What Is Higher Education Financing?

Higher education can open doors to rewarding careers and personal growth. Yet, the rising costs of college often make this path feel out of reach, especially for many lower and middle-income students.

The good news is that various financial tools and options can help make college possible. This guide breaks down essential topics, answering the question, “What is financing in higher education?” and exploring resources such as federal financial aid, scholarships and private education loans.

Understanding your options can help you better navigate the financial landscape and bring your educational goals within reach.

Understanding the Costs of Higher Education

In the U.S., higher education costs encompass tuition, fees, living expenses, and additional items like textbooks.

For the 2024-25 academic year, the national average for in-state tuition at public colleges is $11,610; in Texas, it is slightly lower at $10,858. Private nonprofit four-year institutions are generally more costly, with average tuition reaching $43,350 for 2024-25 — an increase of $1,610 compared to the previous year.

Living expenses also add up significantly: On-campus housing and meal plans cost about $13,310 per year at public institutions and $15,250 at private colleges. Books and supplies typically add around $1,290 yearly.

Considering these figures and facts about higher education financing, many students rely on financial aid to make college more affordable and accessible. Figures from CollegeBoard show that full-time undergraduate students received an average of $16,360 in financial aid per student in the 2023-24 academic year. This amount included approximately $11,610 in grants and $3,900 in federal loans.

Many students encounter challenges in securing enough funding for college. With rising tuition, fees and living expenses, students and parents actively explore educational finance options to make higher education more affordable. These financial hurdles highlight the importance of careful college planning and using available resources to manage higher education finances effectively.

What Is Financing in Higher Education?

Financing higher education involves securing the funds to cover college or university costs. This often involves combining resources like work-study opportunities, scholarships, grants, loans and family contributions to manage expenses such as tuition, housing and other essentials.

Federal Financial Aid Options

Federal financial aid in the U.S. can help students manage college costs through programs based on financial need and eligibility. Some of the leading options include:

• Grants: These are need-based funds that do not require repayment. One example is the Pell Grant, which supports low-income students.

• Loans: Students can borrow funds that must be repaid with interest, including Direct Subsidized Loans for those with financial need and Direct Unsubsidized Loans, which are available regardless of need.

• Work-study Programs: These programs provide part-time employment opportunities, allowing students to earn money specifically for educational purposes.

Students will need to complete the Free Application for Federal Student Aid (FAFSA) each year to qualify.

Scholarship

Scholarships are another type of financial aid that help students cover educational costs without repaying the funds. Scholarships are often awarded based on merit, financial need or specific criteria.

Common types of scholarships include:

• Merit-based Scholarships: These are awarded to students who demonstrate academic excellence, athletic skills or artistic talent.

• Need-based Scholarships: These scholarships are given to students who show significant financial need to help cover college costs.

• Special Scholarships: These are designed specifically for specific groups, such as minorities, women or students entering particular fields of study.

These types of aid help reduce the financial burden of higher education, making it more accessible to students.

Private Loans

Private education loans are loans provided by non-governmental entities like banks, credit unions and other lenders. Unlike federal loans, which are funded by the government, private loans typically have higher interest rates, require a credit check and often offer less flexible repayment options.

State agencies and nonprofit organizations, like Higher Education Servicing Corporation (HESC), help students fund their education through responsible, low-cost financing options. These nonprofits and agencies may also provide scholarships to students, often based on academic merit, financial need or specific personal and professional goals, helping reduce reliance on loans.

When federal aid doesn’t fully cover expenses, private loans can be helpful by offering higher borrowing limits. Still, it’s essential to carefully compare your Federal and private education loan options to find the best loan for your financial situation.

Personal and Family Savings

Your or your family’s savings can be vital in covering higher education fees, offering flexibility, and reducing the need for education loans. By relying on savings, you can lessen your financial burden and avoid the added loan interest cost.

Many families use tax-advantaged accounts, such as 529 plans, which allow funds to grow tax-free and be used for qualified expenses like tuition, housing and books. Starting early and making regular contributions can make college expenses more manageable, helping to make your path to higher education more affordable.

How HESC Helps You Achieve Your Higher Education Goals

Funding higher education can be a significant challenge, as costs often exceed what families can comfortably afford. HESC is committed to helping Texas students and families achieve their educational goals through the Texas Extra Credit Education Loan program, offering affordable, low-cost loan options designed with flexibility and ease in mind.

This program includes two main options: the Student Loan, which provides competitive fixed rates and the ability to add a cosigner for greater eligibility, and the Parent Loan, crafted for parents or family members planning to help finance a student’s higher education. Both loans offer low, fixed interest rates, no fees, and flexible repayment terms, making it easier to focus on educational success without financial stress.

Ready to start? Apply now for a Student or Parent Loan to make your higher education goals a reality. You can also head to our website for the latest news for borrowers.