. But develop a plan. Break it into smaller steps. Tackle each step and stay disciplined. If you have any questions or want assistance with resources, I’m here to help.


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