If you're the parent of a college-aged child, you already know how pricey higher education has become. According to EducationData.org's Education Data Initiative (EDI), the average annual cost of college in the United States in 2026 is $38,270, which means college costs have more than doubled in the 21st century.
Of course, the actual cost of earning a bachelor's degree depends on many factors. These include whether a student attends a public or private institution and whether a public school is in- or out-of-state. Also, will a student live in campus housing, in an off-campus residence or at home? Do those cost calculations take into account books, supplies, technology needs and living expenses? And critically, how much financial aid will the student receive? Let's take a closer look at the real cost of college — and how it's possible to reduce it significantly.
Financial aid can substantially reduce college costs — if you apply for it. Regardless of your family's income level, you should fill out the Free Application for Federal Student Aid (FAFSA) form. Even families with high incomes may qualify for some financial aid. Yet the National College Attainment Network found that only slightly over half of high school seniors completed the FAFSA in 2025. Why is the rate so low? According to Bankrate, a financial information provider, "A mix of misconceptions, skepticism, lack of awareness and a botched 2024 season may be keeping students from applying."
Different schools may use different methodologies to calculate specific financial aid awards. In addition to filling out the FAFSA, your child's college may ask you to submit other forms with additional financial information.
Some private colleges use the CSS Profile or other institutional aid applications to gather more detailed financial information than the FAFSA requires. Depending on the school, institutional aid calculations may consider factors such as home equity, medical expenses, private school tuition, noncustodial parent finances or other family circumstances.
Some schools also use shared institutional aid principles or school-specific formulas. Because methodologies vary, families should review each college's financial-aid requirements and net price calculator.
Regardless of the methodology a college uses, financial aid offices sometimes have flexibility when awarding institutional aid. When awarding federal grants, loans and most state aid, colleges generally use the federal formula. But when awarding their own money, schools may make different calculations.
Important: Some parents mistakenly believe the FAFSA requires them to report their retirement savings. You don't. For financial aid purposes, balances in qualified retirement accounts generally aren't reported on the FAFSA, though withdrawals may affect income.
In the 2024-25 school year, parents and students borrowed $102.6 billion in federal and nonfederal loans to pay for postsecondary education, according to the College Board. Your student may qualify for several types of federal and private loan programs. Be sure to review the terms and conditions of each loan option carefully.
Parents who complete the FAFSA may qualify for federal Parent PLUS loans. If you're considering one of these, however, confirm current annual and aggregate borrowing limits, because federal rules may change by award year. Or you may be eligible to take out private parent loans through a bank or to cosign with your child on private student loans. But beware: You don't want to compromise your own financial security (including your retirement savings plans) to pay for your child's college costs. As the saying goes, you can borrow money for college, but no one will loan you money for retirement.
Never borrow more than what's needed for legitimate college expenses. Some programs make it easy to borrow extra spending money that students can use for, say, travel or entertainment expenses, leading to a hefty loan balance at graduation.
There are billions of dollars of scholarships available to students who make the effort to apply. Scholarships are generally available regardless of your income level. Even if you don't qualify for need-based aid, you may qualify for an educational merit or sports scholarship, or one of the thousands of niche scholarships.
However, finding scholarship opportunities takes research. Your student's high school guidance counselor can help. In addition to private merit-based scholarships, there are state-funded scholarships to explore. These are designed to keep the top students at in-state colleges and universities. And though you should search online for possible scholarships, know that some information may be inaccurate, misleading or even fraudulent. For example, scam websites might charge a fee for the "inside scoop" on scholarships, or they might ask for personal information or credit card numbers that they can use to steal your identity. If you encounter such requests, go elsewhere.
Most scholarships have firm application deadlines, with an application process that requires recommendation letters, transcripts, essays and other supporting documentation. To improve the chances of qualifying, you may need to complete the FAFSA early. Many merit-based scholarships are offered through the institutions your child applies to, and they may require the FAFSA and additional supporting items. In some cases, funding is limited to a fixed number of qualified applicants. In other words: First come, first served.
Important: Keep excellent records of your scholarship and loan applications, and read all the fine print before signing and applying.
Living at home during college or attending a local community college for the first two years is a great way to save money. But if your student wants to go away to college, room and board will likely be a big expense. EDI estimates that the average cost of college room and board for 2026 is $12,917. However, living expenses can vary substantially depending on specific factors.
A little frugality can go a long way. For example, your student may be able to choose a more cost-effective meal plan while living in the residence halls, drink home-brewed coffee or find a few friends to share an off-campus apartment. A part-time job can be a great way for students to earn spending money, contribute to education costs and build their resumes.
When selecting a college, consider the school's graduation rates. One of the best ways to control the cost of college is to graduate on time. Yet four-year completion is far from guaranteed. EDI reports that only about 42% of students seeking a bachelor's degree graduate within four years.
Planning is key to on-time graduation. Students who drop or fail classes, frequently switch majors or enroll in a less-than-full course load each semester are likely to take longer to complete their coursework. So before starting college, your student should take advantage of any advanced placement classes or dual enrollment options. Once in college, students should meet with their academic advisors every semester to ensure they're meeting the requirements necessary to graduate on time.
Important: Students should know what classes their school will offer in their final semesters. They may need a certain class for their major or to graduate, only to find it won't be offered again until the fall after they're scheduled to graduate.
The price you'll ultimately pay for college probably won't be the original sticker price. Smart planning can help you and your student measurably reduce the cost of tuition, room and board, and other higher-education expenses. That's the good news.
The bad news is that worrying about college costs doesn't usually end when you submit financial aid paperwork or receive word about an aid package. It's a four-year — and often longer — process, during which your financial situation could change.
Your school's financial situation may change, too. For example, the school may have offered scholarships or grants to students who chose another school, leaving extra aid available. For this reason, check in with your financial aid office in the summer to see whether it can offer additional financial assistance for the fall.
It's not unusual for parents to feel overwhelmed by the process of funding a child's college education. Your financial advisor can help you strategize for one of the biggest and most rewarding financial commitments of your life, as well as look for ways to cut some of the costs involved.
The American Opportunity Tax Credit (AOTC) can help defray the cost of a higher education. The AOTC provides a maximum annual benefit of $2,500. You may qualify for a credit equal to 100% of the first $2,000 of expenses for the year and 25% of the next $2,000 of expenses. According to the IRS, up to 40% of the remaining credit, capped at $1,000, may be refundable if the credit reduces tax to zero.
The credit applies only to the first four years of postsecondary education and is available only to students who attend school at least half-time. Most tuition, required enrollment fees and required course materials qualify for the AOTC, but room and board — as well as courses involving sports, games or hobbies — generally don't. The credit is per eligible student and is subject to phaseouts based on modified adjusted gross income.
If you don't qualify for the AOTC, you may still be eligible for the Lifetime Learning Credit (LLC), which can help offset qualified education expenses for undergraduate, graduate and professional degree courses, as well as courses taken to acquire or improve job skills. Unlike the AOTC, the LLC is available for an unlimited number of years and doesn't require students to be enrolled at least half-time or pursuing a degree. The maximum credit is $2,000 per tax return and is subject to income-based phaseouts. Contact us to learn more about the AOTC, the LLC and other education-related tax breaks.
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