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When your high schooler starts thinking about college, one of the best things you can do is to have The College Talk: a frank discussion about education, career, and life goals. The College Money Talk — the dollars and cents of the process — should be a part of the conversation. This will help you and your child stay on the same page during the college search.

We’ve assembled a list of topics you may want to include, such as how much you, as parents, can contribute toward college. We’ll also guide you through how to structure the conversation, explain financial aid, and more.

Figure Out How Much You Can Afford

First and foremost, parents should look at their finances as a whole: retirement savings, investment accounts, monthly budget, upcoming large expenses, etc. Also think about the current economy, especially inflation and the bear market.

“Parents need to keep in mind their own financial security first and foremost,” says Brian Walsh, senior manager of financial planning at SoFi. “We don’t want parents to take on too much debt or put themselves in a sticky situation because they helped their kids too much.”

Walsh adds that it’s essential for parents to figure out on their own how much they can contribute before talking to their kids. One way to do that is to see how their retirement savings stack up against suggested amounts:

Recommended: Inflation and Your Retirement Savings

Consider the Timing

You may wonder when, and how often, you should have the college and money talk. Walsh says you can relax during the early high school years.

“Things will heat up junior and senior year,” Walsh says. “That’s when you’re looking at schools the kids are interested in, and determining how realistic it is they’ll get into those schools and secure financial aid. Senior year is when everything comes together — making decisions about where to go and ultimately coming up with a plan for how to pay for college.”

Consider blocking out time to have the conversation freshman year in high school, then intermittently throughout junior and senior year. Use your best judgment in broaching the conversation, and choose a time when your kids seem receptive.

Structure the Conversation

Walsh suggests beginning with a discussion of the paths available to your child after college. This may involve different professions and careers and how to attain them, even jobs that don’t require a college education. Your child may also have no idea about the potential earning power of various professions — a great segue into the cost of college.

According to Walsh, it’s best to have this talk in an environment where everyone feels comfortable. That may be a favorite coffee shop or the living room couch. If you’re not sure, ask your student what they prefer.

If you want to make it a more collaborative process, you can give your child assignments. For example, you may work with your child to search for colleges, look up financial concepts, debate the trade-offs of a big-name school vs. a lesser-known institution, and more.

Your student may also want to research the graduation rates of colleges. Walsh suggests having students identify the schools where students tend to graduate in four years or close to that.

When you start the money conversation, consider bringing up the average “net cost.” That’s a college’s cost of attendance (which factors in tuition, fees, books and supplies, and living expenses) minus any grants and scholarships. According to the College Board, the average tuition and fees for 2024-25 of a private college was $43,350. The average tuition and fees for public in-state college was $11,610.

Explain About Financial Aid

Financial aid can come from various sources: colleges and universities, the government, and private lenders. Financial aid can include grants, scholarships, work-study, and loans:

•   Grant: Grants are a type of need-based aid that you don’t have to repay.

•   Scholarship: A financial award based on academics, athletics, other achievements, or diversity and inclusion. It may or may not be based on financial need, and doesn’t have to be repaid.

•   Work-study: An on-campus job that helps cover the cost of school. You must file the Free Application for Federal Student Aid (FAFSA) to qualify for work-study.

•   Federal Student Loan: A loan is money you borrow to pay for college or career school. You must pay back loans with interest. Federal student loans come from the federal government by filing the FAFSA.

•   Private Student Loan: These loans come from a private bank or online lender. Private student loans do not offer the same federal protections that come with federal student loans, such as loan forgiveness and income-driven repayment plans. Consider these factors before you decide to pursue private student loans.

For detailed information on all available financial aid options, reach out to the guidance office or college office at your child’s high school. Online resources, like StudentAid.gov and SoFi’s FAFSA Guide, are also helpful.

“When you’re down to the final couple of colleges, work with the admissions and financial aid offices at those schools,” Walsh says. “They will be the best resources during senior year and going forward.”

Recommended: Scholarship Search Tool

Talk About Debt (and Debt Repayment)

Many high school students don’t have experience with loans or understand them at all.

“One of the risks of student loan debt is that it can feel like Monopoly money — it’s not real,” Walsh says. In your discussion, try to make student debt more concrete for your child.

Walsh recommends going through a sample budget based on the average starting salary of a career related to your child’s preferred major. (Also check out our guide to ROI by bachelor’s degree.) Calculate the amount your child may earn each month. Estimate what they may pay for rent, utilities, groceries, transportation, student loans, and more. How much will they have left over after those expenses?

Although it may feel awkward, it’s worth talking to your kids about student loans to help them understand how to handle them.

Discuss Parent / Child Contributions

“Be transparent with the student so they know what to expect when they look at different schools,” Walsh says. He urges parents not to overextend themselves or feel guilty if they can’t contribute as much as they’d like. About 36% of parents paid the entire bill for their kids to go to college in 2024, down from 43% in 2016.

