How to Budget for College Without FAFSA®

There are many avenues to pay for college without filing a FAFSA®, although most involve significant long-term planning and saving. College savings plans, independent scholarships, and private loans are the primary source of funding for college for individuals who pay for school without filing their FAFSA®.

College Savings Plans

Many college savings vehicles exist to help families plan for college. While 529 plans and Coverdell accounts are among the most popular options, there are other ways to save.

529 plans and Coverdell (ESA) accounts – These are plans designed specifically for educational expenses. Withdrawals used for qualified education expenses are tax-free.

Roth and Traditional IRAs – Individual Retirement Accounts allow individuals to grow their savings tax-free. You can withdraw money from IRA accounts without penalty for qualified education expenses penalty-free, but the withdrawal is only tax-free up to a certain limit.

UGMA and UTMA accounts – UGMA and UTMA accounts used to be popular college savings vehicles, but they’ve been surpassed by 529 plans and Coverdell accounts. These accounts allow children to own stocks, bonds, and other significant assets without a trust fund, but any growth in value incurs income tax.

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401k plan – 401k plans are good for retirement, but they are not recommended as the primary option for college savings. Withdrawals, before the owner turns 59 ½, incurs both income tax and an early withdrawal penalty.

You can learn more about college saving vehicles here.

Prepaid Tuition Plans

In addition to traditional state-offered 529 plans, some states also offer more direct prepaid tuition plans. In the face of ever-rising tuition bills, prepaid tuition plans allow individuals and families to prepay future college tuition fees at today’s prices. These tuition credits are returned or transferred should a child decide not to attend college or enroll in an out of state university.

Private and independent schools also offer their own version of the prepaid tuition plan, called the Private College 529 Plan. Nearly 300 private and independent universities are now participating in the Private College 529 Plan.

Independent Scholarships

While some scholarships use the FAFSA® to judge a student’s candidacy, many have direct applications. There are thousands of merit-based scholarships given out each year for a variety of traits: athletic, academic, community service and more.

Both FAFSA®-filers and non-filers alike should search scholarship databases to see what scholarships they may qualify for.

Private Loans

If your scholarships aren’t enough to cover your college costs, you can consider taking out a loan. Without FAFSA®, you won’t be eligible for federal student loans, which often come with low-interest rates and attractive repayment options, but you could still take out a private loan. Depending on your local bank or credit union, the terms may not be substantially different than what you’d get from a standard student loan.

Before taking out a private loan, be sure you understand the terms completely. For instance, if you don’t have an extensive credit history, you may need a cosigner to guarantee the loan. If you have to begin paying the loan back right away, make sure that you can work the payments into your budget.