Paying for College When You Have Nothing Saved

As a financial advisor, I’m constantly trying to get my clients to think ahead towards their long term goals as well as their short term goals. The problem is that life is happening in the meantime and as good as our intentions may be, the long term may get put on the back burner. While in some cases this may just push goals out into the future (like retirement), in other cases, those opportunities won’t wait for you. In this case we’re talking about college and how to pay for it when you have nothing saved.


The first thing to look at when you’re trying to pay for college is whether you can get free money. There are tons of scholarships available, but you may not always know where to look. Talking to your high school guidance counselor is always a good place to start. Additionally, there are now tools like Scholly that will match you to scholarships that you may qualify for. Sure, filling out all of those applications and writing essays is time and labor intensive, but when you graduate college without student loan debt, it will all seem worth it.

In addition to this these types of scholarships, merit based scholarships may also be available. Schools want high academic achievers, as do employers, so it’s in your best interest to keep your grades as high as possible. It also gives you a little bit of leverage with the financial aid department. Bringing them a semester-worth of great grades might be enough to have them lower your tuition based on performance.


When you’re looking at taking out student loans, you have a choice between federal and private loans. Federal loans are granted based on the information that you fill out on your Free Application for Federal Student Aid (FAFSA). Given the choice between federal and private loans, I recommend choosing federal loans first. They give you a lot more options for repayment than private loans, and typically have lower interest rates. Some of the good federal repayment programs include income based repayments options to adjust your monthly payment amount if it is disproportionately high compared to your income. Loan forgiveness is another option if you have federal student loans. Loan forgiveness can come about if you enter into a civil service job such as teaching in a low income areas.

The last resort should be private loans. If you need to take out private loans to cover tuition costs, choose the lowest fixed interest rate you can find for an appropriate repayment period. Interest rates will be lower for shorter loans than they will for longer loans, so asking what the monthly payment will be post-graduation can be the best indicator of what you might be able to afford. In fact, you should know how much the monthly payment on all of your loans will be before you sign the paperwork. This will set you up well to understand how much you can afford to spend on rent and other necessities after graduation.


Once you have a good idea of how much college is going to cost you, it might be time to take a trip to the financial aid office at your school. Bring your FAFSA and talk to the folks working in that department and explain to them any financial hardships that may not have been visible based on the standardized paperwork you filled out for the federal government. As with most things in life, a “no” is always possible, but you literally lose nothing by asking. In fact, most schools have money set aside for hardship cases, so you might be pleasantly surprised.


Some retirement plans such as 401(k)s and IRAs will allow you to make a withdrawal from your account to pay for college expenses. They will waive the early withdrawal penalty, but you will still be on the hook for any tax associated with your account (unless it’s a Roth account). You can check with your financial institution if this is a qualified withdrawal that is available to you, however, I typically recommend staying away from this option if you are unsure if you will have enough leftover for retirement after this withdrawal. The bottom line is that there are financing options for college, but the only financing option for retirement is to work longer and make more money.


“Cash flowing” your college expenses is a brave move, but one to be considered. Essentially, it means that you are earning enough money to pay your tuition and other expenses with cash. This might be more possible for a part-time Masters program, but might prove difficult to make enough money without a Bachelor’s degree. To make the most out of this option, you should really consider the affordability of your prospective schools before you commit to them. Spending two years at a community college and then transferring to a four year school can help. Also, attending a state school can help keep cost down. Consider your options and what you can afford ahead of time so you aren’t caught off guard.

Written By: Lindsay Dell Cook

Lindsay Dell Cook is a CPA and founder of Budget Babble. She lives in Philadelphia with her uber supportive husband and adorable daughter. When she's not working, she enjoys spending time with her family, taking their lovable mutt for walks, or reading a good book while buried under a pile of cats.