Look for Ways to Cut Costs

During your college money talk, you may want to explore strategies for cutting expenses. Walk through a sample college budget, and look for ways to save on living arrangements, transportation and travel, Greek life, computers, books and supplies, dining out, and Wi-Fi. Doing all this ahead of time allows you to pick and choose what’s important and plan how parents and kids will spend their money.

You might also suggest that your child begin at a two-year school to save money, then transfer to a four-year institution.

Recommended: A Complete Guide to Private Student Loans

The Takeaway

Paying for college often involves an emotional tug-of-war between a student and their parents. Walsh urges families to use The College Money Talk as a teaching moment. “It’s an opportunity for your child to learn valuable lessons on how debt and savings work,” he says, “and that can help them make better financial decisions in the future.”

Parents should examine their finances and agree on their family contribution before discussing it with their student. Because high schoolers have little experience with money, parents can make it more concrete by walking through sample budgets: one for their expenses while in college, and another that projects their income and student loan debt after graduation.

Ways to pay for college include cash savings, scholarships, grants, federal work-study, and federal and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

How do you tell your kid you can’t afford their dream college?

Be honest and empathetic when explaining your financial limitations. Emphasize your support for their education and explore alternative options together, such as scholarships, grants, more affordable colleges, or transferring after two years at a community college. Reassure them that success depends on their effort, not the school’s prestige.

Do most parents pay for their kids’ college?

About 36% of parents paid for their child’s full college costs in 2024. However, that doesn’t mean you must follow suit, particularly if it will put a strain on your finances. Consider all aspects of your financial situation before deciding how much you can put toward the cost of college.

How do middle class families pay for college?

Paying for college involves planning and research, and that’s the case for families at any income level. Most families cover the cost of attendance through a combination of personal savings, need-based grants, scholarships, work-study, and student loans. This involves filing the FAFSA to see the amount of need-based financial aid your child may receive. You can also arrange to set up a payment plan, in which you make payments over the course of 10 or 11 months during each school year.

About the author

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

This content is provided for informational and educational purposes only and should not be construed as financial advice.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q424-045

The growing cost of college means that parents or grandparents who intend to pay part or all of the tab for a child need to chart a course. A tax-advantaged 529 college savings plan is one way to save for future education costs.

Although 529 plans have been around since 1996, many parents still aren’t sure how they work. Yet they are worth knowing about in detail, as they can be used for a variety of educational expenses and are not subject to federal taxes.

Read on to learn more on 529 plans and whether opening one is the right move for you.

529 Plan Basics

A 529 plan is a tax-advantaged savings account designed to help families save for education expenses. Contributions grow tax-free, and withdrawals for qualified expenses, such as tuition, books, and room and board, are also tax-free. Many states offer additional tax benefits for residents who contribute to their state’s plan.

Funds can be used for various educational institutions, including colleges, universities, trade schools, and even some K-12 expenses. 529 plans offer flexibility and can be transferred to other family members, if needed. There are two types of 529 plans: prepaid tuition plans and education savings plans, each with unique benefits.

Prepaid Tuition Plan

A prepaid tuition plan allows you to prepay tuition and fees at certain colleges and universities at today’s prices for a child’s future educational needs. Such plans are usually available only at public schools and for in-state students. Only nine are accepting new applicants, and the funds saved are typically not able to be used for room and board.

The main benefit of a prepaid college plan is that you could save big on the price of college by prepaying before prices go up. And contributions are considered gifts, so deposits up to a certain threshold each year ($19,000 in 2025, or $38,000 for a married couple splitting gifts) qualify for the annual and lifetime gift tax exclusion.

A few special-case guidelines to note:

•   If your child doesn’t attend a participating college or university, you will likely be able to use the funds you set aside at another school. Another option may be to transfer the plan to an eligible sibling. If no one in the family plans on attending college, most plans will refund your money, perhaps minus a cancellation fee.

•   If your state government doesn’t guarantee the plan, you may lose the payments you’ve made if the state runs into budget shortfalls.

•   Prepaid tuition plans may charge an enrollment fee and ongoing administrative fees.

•   Although most of the plans can’t be used for room and board, Florida Prepaid Plans, for example, offer a prepaid dormitory plan of two semesters of dorm fees for each year of state university coverage.

An alternative to the state-sponsored plans is the Private College 529 Plan, which has over 300 participating institutions nationwide. The Private College 529 Plan is a prepaid tuition plan specifically designed for private colleges and universities. It allows families to lock in current tuition rates at participating private institutions, protecting against future tuition increases.

