College graduates taking self-portrait together outdoors

Ways to save for college and the average costs

Learn ways you can start saving for college now such as 529, Coverdell & Uniform Gift to Minors as well as the average cost of college.

A college degree can help provide greater lifetime earnings and career opportunities. However, no matter what phase of life you're in, finding and understanding ways to pay for college might feel overwhelming.

Grants, scholarships and savings have traditionally opened the doors to a college education. Stafford loans, Perkins loans and PLUS loans may give families additional flexibility. But while grants and scholarships do not have to be repaid, student loans do. One way to avoid taking out loans and remain debt-free is to start saving for college as early as possible. Those savings can be from the parent, family or what the child has set aside for college. The sooner you start, the more time your money will have to grow.

Here are some ways to help save and pay for higher education costs, of which most students use a combination of two or more. We have also provided a snapshot of college costs — along with earning potential.

How to save for college

529 savings plan

The 529 college savings plans are designed to encourage families to save for college. Section 529 of the Internal Revenue Code allows for qualified tuition programs; to help offset future college costs. 529 plans allow more significant contribution amounts than most other options and you maintain control of the assets. According to, the average amount saved in a 529 plan is $26,783.

Contributions may qualify for an income tax deduction or credit. If you remove funds for qualified education expenses, contributions and earnings can be withdrawn tax free. Even if the child who has a 529 plan doesn’t go to college, the 529 plan can still be put to good use. If the beneficiary does not go to college or other secondary education, there may be options to maintain the tax qualification status of contributions and earnings. Consult with your tax planning professional regarding your options.

Coverdell Education Savings Account (ESA)

A Coverdell ESA is a trust or custodial account that allows you to set aside up to $2,000 per year (from birth to the child's 18th birthday) for qualified educational expenses. Assets in the account must be used by the time the beneficiary turns 30 (with a few exceptions), but you maintain control of the account.

Check out how college saving options like Coverdell and 529 plans compare.

Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA)

These gift custodial accounts are designed to hold and protect assets for the benefit of a minor. Although federal gift tax will apply to contributions over a certain amount, there are essentially no contribution limits. Assets can be used for any reason at any time for the benefit of the named beneficiary and the beneficiary gains control of the assets at the age of maturity (18 to 21 years old, depending on the state). Assets can be used for education expenses, but because assets are considered the income of the beneficiary, there may be a high impact on financial aid.

How to pay for college other ways

Financial aid

According to the most recent issue (years 2020-21) by the National Center for Education Statistics, 85% of first-time, full-time undergraduate students at four-year institutions receive financial aid. Fill out the Free Application for Federal Student Aid (FAFSA) and discuss options with your institution's financial aid office. Depending on your need, one aspect could be a campus Federal Work Study job.


There are many types of scholarships available, and a student could benefit from doing some simple research. Scholarships are either merit, financial-need or category based. You can find out more by talking to a high school counselor, the financial aid office at your chosen college or consulting the U.S. Department of Labor's free scholarship search tool.

Private loans

These loans typically offer both fixed and variable interest rates, but repayment options are less flexible. Read the fine print, including whether repayment levels are tied to income.

Federal loans

These may be cheaper and have more repayment flexibility than private loans. Interest rates are fixed, meaning they won't change over the life of the loan. There are also options for parents, such as Parent Loan for Undergraduate Students — PLUS loans.

Jobs and direct payments

According to the U.S. Bureau of Labor Statistics, 42% of full-time students and 81% of part-time students worked at least part of the year while attending college in 2022. Consider asking your tax planning professional about eligibility for credits or deductions.


There are several financial aid offers available to people who are National Guard, veteran or active service members. Not only are the benefits extended to the person who enlisted, but some of the benefits can also carryover to their children.

  • Tuition Assistance
  • Tuition Assistance Top-Up Program
  • Post 9/11 GI Bill
  • Montgomery GI Bill - Active Duty
  • Montgomery GI Bill - Selected Reserves
  • Loan Repayment (LRP)
  • Survivors' and Dependents' Educational Assistance Program (DEA)
  • Work-Study Program
  • Tutorial Assistance Program

Some of the education benefits offered by the military can cover tuition in its entirety.

How much does college cost?

Costs at a four-year college typically include tuition, fees, and room and board, but also consider extra costs for books and other expenses. Some majors in the arts or sciences have added costs for supplies. The average costs provided below are from

Tuition and fees: Tuition is what colleges charge for instruction. Fees can differ vastly at each college, and are used to support things like libraries, athletic facilities or other campus clubs and organizations. The 2022-2023 average cost for college tuition and fees are:

  • Public college (in-state): $10,940
  • Public college (out-of-state): $28,240
  • Private college: $39,400

Room and board: The cost for room and board varies depending on the school and the type of food plan you choose. The average 2022-2023 costs for room and board are:

  • Public college: $12,310
  • Private college: $14,030

Books and supplies: The average 2022-2023 costs for college books and supplies at both public and private colleges is $1,240.

What is the average student loan debt?

The numbers surrounding student loans vary by the type of college attended, but some averages are shown below.

Lower your current debt and save more for college

Between childcare expenses, food, clothing, lessons and the occasional vacation, many parents find saving for college challenging. Incorporating some easy debt payoff strategies can go a long way towards lowering household debt and putting family finances on a more solid foundation.

We hope this has inspired you and your child to save for college — you will be planning college visits and choosing the right college before you know it! And once your student has finished college, check out ways to pay back student loans quickly and Public Service Loan Forgiveness.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

Before investing in a 529 plan, consider the plans investment objectives, risks, charges, and expenses. Contact the plan issuer for an official statement containing this and other information. Read it carefully.

Investors should consider before investing whether their or their beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program and should consult their tax advisor, attorney and/or other advisor regarding their specific legal, investment or tax situation.

Securities are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal.

Securities distributed by State Farm VP Management Corp.

Neither State Farm nor its agents provide tax or legal advice.


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