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Starting to save for college later than planned can feel overwhelming, but it’s never too late to make meaningful progress. Whether your child is a few years from high school graduation or already applying to colleges, there are still practical steps you can take to help fund their education.

From creating a targeted savings plan to exploring financial aid, scholarships, and flexible loan options, this guide offers actionable tips for parents who are playing catch-up on college savings without compromising their overall financial well-being.

Getting a Late Start With College Savings

According to the College Board, the average cost of college tuition and fees for the 2024-25 school year for in-state, public universities was $11,610, and the cost of private universities averaged $43,350 per year.

And that doesn’t include housing expenses, transportation costs, books, supplies, or anything else needed during that time.

So, what do you do if you’re late getting started?

Use the One-Third Rule

When figuring out how to pay for college, consider the one-third rule. This strategy involves saving enough money to cover one-third of the total cost of college expenses, planning to pay another third out of your current income, and relying on student financial aid for the final third. If you can save more than one-third, go for it. But if you can’t, at least you have this one-third plan as a baseline strategy.

Explore Scholarships

Another strategy could be to get the entire family to participate in this savings quest. Your child can play a big part, in fact, by performing well academically and then exploring which schools offer scholarships. Your child could also ask family members to donate to their college fund as a birthday or holiday gift.

Recommended: SoFi’s Scholarship Search Tool

Save With a 529 Plan

One way to save for college expenses is with a 529 plan, which is a qualified tuition plan that is sponsored by state governments, state agencies, and educational institutions. The two types of 529 plans are prepaid tuition plans and education savings plans. At least one type of 529 plan is available in each of the 50 states, plus in the District of Columbia.

Prepaid Tuition Plans

Prepaid tuition plans allow you to prepay tuition at participating colleges and universities at today’s rates. These credits can then be used for tuition payments in the future, but usually do not cover additional college expenses, such as housing.

If your child ends up attending a college or university that isn’t part of the prepaid tuition plan, the money you’ve invested will transfer over to the chosen college, but you’ll have to pay tuition at today’s rates.

Education Savings Plans

Education savings plans involve opening an investment account with funds available for college expenses.

When you withdraw funds from a traditional 529 savings plan, they can be put toward college tuition, fees, room and board, textbooks, and more. You can even use the funds to pay for K-12 tuition, if needed. Investment choices can include mutual funds, exchange-traded fund portfolios (ETFs), bonds, CDs, and short-term reserves.

What if you have a financial windfall, perhaps through an inheritance or large bonus? You can actually contribute up to five years’ worth of contributions in year one of your 529 plan, which would give you the opportunity to front-load your savings and take greater advantage of tax-free growth of your account.

Finally, here’s a question that’s sometimes asked about this strategy: When is it too late to start a 529 plan? The answer: If your child hasn’t yet started college, it’s not too late to take advantage of this type of plan.

Recommended: Benefits of Using a 529 College Savings Plan

Explore Student Loans

Parents looking to help their child pay for college often consider student loans as part of the overall financial strategy. The two main options for student loans for parents are Parent PLUS Loans and private student loans.

Parent PLUS Loans

Parent PLUS Loans are available through the U.S. Department of Education. These loans are taken out in the parent’s name and can cover up to the full cost of attendance, minus any other financial aid the student receives. While credit history is reviewed, income requirements are generally flexible, and repayment can be deferred while the student is enrolled at least half-time. However, interest begins accruing right away, and the responsibility for repayment lies solely with the parent borrower.

Private Student Loans

Private student loans are another route parents may take, either by cosigning on a loan in the student’s name or borrowing directly through a private lender offering parent student loans. These loans are credit-based, so strong credit and income are typically needed to qualify for the best rates. Some families may prefer private loans for their potentially lower interest rates or flexible repayment terms, though federal protections like income-driven repayment plans or forgiveness programs are not included.

💡 Quick Tip: New to private student loans? Visit the Private Student Loans Glossary to get familiar with key terms you will see during the process.

More Tips for Parents Starting Late

If you’re getting a late start to saving for your child’s college education and want to make college more affordable, here are four tips to consider:

•   Encourage your child to take advantage of advanced placement (AP) credits during their junior and senior years of high school, as many colleges will count those as college credit hours. The more credits your child starts with in college, the fewer they may need to take and pay for during college years.

•   Explore what grants are available for your child. Grants for college are funds that don’t need to be paid back.

•   Help your child apply for scholarships. School counselors can often help with this endeavor and, by doing so, your child can go after opportunities that may be lesser known.

•   Consider using digital options for expensive textbooks. If your child rented all their textbooks from a library in digital form, you could potentially save thousands over a four-year period.

The Takeaway

Starting late on college savings may feel daunting, but it’s far from a lost cause. By taking proactive steps — such as setting up a 529 plan, involving family in contributions, and encouraging your child to seek scholarships and part-time work — you can still make meaningful progress toward funding their education. You can also take out a Parent PLUS Loan or private student loan to help your child pay for college.

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 it too late to start saving for my child’s college education?

No, it’s never too late to begin saving for your child’s college. Even if you’re starting later than planned, taking proactive steps now can still make a significant difference in managing future education expenses.

What are some effective strategies for late starters to save for college?

Late starters can focus on maximizing savings by setting up dedicated college savings accounts, such as 529 plans, which offer tax advantages. Additionally, involving extended family in contributing to these accounts and encouraging your child to apply for scholarships can further bolster college funds.

Should I prioritize saving for college over my retirement?

While saving for your child’s education is important, it’s crucial not to neglect your retirement savings. There are various options to finance education, including loans and scholarships, but fewer alternatives exist for funding retirement.

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.

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When financing higher education, understanding the differences between Direct Subsidized and Direct Unsubsidized Loans is essential. Both are federal student loans offered by the U.S. Department of Education, but they vary in terms of eligibility, interest accrual, and repayment responsibilities.