Recommended: Private vs Public College

Education Savings Plan

The second type of 529 plan is an education savings plan. Here’s how it works:

•   You can contribute monthly, quarterly, or annually, or deposit a lump sum. Beyond parents making regular payments, 529 plans can be a clever way for the extended family to give a meaningful gift on birthdays or holidays. There is no limit on how much you can add yearly, but you’ll have to fill out gift tax Form 709 if you contribute more than the annual gift amount.

•   While contributions are not deductible on the federal level, many states provide tax benefits for saving in a 529 plan, such as deducting contributions from state income taxes or giving matching grants. Check your local tax laws to see if you qualify.

•   Once you contribute, you will likely have a range of investment options to choose from. These vary from state to state and may include mutual funds and exchange-traded funds (ETFs).

•   You may want to tailor your choices to the date you expect to withdraw the money. You can possibly be more aggressive if you have a longer timeline, but may sway more conservatively if you only have a few years.

•   Money can be withdrawn tax-free from a 529 savings plan to pay for any “qualified higher education expense,” which includes tuition, fees, books, computers, and room and board.

•   You can make withdrawals as long as your child is enrolled at least half-time at an accredited school, regardless of where in the United States it is, and occasionally abroad. Parents can also withdraw up to $10,000 a year to pay for K-12 tuition expenses and for student loan repayment.

•   If you withdraw money for the above expenses, you won’t have to pay federal income tax, and often state income tax, on your earnings. If you withdraw the funds for other reasons, you’ll have to pay taxes, and you may or may not be able to avoid the 529 withdrawal penalty, a 10% federal tax penalty on the earnings.

•   Starting in 2024, families with leftover savings in a 529 college savings account may be able to roll it to a Roth IRA tax- and penalty-free. That is one of several retirement savings changes that are part of the Secure 2.0 Act.

One last note: It is possible to change the beneficiary of a 529 plan to another eligible family member. For example, you can switch to a younger child if your oldest got a scholarship.

How 529 Savings Plans Compare With Other Options

When planning for education expenses, 529 savings plans are a popular choice due to their tax advantages and flexibility. However, other options are available, each with unique benefits and limitations. Comparing a 529 plan to alternatives like a Coverdell Education Savings Account, basic brokerage account, traditional IRA, Roth IRA, or UGMA/UTMA account can help families choose the best strategy.

Recommended: Financial Aid for Higher-Income Families

Coverdell Account

Like a 529 plan, a Coverdell account, also called an Education Savings Account (ESA), is a tax-advantaged savings account to pay for qualified education expenses.

Unlike a 529 account, total contributions from all sources to a Coverdell account cannot exceed $2,000 annually per beneficiary. Another difference is income limits: You can only use an ESA if your modified adjusted gross income is less than $110,000 (singles) or $220,000 (married couples filing jointly).

You can only make contributions until the child reaches age 18, and all funds must be withdrawn by the time the beneficiary reaches age 30. A 529 plan generally does not restrict the age of the beneficiary.

Basic Brokerage Account

Instead of a 529 plan, some families may favor a brokerage account, which affords the freedom to choose whatever investments they want and the ability to use proceeds for any need a young person has.

The main benefit of a 529 plan is that you don’t have to pay capital gains tax on any distributions used for qualified education expenses. Many families, however, pay a 0% long-term capital gains tax rate anyway. (Long-term capital gains apply to a security held for a year or more. The day-to-day increases or decreases in an asset’s value before it is sold are unrealized gains and losses.)

For 2025, married couples filing jointly with taxable income of $96,700 or less and single filers making $48,350 or less may qualify for the 0% long-term capital gains rate.

A 529 account, then, may be of greatest use to families that need an additional tax shelter.

Recommended: How to Reduce Taxable Income for High Earners

Traditional IRA

Withdrawals from a traditional IRA before age 59 ½ that are used for qualified higher education expenses are not subject to the 10% early distribution penalty — but you will still pay income tax on the distribution.

Money in a qualified retirement plan is not reported on the FAFSA®, but distributions may be reported as untaxed income, and income is weighted much more heavily than assets for financial aid. Remember that a 529 savings plan will have a limited impact on the financial aid offer a student receives.

It is generally thought that retirement plans should be used for just that, and not for college expenses.

Recommended: How College Financial Aid Works

Roth IRA

With a Roth IRA, you can withdraw contributions tax- and penalty-free at any time, but distributions will be reported as untaxed income on the FAFSA, reducing eligibility for need-based financial aid.

You generally must be at least age 59½ and have had the Roth account for at least five years to withdraw earnings tax- and penalty-free. If you are under 59½, you may be able to avoid a penalty (but not taxes) if you withdraw earnings to pay for qualified education expenses.

Some people opt to max out their Roth IRA contributions and then invest additional money in a 529 plan.

