14 Ways to Pay for College Tuition: A Guide for Parents

Key takeaways:

• There isn’t one best way to pay for college. Many families use several sources.

• Completing the FAFSA is an important early step because it can open access to federal, state and school-based financial aid.

• Scholarships and grants generally don’t have to be repaid.

• College savings plans and education tax credits come with specific rules about eligible expenses.

• Parents can decide how comfortable they’re contributing while keeping retirement, debt, and other financial priorities in view.

• If borrowing is part of the plan, compare who will owe the debt, interest rates, fees and repayment terms before choosing a loan.

What is the best way to pay for college?

There’s no single approach that works for every family. A useful place to start is with the net price of each school — what remains after scholarships and grants — rather than the advertised tuition alone.

From there, families can look at the available sources in roughly this order:

• Scholarships, grants and other aid that generally doesn’t need to be repaid

• College savings and money the family has already set aside

• Current parent and student income

• Work-study, employer assistance and other ways the student can contribute

• Education tax benefits for eligible families

• Federal or private borrowing for any remaining amount

That order isn’t a rule. It’s simply a way to see the entire picture before deciding where the next tuition payment will come from.

14 ways parents can pay for college tuition

Complete the FAFSA and compare financial aid offers

The Free Application for Federal Student Aid, or FAFSA, isn’t itself a source of money. It’s the application that gives students access to federal grants, Federal Work-Study and federal student loans. States, colleges and some private aid programs also use FAFSA information when determining eligibility. The current Federal Student Aid guidance reflects the 2026-27 FAFSA process.²

After the FAFSA is processed, compare the financial aid offers from each school. Look separately at grants and scholarships, work-study and loans rather than focusing only on the total dollar amount offered.

For dependent students, having a parent participate as a FAFSA contributor does not make that parent responsible for paying the student’s college costs.⁹

Scholarships

Scholarships can come from colleges, community groups, employers, foundations, professional organizations and other sources. They usually don’t have to be repaid, although each scholarship has its own eligibility and renewal requirements.

Students don’t have to stop searching once freshman year begins. Scholarships are available to current college students too, so it’s worth checking for new opportunities each year. Federal Student Aid recommends looking at the college financial aid office, community organizations, employers, state agencies and the U.S. Department of Labor’s scholarship search tool.²

Grants

Grants are another form of financial aid that generally doesn’t need to be repaid. Many are based on financial need and may come from the federal government, a state, a college or a private organization.

In 2024-25, undergraduate students received an average of $12,080 per full-time-equivalent student in grant aid, according to the same College Board study introduced above.**

Submitting the FAFSA each year is important for students who want to be considered for federal grants and many other aid programs.²

529 college savings plans

529 plans allow money to grow on a tax-advantaged basis for qualified education expenses. Qualified withdrawals can include college tuition and required fees, books, supplies, computers and certain room-and-board expenses.³

Transportation generally isn’t a qualified higher education expense under federal 529 rules, but current law does allow 529 funds to repay principal or interest on certain student loans, subject to a $10,000 lifetime limit per individual.³

Unused 529 money doesn’t necessarily have to be cashed out. Depending on the circumstances, options may include changing the beneficiary, keeping the account for future education or making an eligible rollover to the beneficiary’s Roth IRA. Roth IRA rollovers have several requirements, including annual contribution limits, a $35,000 lifetime limit and rules tied to how long the 529 account and contributions have been in place.³

Prepaid tuition plans

A prepaid tuition plan is another type of 529 plan. Instead of investing primarily for future education expenses, these plans generally allow families to prepay some future tuition costs under the terms of the plan.

Rules vary considerably. Participating schools, eligible expenses, residency requirements and what happens if the student attends another college can all depend on the individual plan. Review those terms before counting prepaid tuition toward the amount available for college.

Coverdell Education Savings Accounts

A Coverdell Education Savings Account is a tax-advantaged account for qualified education expenses. Contributions aren’t federally tax deductible, but earnings can grow tax free and qualified distributions generally aren’t taxable. Contribution and income limits apply.⁵

Coverdell accounts can also be used for certain elementary and secondary school expenses, which makes their rules different from those of some other education accounts.

Current income, savings and college payment plans

Not every college dollar has to come from an account earmarked for education. Some families pay part of the bill from current income or other savings.

Another option is to ask the school about a tuition payment plan. Some colleges let families divide a semester or annual bill into several payments instead of paying the full balance at once. Terms and fees vary by school, so compare the payment schedule and total cost before enrolling.

This can also make it easier for parents and students to split responsibility. A parent might handle a set amount each month while the student pays for books, transportation or some living costs.

Custodial accounts

Money held in an account established under the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act can be used for college expenses.

The key distinction is ownership. Gifts to these accounts are generally irrevocable, and the assets eventually come under the child’s control when they reach the applicable age under state law. That means the student may ultimately use the money for college, or for something else.

