Paying for College Tuition

Temple University Fox School of business commencement ceremony, December 2014

There are two methods to pay for college tuition: direct and indirect.

The direct method is paying tuition with cash. Examples include generous parents, earning an academic, an athletic scholarship, or taking on debt.

Then, the indirect method is minimizing your rate by proxy or service. Examples include attending a military academy. Or the Servicemen's Readjustment Act of 1944 (G.I. Bill). Or taking advantage of a federal grant. Or declaring residency and qualify for an in-state-rate. Or work at a company with a tuition reimbursement program. Or earn an associates degree then transfer to a four-year institution to complete a bachelor degree. This post will focus on which direct method is the best way to pay for college tuition.

There is no doubt most parents want what is best for their children. What parent wouldn't want to pay for their children's college education? All it takes is small, quotidian deposits into a savings accounts or premium payment to a term life insurance policy. But saving requires disposable income, which, let's face it, could spend on prioritized needs. This method is fortuitous, thus cannot be a viable option.

The student has to perform and work hard to achieve an academic or athletic scholarship. Only the most gifted students earn a scholarship. Even those few gifted students may not have the scholarship for their entire spent at college. Though an athletic scholarship could pay for some or all the student's tuition, it could negatively affect the quality of that student's education. Even so, scholarships exist to attract and keep top talent. Scholarships only go to top performers, not all students. Counting on a scholarship isn't viable for all students.

Some students take on debt to pay tuition-- this is a big responsibility, especially for an 18-year-old. Taking on loans incentivizes the student to perform well and earn a well-paying job to pay back their loans promptly. Only if the student plans on entering the workforce as professional after college, then debt is a viable option.

One thing I wish my college peers knew at the age of 18 is the total post-tax annual income you make after college. It should be a third of the total amount of debt taken during college. Also, private students are easy to get for a reason-- high-interest rates, so please shop around.

At the end of the day, the caveat emptor is the student. Choosing which method of paying depends on merit-- you have it or you don't. If the student does not have the merit to go the indirect method, then the students opt for the direct method. The student opts into financial responsibility.

Many students are not aware of every available direct method of paying for college tuition. Would you think High School guidance counselors would drop a few points?

The best method to pay for college tuition is indirect. The student can go to college based on the merit of their ability, so they are free to study what ever they want.

The direct method is not a bad, it just comes with more responsibility. When students pay for it themselves through the direct method they have an incentive to complete their course work, on time, to ensure opportunity after college. If the student doesn't do a thorough job of completing their course work, then it will take them longer to pay back the cost of attending college. Nevertheless, this option is widely available to most students and, if the consequences are considered, will incentivise the student to do well. 

-Tyler