UGMA and UTMA Accounts

You can open a Uniform Gifts to Minors Act or Uniform Transfers to Minors Act account on behalf of a child under age 18. The adult custodian controls the money, but gifts and transfers irrevocably become the property of the child.

As with a 529 plan, annual contributions to a UGMA or UTMA account are unlimited, and gifts below the annual gift threshold do not need to be reported to the IRS on gift tax Form 709.

Unlike college savings plans, there is no penalty if the account assets aren’t used to pay for college. Once the minor reaches adulthood, the money is turned over to the former minor, who can use the assets for college or anything else.

But custodial accounts have drawbacks when compared with 529 savings plans: The accounts offer no tax benefits when contributions are made. Earnings are subject to taxes. A custodial account is also counted as a student asset on the FAFSA and will weigh more heavily against financial aid eligibility than parents’ assets or assets held in a 529 account or an ESA.

Choosing a 529 Savings Plan

Every state offers a 529 savings plan, but not all are created equal. When trying to find the best 529 college savings plan, you may want to think about the tax benefits and the fees.

First, you may want to understand whether you qualify for a state income tax deduction or credit for your contributions, based on your state of residence and the plan. Check your state laws and consult a tax professional to learn more about your particular situation.

The next thing you could consider are the fees associated with your plan, which could include enrollment fees, annual maintenance fees, and asset management fees. Some states let you save on fees if you have a large balance, contribute automatically, are a state resident, or opt for electronic-only documents.

The Takeaway

For many students, the cost of college can be eased with a tax-advantaged 529 savings plan. The accounts allow for tax-free growth of funds that can help dreams of affording higher education come true.

529 plans are still rarely used, though, as most college students take on loans to get through school. Students can rely on both federal and private student loans, in addition to cash savings, scholarships, and grants.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

Are 529 plans worth it?

A 529 plan can be a worthwhile college savings vehicle, depending on a family’s situation. If the student is definitely going to attend college and if the state of residence offers tax benefits for these savings, or a prepaid tuition plan, it can be a good option.

Why shouldn’t you invest in a 529 plan?

For some people, a 529 may not be the best option. If a family is unsure whether a child will attend college, lives where there aren’t state-level tax breaks for these programs, or thinks they can earn higher returns elsewhere, they might not want to open a 529 college savings plan.

Is a 529 plan better than a savings account?

A savings account offers more flexibility than a 529 college savings plan, but it won’t offer the tax advantages that a 529 does. With a 529 account, contributions will grow tax-free, and withdrawals for qualified education expenses are also not subject to taxes.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

If you’ve applied for federal student loans in the past, chances are you’re familiar with the Expected Family Contribution, or EFC — a number used by colleges to figure out how much financial aid students are eligible for.

Starting in the 2024-2025 school year, the EFC was replaced by the Student Aid Index, or SAI. It fulfills the same basic purpose but works a little differently, which we’ll discuss in-depth below.

This change was part of the larger FAFSA® Simplification Act, which itself was part of the larger Consolidated Appropriations Act passed in December 2020. The idea is to simplify the federal aid application process by making it more straightforward for students and their families, particularly for lower-income earners. But all changes come with a bit of a learning curve, even if simplicity is the goal. Here’s some helpful information about the Student Aid Index.

Student Aid Index vs the Expected Family Contribution (EFC)

While both of these calculations perform a similar function, there are important differences in how they work—and important ramifications on how students receive financial aid.

How the EFC Currently Works

Despite its name, the Expected Family Contribution is not actually the amount of money a student’s family is expected to contribute—a point of confusion Student Aid Index is meant to clarify.

Rather, the EFC assesses the student’s family’s available financial assets, including income, savings, investments, benefits, and more, in order to determine the student’s financial need, which in turn is used to help qualify students for certain forms of student aid, including Pell Grants, Direct Subsidized Loans, and federal work-study.

A very simplified version of the calculation looks like this:

Cost of college attendance – EFC = Financial Need

However, a college is not obligated to meet your full financial need, and they may include interest-bearing loans, which require repayment, as part of a student’s financial aid package.

Still, the EFC plays an important role in determining how much financial aid you’re eligible for and which types.

How Does the Student Aid Index Work?

The Student Aid Index works in much the same way: the figure will be subtracted from the cost of attendance to determine how much need-based financial aid a student is eligible for. However, there are some important updates that come along the rebranding:

Pell Grant Eligibility

Pell Grant eligibility is determined primarily by a student’s SAI, which measures financial need based on information provided in the FAFSA. Unlike the EFC, the SAI can go as low as -$1,500, helping to identify students with the highest need. Students with lower SAIs are more likely to qualify for Pell Grants, which are awarded to low-income undergraduate students to help cover educational expenses.
Eligibility also depends on factors like enrollment status, the cost of attendance, and federal guidelines. The SAI provides a clearer, more equitable assessment of financial need for Pell Grant allocation.