American Opportunity Tax Credit

The American Opportunity Tax Credit may be available for eligible students during their first four years of higher education. For 2026 tax guidance, the maximum credit remains $2,500 per eligible student, with income and other eligibility requirements. Up to 40% of an eligible credit may be refundable.⁴

Qualified expenses generally include tuition, required enrollment fees and certain course materials.

Tax credits don’t usually reduce the tuition bill when it arrives. Instead, they may reduce federal income tax owed or, for the refundable portion of the American Opportunity Tax Credit, increase a refund.

Lifetime Learning Credit

The Lifetime Learning Credit may be worth up to $2,000 per tax return for eligible taxpayers. Unlike the American Opportunity Tax Credit, it isn’t limited to the first four years of higher education and the student doesn’t have to be pursuing a degree.⁴

That makes the credit relevant to graduate education and some courses taken to gain or improve job skills.

You can’t claim both education credits for the same student and the same expenses in the same tax year. The same expenses also generally can’t be used for more than one education tax benefit.⁴

Life insurance

Within certain policies, such as whole life or indexed universal life (IUL), any accrued cash value can generally be accessed through policy loans or withdrawals to help supplement college funding (assuming the policy remains in force). With IULs, in particular, you can access the cash value at any age, at any time and for any reason. Keep in mind, policy loans and withdrawals will reduce cash value and death benefit. Policy loans are subject to interest charges.

Federal Work-Study and other student jobs

Federal Work-Study gives eligible students an opportunity to earn money through part-time employment while they’re in school. Students must submit the FAFSA and qualify through a participating school. Jobs and funding are limited and aren’t guaranteed from one year to the next.⁶

Work-study typically comes as a paycheck. It doesn’t automatically reduce the tuition bill. Students often use the money for everyday expenses, although some schools allow earnings to be directed toward billed school costs.

Students who don’t qualify for work-study can still consider regular part-time or seasonal employment.

Employer tuition assistance

Employer benefits are one of the more overlooked ways to pay for college, particularly for adults returning to school.

Some employers offer educational assistance for tuition, fees, books, supplies or other eligible expenses. Under a qualifying Section 127 program, up to $5,250 of employer-provided educational assistance can be excluded from an employee’s taxable income in 2026. The benefit depends on what the employer’s plan offers.⁷

This benefit applies to the employee’s own education, so a parent generally can’t use their employer’s Section 127 benefit to pay a child’s tuition.

Federal and private student loans

Loans may be one part of a college funding plan when savings, income and financial aid don’t meet the full cost.

• Federal student loans for students include Direct Subsidized and Direct Unsubsidized Loans. The terms differ, including how interest accrues, so students should review the financial aid offer and understand the amount they’re accepting.²

• Parents of dependent undergraduate students may also be eligible for Parent PLUS Loans. Beginning July 1, 2026, new Parent PLUS borrowing limits apply to many new borrowers. Unless the student qualifies for a limited exception, all parents combined may borrow up to $20,000 per academic year and $65,000 over the student’s undergraduate study.⁸

• Private student loans are offered by banks, credit unions and other private lenders. Rates, fees, credit requirements and repayment options vary. Before borrowing, compare the total amount that will have to be repaid — not just the amount available today.

Creative ways to lower how much college costs

Finding money for college is only half of the equation. Reducing the bill can leave less to fund in the first place.

A few possibilities include:

• Compare net prices. A school with a higher sticker price may cost less after grants and scholarships.

• Start at a community college. Students may be able to complete some coursework at a lower cost before transferring. Confirm in advance that credits will transfer into the intended degree program.

• Earn college credit earlier. Advanced Placement or dual-enrollment courses may reduce the number of college classes a student needs, depending on the school’s credit policies.

• Keep applying for scholarships. Current college students can qualify too.

• Ask about an aid adjustment. If a family’s financial situation has changed significantly since the FAFSA information was reported, the student can contact the school’s financial aid office and ask whether a professional judgment review is appropriate.²

• Look beyond tuition. Housing, meal plans, books and transportation can change the total cost considerably.

• These approaches won’t fit every student, but they can be worth reviewing before deciding how much needs to be paid by savings or loans.

Questions families ask about paying for college

How do parents pay for kids’ college tuition?

Most families don’t rely on a single source. Parents may use college savings, current income or other savings while students contribute scholarships, grants, earnings and financial aid.

The useful question isn’t necessarily, “Can we pay the entire bill?” It’s, “What amount makes sense for us to contribute, and what will our student be responsible for?”

Having that conversation before choosing a school also gives the student a clearer idea of what different college prices could mean after graduation.

Should parents pay for college?

There’s no set amount or percentage parents are expected to pay for college. Some families cover most expenses, while others split costs with their student or decide on a fixed amount they can contribute.

