The cost of student loan debt is rising. The average student loan debt among recent graduates is more than $37,000. That’s more than double the average amount from 2007. Almost half of borrowers are still paying off their debt 20 years later. 

Lots of occupations demand a higher level of education, experience or training. So, it makes sense to invest in your child’s education or your own. Considering the expenses (including tuition, fees and room and board) clocks in at $36,400 — close to $150,000 for a four-year degree — it’s not surprising that you may need student loans to help you pay for college.

However, graduating from college with an unmanageable amount of student loan debt can put your financial future at risk. The average payment a student loan borrower makes each month toward student loan debt is $250. That’s money that could be invested in your retirement fund, used to pay off other debts or spent on major investments like buying a home.

If you’re planning to send your kids to college — or if you’re preparing for college yourself — there’s good news! You have options when it comes to saving and paying for college that can help you reduce or eliminate the burden of student loan debt.

This comprehensive student loan guide covers what you may need to know about preparing for the cost of college. You can navigate to the sections most relevant to you with the links below or bookmark this guide to read later.

The Total Cost of College

The first step in creating a college savings plan is knowing how much money you need to allocate for college expenses. You need to understand the total cost of college, which includes the cost of tuition plus additional expenses like books, fees, room and board and travel to and from the school.

For example, the annual cost of tuition at Iowa State University for the 2023/24 academic year clocks in at about $10,500 for Iowa residents. Room and board costs nearly as much — doubling the total cost of college for students who need to live on campus. Add another $1,100 for books, supplies and other expenses, and the total cost amounts to almost $22,000 per year.

However, the cost of college can vary widely depending on several factors.

College Cost Factors

When you consider these factors, you’ll get a better picture of how much you need to save for college.

Community College Can Make Education More Affordable

Community colleges are two-year schools that can launch your career or help you start a four-year degree at a lower cost. At a community college, you can earn an associate degree that demonstrates your knowledge in a specific field or subject matter. For some occupations, an associate degree is sufficient to start building a career in that field. In other cases, you can transfer to a four-year college after community college and complete the requirements for a bachelor’s degree.

If you or your child is planning to obtain a bachelor’s degree, you may be wondering: Does it matter whether I attend community college first or go straight to a university if I still need to attend college for four years?

You may be able to reduce your costs significantly by starting out at a community college. The average cost of tuition and fees to attend community college is $4,110 per year — compared to $9,678 at a public university. So, attending community college first can help you save on college expenses and help you achieve your overall college savings plan.

In-State Tuition Is Cheaper

At public universities, state residents usually pay a lower tuition rate, called in-state tuition. Students who are not state residents typically pay a higher rate, called out-of-state tuition. Out-of-state tuition is usually more than double the cost of in-state tuition. If you or your child plans on attending an out-of-state public university, you’ll want to save more money to cover the higher tuition costs.

Private Universities Cost More

Private universities are not funded by state governments, so they typically need to rely more on tuition for funding. That means students often pay higher tuition rates. A private university may cost three times more than in-state tuition at a public university. 

The average cost of tuition and fees alone at a private university is $38,768 a year. You could potentially cover all four years of in-state tuition at some colleges with that much money. Most private universities do not charge higher tuition for non-residents, though. So, a private university could cost about the same as paying out-of-state tuition.

Living Accommodations Are Expensive

On-campus housing can cost nearly the same amount as tuition. Usually, people that go to college a distance from home may need to save twice as much money as they anticipated. You’ll also want to factor in costs like a meal plan and parking. If you’re a parent saving for your child’s college education, having your child live at home while attending college can significantly lower your expenses.

If you’re still not sure how much money you should save for college, a college savings calculator can help.

Investing in a College Savings Plan

When you’re saving to pay for college, there are benefits to opening a tax-advantaged college savings plan. Two types of plans can help you save for higher education: the 529 plan and the Coverdell Education Savings Account (ESA). 

These plans are designed to help families save for college. You can use the money in these savings accounts to pay for tuition, fees, books, room and board and other college expenses.

529 Savings Plan

A 529 plan is a state-sponsored plan that gives you tax advantages on the investments you use to cover the cost of higher education. Each state offers at least one 529 plan, and the costs of plans and their investment options differ from state to state. Each 529 plan has contribution limits. The maximum contributions can be as high as $550,000 per student.

Coverdell ESA

The ESA college saving plan is another way you can use investments with tax advantages to fund education. Unlike a 529 plan, you can use your ESA account to pay for elementary and secondary school expenses as well as college expenses. The maximum contribution for an ESA is always $2,000 per year per child, from birth to age 18.