New Rules

The SAI comes along with new rules that allow financial aid administrators to make case-by-case adjustments to students’ financial aid calculations under special circumstances, such as a major recent change in income. The bill also reduces the number of questions on the FAFSA down to a maximum of 36 (formerly 108), removes questions about drug-related convictions (which can now disqualify applicants from receiving federal aid), and more.

Recommended: How to Complete the FAFSA Step by Step

How Will the Student Aid Index Be Calculated?

The Student Aid Index will be calculated much the same as the Expected Family Contribution is calculated today, though the bill does include some updates to make the process easier.

For one thing, the bill works together with the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act to import income directly into a student’s FAFSA, simplifying the application process.

The new FAFSA will also automatically calculate whether or not a student’s assets need to be factored into the eligibility calculation, shortening the overall application and offering more students the opportunity to apply without having their assets considered.

The bill also removes the requirement that students register for the Selective Service in order to be eligible to receive need-based federal student aid.

Recommended: Getting Financial Aid When Your Parents Make Too Much

What Is a Good Student Aid Index Score?

The Student Aid Index isn’t like a test or a report card — there aren’t really “good” or “bad” scores, or “scores” at all. It just depends on your personal financial landscape.

But just like the EFC, the lower the SAI, the more need-based aid a student may be qualified for. Since need-based aid includes grants, which don’t need to be repaid, and subsidized loans, whose interest is covered by Uncle Sam while you’re attending school, a lower SAI may translate into a lower overall college price tag.

Recommended: Private Student Loans vs Federal Student Loans

How Will the Student Aid Index Be Used?

Like the EFC before it, the SAI is used to help colleges determine a student’s financial need based on their financial demographics. Although the school itself may have its own grant programs and other types of aid, certain forms of federal student aid — such as Pell Grants and Direct Subsidized Loans — are offered based on demonstrable financial need, and the SAI is a key part of the calculation used to determine that need.

In short: the SAI will be used to determine how much financial aid a student is eligible to receive.

When Did the SAI Go Into Effect?

The SAI was implemented in the 2024-2025 academic year.

The Takeaway

The Student Aid Index is essentially the same number as the Expected Family Contribution, but it’s been renamed as part of the FAFSA Simplification Act in order to clarify to families what exactly the number means. This act also bundles in some other important changes that will hopefully simplify the overall student loan application process and increase access to education for the lowest-income students and their families.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

What is the Student Aid Index?

The Student Aid Index (SAI) is a measure used to determine a student’s eligibility for federal financial aid. It replaced the Expected Family Contribution (EFC) starting in the 2024-2025 academic year. The SAI assesses a family’s financial situation to calculate the amount of need-based aid a student may qualify for.

How is the Student Aid Index calculated?

The SAI is calculated using financial information from the FAFSA, including family income, assets, and household size. Unlike the EFC, the SAI can be a negative number, which helps identify students with the highest financial need.

Why was the SAI introduced?

The SAI was introduced to improve clarity and fairness in the financial aid process. By allowing for a negative value, it better reflects the financial need of students from low-income families. The change aims to make financial aid distribution more equitable and easier to understand for students and families.

Photo credit: iStock/SDI Productions

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q424-061

Deciding to pursue a master’s degree during a recession can be a strategic move or a financial risk, depending on your circumstances. While economic downturns often reduce job opportunities, they can also provide a chance to invest in education, build new skills, and enhance career prospects.

Historically, times of economic turmoil have seen big upticks in graduate school enrollment. But is this the right move for you now?

This guide explores the pros and cons of pursuing a master’s degree during uncertain economic times to help you make an informed decision.

Why People Go Back To School During Recessions

Periods of decline in economic activity (aka recessions) are commonly accompanied by corporate layoffs, rising unemployment, and dwindling wage growth. Because there are fewer employment opportunities, job hunting and career advancement become more competitive. Many workers decide a return to school, often to earn a master’s degree, makes sense in a tough employment market.

Earning an advanced degree can boost your earning power in your chosen field or provide an opportunity to change fields. Career changers may gravitate to growing, “recession-proof” industries and fields that they are passionate about.

Recommended: 12 High Income Skills to Learn

Who Should Get a Master’s Degree?

Whether you should get a master’s degree depends on your professional and academic goals. A master’s degree indicates a high level of knowledge in a profession or research area. It takes anywhere from one to three years of full-time study to complete a master’s. A bachelor’s degree is required to apply for a master’s program.

For academics, a master’s is usually a stepping stone to a Ph.D. or other doctoral degree. Professional master’s degrees can also be the first step toward advanced degrees required for doctors, pharmacists, and lawyers, and are a necessary part of education for those careers.

