Navigating Student Aid: How to Make Smart College Financing Decisions

If your child is a high school junior, the clock is ticking — and it’s time to start making decisions about how to pay for college. The good news? Most students will receive some form of financial aid. The key is knowing how the system works, what your options are, and when to take action.

At the center of it all is one critical step: completing the Free Application for Federal Student Aid, or FAFSA.

FAFSA: The First Step to Free and Borrowed Money

Think of the FAFSA as the doorway to nearly all college aid — grants, work-study, federal loans, and even some scholarships. It’s also, quite literally, a financial game-changer. Once it’s submitted, your child becomes eligible to borrow federal student loans — no job, no credit check, and no cosigner required.

With a few clicks, a student can unlock up to $31,000 over four years in federal Direct Loans, usually starting with $5,500 as a freshman. These are low-interest, fixed-rate loans that go into the student’s name — and yes, they alone are responsible for repayment, not the parents.

But with college costs rising, federal student loans won’t cover everything.

For example, the average in-state public university now costs $27,000–$35,000 per year, including tuition, fees, room, and board. That adds up to over $100,000 for four years. Subtract the standard federal student loan, and you’re still left with a big financial gap to fill.

Here’s where other aid and funding sources come into play.

1. Pell Grants: Free Money That Never Has to Be Repaid

Pell Grants are awarded to students based on financial need — as calculated by the new Student Aid Index (SAI), which replaced the old Expected Family Contribution (EFC). The maximum Pell Grant for the 2025–2026 school year is $7,395.

• Families earning under $80,000 may still qualify for a partial grant.
• Low-income families who have received Medicaid or SNAP for two years automatically qualify for the maximum award.
• Assets like home equity and retirement accounts generally do not count against your eligibility.
• Family size can increase your eligibility — more kids means more aid.

Even a partial Pell Grant can significantly reduce borrowing needs.

2. Work-Study and Summer Jobs: A Realistic Boost

Students who qualify for federal work-study can earn $2,000 to $3,000 per year by working part-time on campus. Pair this with a summer job, and students can contribute $4,000 to $6,000 annually toward their own education.

Not only does this reduce how much they need to borrow, but it also builds independence and financial habits.

3. Parent PLUS Loans: Easy to Get, Expensive to Repay

For families who need more funding, Parent PLUS loans are a popular option. These federal loans are taken out in the parent’s name, not the student’s, and offer easy approval with minimal credit requirements.

However, they come with a catch: higher interest rates (currently 8.05%) and a 4.2% loan fee. If denied, though, your student can receive an extra $4,000–$5,000 in unsubsidized federal loans — so it may be worth applying even if you don’t intend to borrow.

Still, experts advise using PLUS loans only as a last resort, especially if repayment would strain your family budget.

4. Private Student Loans: Some Flexibility, But Be Cautious

Private lenders offer student loans ranging from $3,000 to over $30,000, often requiring a cosigner with good credit. Some lenders now offer no-cosigner loans, but they typically come with higher interest rates or limited loan amounts.

Private loans can fill funding gaps, but repayment terms vary widely. Read the fine print — and don’t borrow more than you absolutely need.

5. Parental Contributions: The Unsung Hero of College Financing

Despite all the loans, grants, and scholarships, most students still rely on their parents for some level of financial support. This could come from:

• 529 college savings plans
• Monthly contributions from income
• Cutting costs elsewhere in the family budget
• Choosing a more affordable school

Parents don’t have to pay for everything, but realistic conversations about what you can (and can’t) afford are essential before your child starts applying to colleges.

Bottom Line

If your child is a junior in high school, now is the time to get your financial aid game plan in place. The FAFSA opens doors — to grants, loans, and scholarships — and marks the starting point for every family’s college financing journey.

But don’t stop there. Understanding your full range of options — and their long-term consequences — will help your student make smarter choices, graduate with less debt, and enter adulthood with stronger financial footing.