How to Avoid Crushing Student Loan Debt

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Students, Loans and Debt

Source: USAToday, Butch Dill, AP files,

A common complaint among recent graduates that is trumpeted in the media is that getting a college degree now requires thousands upon thousands of dollars in student loan debt.

This crushing debt is supposedly holding the latest crop of graduates from doing anything successful in their lives. There are many stories of students graduating, finding themselves without jobs, then moving back in with their parents. The only problem is they are now saddled with thousands of dollars in student loans that they cannot effectively pay.

This idea has become so popular that there is a bill floating around Congress that would drastically reduce the student loan balances and payments for many people that are in college or have recently graduated. Of course the cost of these loan reductions would fall on the shoulders of current taxpayers (and future generations).

No matter how you feel about this legislation, we can all agreed that student loan debt can be crushing.

Yet there is good news: you can avoid student loan debt by using the right strategies.

How to Avoid or Minimize Student Loans for College

Here are four different strategies you can use to minimize or completely dismiss the need for taking out expensive student loans.

Get a Scholarship

Almost every college and university out there has a multitude of scholarship funds available for incoming students to earn. Additionally there are many organizations that offer scholarships.

Yes, you must write essays or perform some other work that would result in you earning the award. But they are available. Many large schools have over 50% of tuition covered by scholarships for students. Writing essays in the summer or two before you start college can pay off with thousands of dollars in scholarships.

Getting a scholarship lowers the cost of your going to school which of course drops how much you need to take out in loans. There’s no valid reason to avoid applying for as many scholarships as you can.

Go to an In-State, Public Institution

Private schools may offer smaller class sizes, more specialized degrees, and more impressive campus environments, but they charge for it. As tuition continues to rise across all schools the cost of a private institution degree can become almost unbearable without scholarship assistance. If you can’t get scholarships to go to your desired private school, it may be financially not worthwhile to go.

Public school tuitions have been rising as well, but with the initial cost being significantly lower those tuition rates are much more affordable. And by staying in-state your tuition costs will be significantly lower than if you go to a school where you are considered an out-of-state student.

Take General Education Classes at Community College

Another easy way to lower your tuition costs is to only go to a large institution (public or private) for your core degree courses. This means that for your general education requirements like math, history, and so forth (unless you are majoring in those areas) you would go to a community college. You take your courses at an accredited community college and then transfer them to the school of your choice you want to go to for your degree major. (Just make sure your credits can be transferred in.)

Community colleges have many benefits for general education requirements over “normal” schools.

First, there are the significantly lower tuition rates. A large university in my area charges $326 as its base undergraduate tuition rate per credit hour. Compared to a local community college tuition rate of $135 per credit hour, you can see there are significant savings to be had. (That’s a savings of 58.5%!)

Second, if you go to a community college you can go to one local to your parents home. You may not get the “full college experience”, but avoiding room and board combined with lower tuition costs leads to significant savings.

Third, if you are living at home and taking less expensive community college courses you can usually afford to spend some of your spare time working a job to help pay for your tuition.

Lastly, any scholarships you received from any non-school related organizations can be applied to your community college costs. It’s like getting a coupon when you go shopping at the discount store. You will be reducing further already low costs.

Work Through School

Whether or not you go to community college to save on tuition costs or go straight to the school of your choice, you can always work your way through school. This can be as simple as keeping a part-time campus job while juggling homework and getting to class on time.

However, another method that can help you avoid student loans is to only take as many classes as you can afford to take while working. This is extremely difficult to do (and admittedly, is more common among professionals who are going back to get degrees after already entering the workforce) but can lead to no student loan debt at all.

Why Student Loans Can Stunt Your Advancement

The average student loan debt load for graduating students this year is $20,835 according to a report from the Federal Reserve Bank of New York. Assuming the loan comes with a 6.8% interest rate that student will have 10 years of payments of $239.77. For most people that’s a car payment and it can really pinch the budget when you first graduate, especially considering the challenging employment market.

Of course the main problem is that if the average is $20,835, that means there are many students above that average with even higher payments.

Own Your Responsibility of Having Student Loans

No matter if you have to take $5,000 in loans to finish out your senior year or end up with $50,000 in loans for your entire education, own your responsibility in having loans. Many media reports paint students with high debt levels as victims. The last time I checked no one forces you to go to a school that will be so expensive that you need loans. No one forces you to sign the loan documents.

It was your choice and you must live with the consequences. If you’re about to start school, hopefully these tips will help you avoid a similar fate.

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About Author

Kevin holds an MBA and has been sharing tips on avoiding debt and earning more income for more than four years on top personal finance websites. He's a big believer in spending less than you earn and tracking your finances through budgeting.


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