Master’s degrees can also be required or particularly helpful in education, social service, health care, business, and STEM fields (science, technology, engineering, and mathematics).

Recommended: What Should I Do After My Master’s Degree?

Pros of Getting a Master’s Degree in a Recession

For many people, a recession is a good time to go back to school, either full- or part-time. Here’s why.

Potential Salary Boost

In many careers, a master’s degree will command a higher salary and increase job security. According to the Bureau of Labor Statistics (BLS), workers with graduate degrees (master’s, professional, and doctoral) have the highest earnings.

The median weekly earnings for full-time workers over 25 with a master’s degree is $1,737, compared to $1,493 for employees with a bachelor’s degree only.

Increased Job Security

Workers with graduate degrees also experience lower levels of unemployment, according to BLS data. The unemployment rate in 2023 for people with a master’s was 2.0%, compared to 2.2% for workers with bachelor’s degrees.

People who have been negatively affected by a recession — either laid off or unemployed for an extended period — often find that an advanced degree can lead to more job security and advancement. As mentioned above, recessions can also be a good time for workers in hard-hit industries to gain skills and knowledge through a master’s in a fast-growing field.

Many grad school students find that networking with other students, faculty, and alumni helps them find new opportunities, especially in a competitive job market.

Easy Access To High Quality Programs

Hundreds of high-quality, in-demand graduate degree programs are now available online from prestigious colleges and universities. Remote learning makes these programs accessible to students anywhere in the country. Online programs often cost less than in-person learning and can offer more flexibility for students who need to continue working full- or part-time.

Recommended: 10 Most Affordable Online Colleges in the United States

Cons of Getting a Master’s Degree in a Recession

Grad school isn’t right for everyone, and making this move demands careful consideration. Potential cons of going to grad school in a recession include:

Costs and Potential Debt

The average cost of a master’s degree is $62,820, according to a 2024 report from the Education Data Initiative. That does not include living expenses or lost wages from taking time off work. And people with a master’s degree carry an average of $69,140 in student loan debt.

Determining whether taking on federal or private student loan debt is worth the increased earning potential or career satisfaction is an important step in your decision-making process.

Increased Competition for Admissions

You’re not the only one debating whether to ride out tough economic times by going back to grad school. That can mean increased competition for the best programs. If a degree from a particular college or university is part of your career plan, carefully consider your timing.

Missed Work Experience

If you’re considering leaving a job to attend grad school, keep in mind that you may miss valuable work experience that can put you in a better position when the recession ends. Working part-time can help pay for grad school and sometimes alleviates missed work experience, but not always. That’s because part-time employees don’t always encounter the same opportunities to gain valuable experience as full-time staffers.

Recommended: Undergraduate vs. Graduate Student Loans: How They Differ

How Much Does a Master’s Degree Cost?

Depending on the field of study and institution, master’s programs range from $18,000 to $47,000 per year. Unlike many doctorate programs that waive tuition and fees and even offer a stipend, master’s degrees are not fully funded.

Ways To Pay for a Master’s Degree

Most students rely on a combination of savings, scholarships, grants, federal loans, private loans, and help from employers to pay for graduate school.

Federal Grants

Federal grant programs include the Pell Grant, which is generally available only to undergrads who demonstrate exceptional financial need. However, it may be possible to receive some grant funding to help you pay for grad school during a recession. Remember, this time around you’re an independent student, and you won’t be tied to your family’s income to determine need.

Another federal grant that may be available to graduate students is the Teacher Education Assistance for College and Higher Education, or TEACH Grant. This grant has relatively stringent requirements and is available for students pursuing a teaching career who are willing to fulfill a service obligation after graduation.

Filling out the Federal Application for Student Aid (FAFSA) is the first step to determining whether you’re eligible for federal grants.

Scholarships

The FAFSA also gives you access to many scholarships. There are scholarships offered in every field imaginable. Start your search with these online tools:

•   Graduate School Scholarship Search at Sallie Mae

•   Scholarship Search Engine at CollegeScholarship.org

•   SoFi’s State Scholarship Search

Federal Student Loans

Grad students may be offered loans as part of their financial aid offer. A loan is money you borrow and must pay back with interest. Loans made by the federal government, called federal student loans, usually have more benefits than loans from banks or other private sources.

The lifetime limit for Direct Subsidized and Unsubsidized student loans is $138,500 for graduate or professional students. Of this amount, no more than $65,500 can be in subsidized loans. This includes student loans borrowed during undergraduate study.

Private Student Loans

Many students also rely on private student loans to help pay for graduate school. The maximum amount that students can borrow with a private student loan varies by lender, but can’t exceed the cost of attendance.

The cost of attendance is the combined total of tuition and fees, books and supplies, living expenses, transportation, and miscellaneous expenses. This estimate may also include dependent care, study-abroad, and costs related to disabilities.