Using an IRA to Pay for College

In addition to college savings plans, you can use an IRA to pay for college expenses for your child.

A 529 plan or an ESA can only be used to cover qualified education expenses. But an IRA can be used for both college expenses and retirement income. So, if your child doesn’t go to college or if scholarships pay for their college education, you can use the funds for retirement.

If you plan to use your IRA to pay for college for your child, keep these IRA education withdrawal rules in mind.

  • You must use the distribution for qualifying expenses.
  • Roth IRAs and traditional IRAs have different guidelines.
  • You can roll a 401(k) into an IRA to pay for education expenses.
  • An IRA withdrawal might affect financial aid.
  • You need to file taxes on distributions.

Alternative Ways to Pay for College

Even if you don’t have enough — or any — money saved for college, there are many ways to pay for college on your own. And some options don’t cost you anything. Of course, with so many financial aid options, it can be hard to decide how to proceed. Here are a few possibilities.


A scholarship is financial aid you can receive based on your merits or financial need — and sometimes for reasons you may not expect. Unlike loans, scholarships don’t need to be repaid. 

There are thousands of scholarships available to college applicants, but you’ll need to do your research to find out what’s available, which ones you qualify for and what the deadlines and application requirements are. You can start your search with these tips from the U.S. Department of Education.


A grant is need-based financial aid that, like a scholarship, doesn’t need to be repaid. You’ll need to submit the Free Application for Federal Student Aid (FAFSA) to help determine your eligibility for need-based financial aid.

Tuition Reimbursement

Many businesses offer tuition reimbursement programs. They cover some or all the costs of college courses you take while you’re working. They are a great option for people who want to earn a degree while they have a job.

Saving Money During the College Years

You may not be able to save enough to cover the total cost of college for your child or yourself. Smart budgeting in the college years can help cover the gaps in your savings, so you don’t have to rely as heavily on student loans. These college budgeting tips can help.

Create a Budget

By creating a personal budget, you can map out monthly expenses for yourself or your child. When you put your expenses — like food, rent, gas, insurance and other costs — down on paper (or in an app), you can spot ways to cut back on spending that can potentially help you save money for college. 

Cut Costs

Every penny counts when it comes to saving money in college. Cut back on costs by cooking meals and making coffee at home, splitting the cost of rent with roommates and using coupon apps to stretch your funds.

Increase Your Income

Working a part-time job is great way to generate income while you’re in college. Many college students find that they can manage working 10 to 20 hours per week and keep up with their classes. Some universities even offer work study programs or on-campus employment to help students pay for college. But if you’re worried that taking on a job could harm your studies, there are other options to generate income. You could consider selling gently used clothes or other items, like textbooks for classes you’ve finished.

Avoid Credit Cards

It’s tempting to use credit cards when funds are tight. But if you’re not able to pay the balance each month, you’ll end up paying interest on your purchases and spending more than you need to. Do your best to live within your means so you don’t accumulate debt.

Ditch the Car

If you’re living on or near campus, you may not need a car to get around. Most university campuses are walkable, and many schools run shuttles to nearby apartments, grocery stores and shopping areas. When you don’t bring a car to school, you reduce expenses for things like gas, maintenance, repairs and parking. It may be more affordable to use a taxi or ride share service for the times you need a car.

Paying Off Student Loans

Paying cash for college is the best option — if you can. But most people aren’t able to cover the steep cost of college without the help of student loans. 

If you do need student loans for college, make sure you borrow only what you need. And when you graduate and secure a job (congrats!), get to work paying off your student loans as soon as possible with one of several student loan repayment options.

Here’s how to pay off student loans using three different strategies.

1. Start With Your Smallest Student Loan

If you’re feeling overwhelmed and discouraged by the number of loans you have, knocking out your smallest loan can help you feel like you are making progress toward your overall goal more quickly.

2. Start With Your Highest Interest Rate Loan

By starting with the loan that has the highest interest rate, you are cutting back on how much interest you must pay. By paying less interest, you’ll have more money in the bank to potentially pay off more loans or add funds to your savings. 

3. Start With Unsubsidized Loans

Unsubsidized loans start gathering interest as soon as you borrow them. So, it makes sense to pay off these loans first.

Get Advice on Paying for College

Whether you’re ready to start saving for college for your child, you’re paying for college as you go or you’re paying off your student loan debt, Farm Bureau can help. Contact your local Farm Bureau wealth management advisor for advice to get your college savings on track.

Want to learn more?

Contact a local FBFS agent or advisor for answers personalized to you.