Unit 6: Paying for College and Career Training
Last updated 10/14/2026 by
Andrew Latham
Summary:
For many students, choosing how to pay for education is the largest financial decision they will make before age 25, and they make it at 17. Comparing net prices, borrowing federal before private and matching borrowing to expected pay can save tens of thousands of dollars.
This is Unit 6 of 9 in Money 101 by SuperMoney, a free personal finance course. It takes about 2.5 weeks in a classroom, or 45 to 90 minutes on your own. Then take the five-question quiz below. Score 4 of 5 to mark the unit complete.
What you’ll learn
- Complete the FAFSA, or a practice version, and explain the Student Aid Index.
- Rank funding sources from cheapest to most expensive.
- Compare two financial aid offers to find the true net price.
- Explain federal loan limits and the protections private loans lack.
- Compare total borrowing with expected starting salary.
- Compare lower-cost paths: community college, apprenticeships, trades, military and employer tuition help.
- Explain grace periods, repayment, delinquency and default.
Key terms
- Cost of attendance: A school’s full yearly price: tuition, fees, housing, food, books, transportation and personal costs.
- Net price: Cost of attendance minus grants and scholarships. Loans do not reduce the net price. They are how you pay it.
- FAFSA: Free Application for Federal Student Aid. Unlocks federal grants, work-study and federal loans, and is used by many states and schools.
- Student Aid Index (SAI): A number calculated from the FAFSA that schools use to determine your aid.
- Grant: Aid you do not repay, usually based on need, such as the Federal Pell Grant.
- Subsidized loan: A federal loan for students with financial need. The government pays the interest while you are in school at least half time.
- Unsubsidized loan: A federal loan where interest builds from the day it is paid out.
- Capitalization: When unpaid interest is added to your loan balance, so you then pay interest on it.
- Repayment Assistance Plan (RAP): The income-driven repayment plan for federal loans made on or after July 1, 2026. Payments are 1% to 10% of income; any balance left after 30 years is forgiven.
- Default: Failing to repay a federal loan, generally after 270 days without payment. Leads to collections, damaged credit and possible wage garnishment.
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Lesson 6.1: The FAFSA and the real price
Every college-bound student should file the FAFSA, even if they think they will not qualify. It is required for federal grants, work-study and federal loans, and many states and colleges use it for their own aid. It opens each fall for the following school year. File early, because some state and school aid runs out.
A school’s sticker price is not what most students pay. The number that matters is the net price: cost of attendance minus grants and scholarships. Every college has a net price calculator on its website. A private school with a high sticker price can cost less than a public one after aid.
When financial aid offers arrive, separate free money (grants, scholarships) from money you must earn (work-study) and money you must repay (loans). Some offers list loans as if they were aid. They are not.
Lesson 6.2: Cheapest money first
Pay for education in this order. First, free money: scholarships and grants. Second, savings and earnings, including work-study. Third, federal subsidized loans, then federal unsubsidized loans. Last, Parent PLUS and private loans.
Federal student loans have fixed rates, do not require a credit check for undergraduates, and come with protections: income-based repayment options, deferment and forbearance in hardship, and forgiveness programs for certain public service jobs. Private loans usually require a credit check or co-signer, may have variable rates and have far fewer protections. Use them only after federal options are used up.
Federal loan limits for dependent undergraduates are $5,500 in the first year, $6,500 in the second and $7,500 in the third year and beyond. Rules changed on July 1, 2026. Parent PLUS loans, which parents take out for a dependent student, are now capped at $20,000 a year and $65,000 in total per student, so families can no longer borrow up to the full cost of attendance. New Grad PLUS loans for graduate school have ended. Check studentaid.gov for the current rules before you borrow.
Lesson 6.3: How much is too much?
A common guideline: keep total student debt below your expected first-year salary, and ideally well below it. The federal College Scorecard shows typical earnings for graduates of specific programs at specific schools. Look up your intended major, not just the school.
Lower-cost paths can lead to the same place. Starting at a community college and transferring can cut the cost of a bachelor’s degree sharply. Registered apprenticeships pay you while you train. Many trade programs take under two years. Military service, the National Guard and employer tuition assistance can pay for school outright.
Whatever path you choose, finishing matters. Students who borrow and do not complete a credential are the most likely to struggle with repayment, because they have the debt without the higher earnings.
Lesson 6.4: Repayment basics
Most federal loans have a six-month grace period after you leave school before payments start. Interest on unsubsidized loans keeps building during school and the grace period. Paying even the interest while in school keeps the balance from growing.
Anyone who takes out a new federal loan on or after July 1, 2026 has two repayment plans to choose from. The standard plan has fixed payments, with a longer term for larger balances, and usually costs the least in total. The Repayment Assistance Plan (RAP) sets your payment at 1% to 10% of your income, depending on how much you earn, and forgives any balance left after 30 years. RAP keeps payments low early in a career but can cost more over time. Set up autopay; many servicers offer a small rate discount for it.
If you cannot pay, contact your servicer before you miss a payment. Federal loans 90 days late are reported to credit bureaus, and loans in default can lead to collections and garnishment of wages or tax refunds. There is almost always a better option than ignoring the bill.
Worked example: two aid offers
Yearly numbers for illustration.
| School A: cost $28,000, grants $12,000 | Net price $16,000 a year |
| School B: cost $45,000, grants $25,000, loans $5,500 | Net price $20,000 a year (the loan is not aid) |
| Difference | School A is $4,000 a year, $16,000 over four years, cheaper |
| Borrowing $27,000 total at an example 6.4% over 10 years | about $305 a month, about $9,600 in interest |
Takeaway: Always subtract only grants and scholarships. A big loan on an offer letter makes a school look cheaper than it is.
Activity: Four-year funding plan
Choose two real schools or programs (for example, one in-state public and one private or out-of-state, or a college and a trade program). Use each school’s net price calculator and the College Scorecard. Use the sample aid offers in the Document Pack (Appendix C) for practice first.
- School / program 1: cost of attendance, estimated grants, net price per year
- School / program 2: cost of attendance, estimated grants, net price per year
- How you would pay each year, cheapest money first
- Total borrowing after four years (or program length)
- Typical earnings for your program from the College Scorecard
- Estimated monthly loan payment and percent of monthly take-home pay
The printable worksheet and the sample documents for this activity are in the Money 101 course book (PDF).
Reflect: What is one path after high school you had not considered before this unit? What would it cost?
Up next: Unit 7: Investing and Building Wealth | Previous: Unit 5: Borrowing and Getting Out of Debt | Course overview
Andrew is the Content Director for SuperMoney, a Certified Financial Planner®, and a Certified Personal Finance Counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.
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