Recommended: A Complete Guide to Private Student Loans

The Takeaway

Pursuing a master’s degree can be a great way to enhance your skills and career opportunities. Taking advantage of a slow or troubled economic time to do so can help ensure your job security in the future. That said, it’s important to consider the tuition costs associated with a graduate degree, the potential for taking on debt, and the effects of missed earnings and opportunities if you take time off work to go back to school.

Ways to pay for graduate school include cash savings, tuition assistance from your employer, scholarships, grants, and federal and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

Is grad school a good place to ride out a recession?

It can be. Recessions are usually accompanied by high unemployment and layoffs. For many people, gaining new skills and expertise in a graduate program can be a good way to make yourself recession-proof in the future.

Do more people head for grad school during a recession?

Yes, more people often pursue graduate school during a recession as job opportunities shrink and individuals look to enhance skills or change careers. Higher education can provide a competitive edge, but it’s crucial to weigh the costs, especially when taking on debt during uncertain economic times.

What are worthwhile master’s degrees to get during a recession?

Master’s degrees in fields with strong job stability and growth potential are worthwhile during a recession. Examples include health care, data science, cybersecurity, education, and business administration (MBA). These fields often offer consistent demand, diverse career opportunities, and higher earning potential, making them strategic choices in uncertain economic times.

Photo credit: iStock/izusek

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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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SOISL-Q424-046

The demand for dentists, like other health care professionals, is on the rise, partly due to an aging U.S. population and partly due to more attention on dental health with each generation. The aging population is likely to need additional oral care, some of which can include complicated procedures.

By learning about the average tuition costs and ways to pay for dental school, prospective students can figure out if a dental career is the right choice for their future.

Keep reading to learn more on the employment outlook for dentists, ways to pay for dental school, how to pay for dental school without loans, and more.

Employment Outlook for Dentists

The U.S. Bureau of Labor Statistics (BLS) projects there to be a 5% increase in available dentist jobs from 2023 to 2033. Dentists can work in a variety of settings, such as private practice — either on their own or with a partner — or in an outpatient care center, among others.

The median annual salary of a general dentist was $170,910 in 2023. For perspective, the median annual U.S. income in the same year was $65,470.

While dentistry pays well, it also costs a lot to become a dentist. Dental school programs typically take four years to complete after students have already completed a bachelor’s degree. A degree from an accredited dental school will be either a D.D.S. (Doctor of Dental Surgery) or a D.M.D. (Doctor of Dental Medicine).

Individual universities determine which degree is awarded, but they are both approved by the Commission on Dental Accreditation (CODA), a part of the American Dental Association (ADA). Whichever degree a dental graduate is awarded, chances are they may also have hundreds of thousands of dollars worth of student loan debt to contend with after graduation.

How Much Does Dental School Cost?

The range of dental school costs depends on whether a student is in-state (resident) or out-of-state (non-resident), and whether attending a public or private school. In-state public school tuition is typically going to be the least expensive option for most students.

According to the ADA, the average first-year cost of dental school (public or private), including tuition and mandatory fees, in 2023-2024 was $44,608 for residents and $75,163 for non-residents.

The cost difference between public schools and private schools can be substantial. The average resident cost for the first year of a public dental school program was $41,711, while the first-year cost for private dental school was $84,842 in 2023-24. After four years in school, students are looking at an average of $293,900 in debt.

Prospective students can compare the cost of dental schools and then determine how much they are willing to pay for their education. According to the ADA, there are 81 accredited dental schools throughout the United States and 10 in Canada.

Ways to Pay for Dental School

Even though dental school tuition can be expensive, students have options when figuring out how to pay for dental school. Students can explore scholarships, grants, fellowships, and service programs to help pay for dental school.

Federal and private student loans are also an option. After graduating from dental school, some borrowers may consider refinancing their student loans as they pay off dental school debt. Continue reading for more details on paying for dental school.

1. Scholarships and Grants

Scholarships and grants are awards that, in most cases, don’t have to be repaid. For students without the means to pay for tuition and other costs from personal savings, exploring these options may be a good place to start.

Dental schools may offer scholarships and grants to students who meet certain academic standards or who are working towards a certain type of degree, for example. When researching dental schools, prospective students may consider asking financial aid offices about available scholarships and grants.

Along with reaching out to schools, students may want to research scholarships and grants through organizations like the American Dental Association, the American Association of Public Health Dentistry, or the American Dental Education Association. There are also a variety of online scholarship search tools that students can use to find scholarships.

Recommended: What Is a Scholarship & How to Get One?

2. Service Programs

Several service programs can help pay for dental school, including:

•   National Health Service Corps (NHSC): This federal program offers scholarships and loan repayment options to dental students who commit to working in designated Health Professional Shortage Areas (HPSAs) after graduation. Scholarships cover tuition, fees, and living stipends, while loan repayment programs reduce educational debt in exchange for a minimum service obligation of two years.