Keep reading to learn the similarities and differences between subsidized and unsubsidized loans, plus additional ways to pay for college.

What Is a Direct Subsidized Loan?

Direct Subsidized Loans are available only to undergraduate students, and they are awarded based on financial need.

The U.S. government pays the interest on Direct Subsidized Loans as long as the student is enrolled in classes at least half-time. The accrued interest is also covered during the six-month grace period after the student leaves school or graduates and if the student’s loan is in a period of deferment.

The federal help is meant to give students a chance to get on their feet financially before the debt starts accruing interest they’ll have to pay.

What Is a Direct Unsubsidized Loan?

A Direct Unsubsidized Loan is a federal student loan available to eligible undergraduate, graduate, and professional students that accrues interest from the time it is disbursed, regardless of financial need.

Like subsidized loans, repayment doesn’t begin until six months after the student graduates, drops below half-time, or leaves school, but the interest will still accrue during this time.

Unsubsidized student loans can cost more in the long run than subsidized loans because of the accruing interest.

Differences Between Subsidized and Unsubsidized Loans

Subsidized and unsubsidized student loans both can help pay for college, but they vary in terms of eligibility, interest accrual, and long-term cost. Knowing how each works can help you make smarter borrowing decisions. Differences between the two include:

•   Subsidized loans are only available to undergraduate students who demonstrate financial need.

•   Unsubsidized loans are available to both undergraduate and graduate students, regardless of financial need.

•   With subsidized loans, the government pays the interest while you’re in school at least half-time, during the grace period, and deferment.

•   Subsidized loans typically cost less over time due to the government covering interest during specific periods.

•   Annual and aggregate loan limits are higher for Direct Unsubsidized Loans than for Direct Subsidized Loans.

Similarities Between Subsidized and Unsubsidized Loans

While there are notable differences between subsidized and unsubsidized student loans, these two federal loan types also share several important similarities. Similarities include:

•   Both loans are part of the federal Direct Loan Program and are issued by the U.S. Department of Education.

•   Eligibility for both loan types requires students to complete and submit the Free Application for Federal Student Aid (FAFSA®).
Subsidized and unsubsidized loans come with fixed interest rates set annually by the federal government.

•   Both loan types offer a six-month grace period after graduation, leaving school, or dropping below half-time enrollment before repayment begins.

•   Borrowers of either loan may qualify for federal repayment options, deferment, forbearance, and certain loan forgiveness programs.

For the 2025-2026 school year, the federal student loan interest rate is 6.39% for Direct Subsidized and Unsubsidized Loans for undergraduates, 7.94% for Direct Unsubsidized Loans for graduate and professional students, and 8.94% for Direct PLUS loans for parents and graduate or professional students.

How Do I Get a Federal Student Loan?

The process to receive federal financial aid begins when the student completes the Free Application for Federal Student Aid (FAFSA), which must be filled out annually. The form asks for information about the student (name, date of birth, address, financial information from tax forms and bank statements). If the student is a dependent, there will be similar questions about support from home that will help determine financial need.

Borrowers who don’t demonstrate enough need may not qualify for subsidized loans. They can, however, qualify for unsubsidized student loans, scholarships, grants, and work-study.

Based on the results of the FAFSA, the schools the student listed on the application will send a financial aid offer to the student, and the school will explain how to accept all or part of the federal financing.

The FAFSA deadline is typically June 30, but each college and state may have its own deadlines.

Recommended: Navigating Your Financial Aid Package

What if Federal Loans Aren’t Enough?

If a student doesn’t qualify for federal student loans — or if more funding is required — there are other options for financing a college education.

Private student loans can help fill the gaps if federal loans don’t cover all the costs of attending school. These loans are offered by private lenders, including banks, credit unions, and online financial institutions, so the terms vary from one to the next — and the qualifications and terms will be different from federal loans.

Private student loans can have fixed or variable interest rates, and some lenders offer more competitive rates than others. (All federal loans have fixed interest rates.)

A borrower’s credit rating and income, among other factors, will generally be used to determine the interest rate and how much may be borrowed. Those who need help qualifying could consider tapping a trusted student loan cosigner.

Repayment terms on private loans also differ from lender to lender — and they’re generally less forgiving than the repayment plans offered for federal student loans. It’s important to understand what’s expected before signing for any type of loan.

Recommended: Private Student Loans vs Federal Student Loans

The Takeaway

Subsidized federal student loans do not accrue interest while the borrower is attending school at least half-time. Unsubsidized federal student loans lack this benefit, and borrowers are responsible for interest that accrues as soon as the loan is disbursed. Both loans offer federal benefits and protections, such as income-driven repayment plans and student loan deferment.

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 main difference between Direct Subsidized and Unsubsidized Loans?

The primary difference lies in interest accrual. With Direct Subsidized Loans, the federal government pays the interest while the student is in school at least half-time, during the six-month grace period after leaving school, and during deferment periods. In contrast, Direct Unsubsidized Loans accrue interest from the time the loan is disbursed, and the borrower is responsible for all interest, including during in-school, grace, and deferment periods.

Do both loan types require repayment to begin at the same time?

Yes, repayment for both Direct Subsidized and Direct Unsubsidized Loans begins six months after the borrower graduates, leaves school, or drops below half-time enrollment. However, interest accrues differently during this period: subsidized loans do not accrue interest, while unsubsidized loans do.

Are there loan limits for Direct Subsidized and Unsubsidized Loans?

Yes, both loan types have annual and aggregate limits, which vary based on the student’s year in school and dependency status. Notably, the loan limits for Direct Unsubsidized Loans are generally higher than those for Direct Subsidized Loans.

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.

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