For many parents in their 40s and 50s, college costs come at a time when they’re also managing other financial priorities. As Mark Zagurski, director of strategy and operations at Mutual of Omaha Advisors and host of the Make it Personal podcast explains, “Many Gen Xers are in their peak earning years, but also juggling expenses like mortgages, kids’ education, aging parents, and saving for their own retirements.”

Those competing priorities can make the decision more complicated. Mutual of Omaha’s 2026 Retirement Accounts and Tax Rules survey found that only 43% of respondents felt very or extremely confident making decisions about their retirement accounts**.

Before deciding how much to contribute toward college, consider what fits alongside retirement savings, debt payments, emergency savings and other household expenses. It can also help to talk with your student about what they can reasonably contribute through savings, work, scholarships or financial aid.

What about using a Roth IRA to pay for college?

A Roth IRA can be used for certain higher education expenses without the additional 10% early-withdrawal tax that might otherwise apply. However, that doesn’t mean the withdrawal is always tax free. Roth IRA distributions follow specific tax and ordering rules, so it’s important to understand how a withdrawal could affect both your current taxes and your retirement savings.⁵

Can I write off my daughter’s college tuition on my taxes?

Not as a general federal tuition deduction.

However, you may qualify for the American Opportunity Tax Credit or Lifetime Learning Credit when you pay eligible education expenses for a daughter or other student you claim as a dependent, provided the requirements for the credit are met.⁴

Tax rules depend on who claims the student, who paid the expense, the type of expense, income and other factors. Check current IRS guidance and speak with a tax professional about your situation.

How can I get tuition paid for as an adult?

Adults returning to college have many of the same options as younger students. Start with the FAFSA, since eligible adult students may qualify for grants, federal student loans and Federal Work-Study.

Then check your employee benefits. An employer educational assistance program may pay some eligible tuition and other education expenses. The Lifetime Learning Credit may also apply to eligible courses, including certain classes taken to acquire or improve job skills.⁴ ⁷

Choosing how your family will pay for college

Paying for college is often a combination rather than a single decision. Start with what the school will actually cost after grants and scholarships. Then look at what has already been saved, what parents and students can reasonably contribute and whether work, tax benefits or other resources change the amount left over.

If borrowing is still part of the picture, look at the debt in the context of the rest of the family’s finances. College costs change from year to year, and so can income, aid and family priorities. It’s worth running through the numbers again before each school year rather than assuming last year’s plan still fits.

Disclosures:

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc.  Mutual of Omaha Advisors is a division of Mutual of Omaha Insurance Company, a stock insurer*.

All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.

Mutual of Omaha and its representatives do not provide tax and/or legal advice, and the information provided herein is general in nature and should not be considered tax and/or legal advice.

Not all Mutual of Omaha agents are registered representatives or financial advisors.

*Mutual of Omaha Insurance Company (the Company) is a stock insurer. Policyholders of the Company are members of Mutual of Omaha Holding Company (MOHC) of Omaha, Nebraska. The Company is an indirect, wholly‑owned subsidiary of MOHC.

Sources:

** Mutual of Omaha, Retirement Accounts and Tax Rules, proprietary research conducted by quantilope Feb. 6-9, 2026; n=300 adults age 40+ with annual household income of $50,000+.

1. College Board, Trends in College Pricing and Student Aid 2025, November 2025.  https://research.collegeboard.org/trends/college-pricing

2. U.S. Department of Education, Federal Student Aid, Steps for Students Filling Out the FAFSA Form, reflecting the 2026-27 FAFSA process.  https://studentaid.gov/articles/fafsa-student-steps/

3. Internal Revenue Service, Topic No. 313, Qualified Tuition Programs, updated Feb. 6, 2026.  https://www.irs.gov/taxtopics/tc313

4. Internal Revenue Service, Education Credits — AOTC and LLC, updated 2026.  https://www.irs.gov/credits-deductions/individuals/education-credits-aotc-and-llc

5. Internal Revenue Service, Publication 970: Tax Benefits for Education (2025).  https://www.irs.gov/publications/p970

6. U.S. Department of Education, Federal Student Aid, 8 Things You Should Know About Federal Work-Study.  https://studentaid.gov/articles/8-things-federal-work-study/

7. Internal Revenue Service, Educational Assistance Programs, April 2026.  https://www.irs.gov/newsroom/irs-updates-frequently-asked-questions-about-section-127-educational-assistance-programs

8. U.S. Department of Education, Federal Student Aid, PLUS Loan Credit Counseling, including July 1, 2026 Parent PLUS changes.  https://studentaid.gov/plus-loan-credit-counseling

9. U.S. Department of Education, Federal Student Aid, Completing the FAFSA Form: Steps for Parents, reflecting the 2026-27 FAFSA process.  https://studentaid.gov/articles/fafsa-for-parents/