•   Armed Forces Health Professions Scholarship Program (HPSP): Provided by branches of the U.S. military, HPSP covers full tuition for dental school, offers a monthly living stipend, and may include bonuses. Participants serve as military dentists for a designated number of years after completing their education, gaining valuable clinical experience and leadership training.

•   Indian Health Service (IHS) Loan Repayment Program: This program is aimed at improving dental care access in Native American and Alaska Native communities. Dentists receive up to $40,000 in loan repayment for a two-year service commitment at an IHS or Tribal site. Participants can extend their service for additional loan repayment benefits.

•   Public Health Service Commissioned Corps: This program allows dentists to serve as officers in the U.S. Public Health Service, providing care in federal agencies like the Centers for Disease Control and Prevention (CDC), Bureau of Prisons, or the Food and Drug Administration (FDA). Participants may receive loan repayment assistance and competitive salaries.

•   State-based programs: Many states offer incentives such as scholarships, grants, or loan repayment programs to dental professionals willing to practice in rural or underserved areas. These programs vary by state and may require service commitments ranging from two to five years.

Each program offers financial relief but requires a contractual commitment to serve specific populations or organizations.

3. Federal Student Loans

Completing the FAFSA® (Free Application for Federal Student Aid) form is the first step students should take to determine eligibility for federal financial aid. To fill out the form, they will need to provide personal identification and financial records.

Federal student loans for graduate and professional school students are either Direct Unsubsidized Loans or Direct PLUS Loans. Students may borrow up to $20,500 each year in Direct Unsubsidized Loans, and eligibility is not based on financial need.

If a student has costs in excess of that borrowing limit, they may want to consider a Direct PLUS Loan. Like a Direct Unsubsidized Loan, eligibility for a Direct PLUS Loan is not based on financial need, although a credit check is required.

Students are encouraged to ask the financial aid office at their school about school-based loans that might be available. Some federal funds are offered to schools instead of directly to students and are tied to certain eligibility requirements.

4. Private Student Loans

It’s always recommended that students exhaust all federal student loan options before considering a private student loan. But if there is still a financial need, a private student loan may be the right choice for some students. Private student loans are available from private lenders and are awarded based on factors including your income, credit history, and credit score, among other factors.

Considering Student Loan Refinancing

After graduating, dentists may consider refinancing their student loans to secure a more competitive interest rate or more favorable terms. Refinancing also allows borrowers to combine all their loans into a single loan. This won’t be the right choice for all borrowers because when you refinance federal loans you’ll lose access to any federal benefits — like any loan forgiveness options.

Should you refinance your student loans? The answer is personal and will depend on factors including the amount of student debt you currently have, your credit score, income, and whether you are your income, and whether you are refinancing with or without a cosigner.

Recommended: Student Loan Refinance Guide

5. Employment

Dental school is rigorous, but if students have the time and energy, they may want to consider working to supplement their educational costs. The federal work-study program is available to graduate and professional students with financial need, and has the same eligibility requirements and position availability as it does for undergraduate students. Financial aid offices at individual schools will have information pertaining to this program.

Training grants and fellowships, an option some dental students might find appealing, are sources of funding that often include a stipend and sometimes cover part of a student’s tuition.

These programs are designed to further a student’s education in a specific research area that interests them. They differ from simple grants in that there is a work component to them.

The Takeaway

Dental school can be expensive but can lead to a fulfilling and lucrative career. When determining how to pay for dental school, students can explore dental school scholarships, grants, federal student loans, and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

How do students afford dental school?

Students afford dental school through a combination of federal and private student loans, scholarships, grants, and work-study programs. Some seek financial aid through military service or dental school repayment programs. Budgeting, saving, and seeking loan forgiveness options also help manage the significant costs associated with dental education.

Does FAFSA cover dental school?

Yes, FAFSA can cover dental school by determining eligibility for federal financial aid, including Direct Unsubsidized Loans and Grad PLUS Loans. While FAFSA doesn’t directly pay for dental school, it provides access to federal loans and grants, helping students finance their education and manage costs effectively.

Is it possible to go to dental school for free?

It is possible to attend dental school for free through scholarships, grants, and service-based programs. Options include military scholarships, school-specific awards, and programs like the National Health Service Corps, which cover tuition in exchange for service commitments in underserved areas after graduation. Financial aid opportunities vary by eligibility.

About the author

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer who covers topics such as credit cards, loans, investing, and budgeting. She has worked for major brands such as Mastercard and Visa, and her work has been featured by MoneyGeek, Slickdeals, TaxAct, and LegalZoom. Read full bio.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.