Student loan debt has become a huge problem across the country and some are predicting it will be the next big financial crisis.
My wife and I started our marriage with zero student loan debt, thanks to our parents, scholarship money, and me taking a little longer to work part-time while I finished my degree. This has allowed us to save money by not paying interest on those pesky student loans.
If you are in college now, heading there soon, or have a child that is heading there one day here are 14 ways to avoid student loan debt. I’ll be honest, they get more extreme the farther you go down the list.
1. Save Your Money
I know this seems like a crazy thought but if you save your money before you go to college and then don’t blow it all while you are there then you can use that money to pay off some of your loans. Get a job, sell stuff online, or whatever you can do before and while you are in school to accumulate cash. This will payoff big in paying less interest on those loans.
2. Make Sure Your ROI Works
ROI stands for “return on investment”. This means you need to check to see if whatever debt you are taking out will payoff once you once you start working.
I know some people have their heart set on that school that costs $30,000 a year, but if your chosen career will only pay $45,000 a year then that is not a good idea. In fact, it is a disastrous idea. Especially when you could have gone to the state school for $8,000 a year and walked out $88,000 less in debt. Do the cold hard math calculation and make sure that you are going to the right school for your major, not just your emotions.
If you aren’t sure where to start head to PayScale.com where you can look up what people are making with the job you want to do.
Grants are money that does not have to be paid back. Unlike scholarships which are merit based, grants are a need-based college funding. They will not cover all your tuition but work to supplement to all the other forms of financial aid available. Some of the more common grants are:
- Pell Grants – This is one of the most well-known grants across the country. The amounts vary greatly by how much the family is expected to contribute. They are widely accepted at more than 5,000 schools.
- TEACH Grants – These grants are for teachers who are willing to teach in low-income areas after they finish their education. If you do not teach in a low income school for four of your first eight years then it changes into a student loan.
- FSEOG – The Federal Supplemental Educational Opportunity Grant is for people of exceptional financial need.
- Other Grants – Everyone has heard that there are a lot of sources for scholarships but grants are also plentiful.
If you can qualify this is a great way to pay for college.
There are TONS of places that offer scholarships for a wide variety of reasons. Whether it is the school you attend, private organization, or fortune 500 company, you can find ways to get scholarship money even if you are not the absolute best student.
There are college scholarships available for:
- Academics – This is the most obvious of the scholarship options that is widely available. You can get these from your chosen school, non-profits, for profits, and a host of other places. Dig deep and look around and you may be able to find enough to pay for your entire education, even if you are not number one in your class.
- Athletics – Sure you have to be gifted in athletics to get these, but there are also athletic scholarships at much smaller schools than you think of with the major universities. If you are gifted at two sports then choose the one with less competition for scholarships and go for it.
- Field Of Study – Some majors have people willing to offer scholarships to people just to pursue that major. So if you know what you want to be when you grow up seek these organizations out and get that money.
- Character – If you embody noble qualities that are important to one group or another they may have a scholarship you can apply for. Volunteering and taking on leadership roles can get you some scholarship cash.
- Personal History – Whether you are a minority, have ancestors with unique histories, or have a religious affiliation, there are people out there that want to make sure you can go to college.
The best thing about scholarships over loans is that you do not have to pay back a scholarship. If you need more help consult with your school guidance office. They should have a huge database. After that you can do searches online to find a lot of opportunities.
5. Get a Job or Internship With a Relevant Employer
While I was in school I had a part-time job selling cell phones. Since I earned a degree in business that meant that I exited college with two years of sales experience. If you think that didn’t make my resume look better than the guy who didn’t work while in school then you are greatly mistaken.
Another advantage above your resume is that if you are a good employee you have really set yourself up for advancement because most employers like to hire from within. This way they get someone who is already familiar with their methods and company culture.
Not only can you make money and pay for tuition, but you can set yourself up for a higher paying job when you get out of school. AND some employers offer tuition reimbursement if you pursue a degree in something relevant to the company.
6. Find a School that Wants You
Schools are constantly looking to diversify their student population. I was talking to a parent who graduated from an Ivy League school and now has three of her children either enrolled or graduated from Ivy League schools. It turns out if you are from the South you have a better chance of getting in because so few Southerners who qualify want to head that far away from home.
Schools across the country are looking to do the same thing. So if you can help them diversify their student body you have a chance to get special incentives to come to that school.
7. Negotiate with Financial Aid
The financial aid office at your chosen college can be a huge help in getting you special aid packages for students who need help paying tuition.
Many times you can negotiate with them if they want you bad enough (see point above). However, if you are already enrolled they do not have the same motivation to get you a better deal. This can be particularly useful at private schools that aren’t as restricted as the state schools.
8. Check Out Off-Campus Housing
Dorm living can be a lot of fun, but it can be very expensive. If you are going to a school where the dorms and meal plan are more expensive than what you can get with a couple of roommates in an off-campus apartment then you should look at moving to a nearby apartment/house. I have seen several meal plans where you pay $10 a meal when you could do much better by cooking for yourself.
Some schools even offer discounts for off-campus students who purchase a meal plan because they have to compete with grocery stores. Check the numbers and make sure living off campus is an option and if it will save you money.
9. Live Within Your Means
Frugal living is not difficult if you have a plan. With every penny you bring in make sure you have a budget. Don’t splurge on extra pizza toppings when Little Caesar’s has the one topping for $5.
I had a few friends that had student loans that exceeded their tuition so they got a check back each semester. Instead of sending that extra money back to the student loan company they spent it. When they got out that was extra money they had to pay back with interest.
10. Join the Military
The armed forces have a ton of financial aid and continuing education opportunities. The GI Bill offers 40% to 100% coverage of your tuition with time of service being the determining factor.
People in the military can frequently take college courses on base for limited or no cost as well as being able to take CLEP tests.
Also military service is one of the criteria for being declared independent on the FAFSA.
11. Study Abroad
The United States has the second highest cost of higher education in the world. It could be a good deal if you get into the right school for your major. Make sure you are paying attention though. Some countries only offer subsidies on education for students that are citizens of that country.
Federal and state student aid assumes that parents will be helping with the cost of tuition. So when you fill out the FAFSA (free application for federal student aid) they take into account the parents tax information.
There are ten different ways for a student to be declared “independent”. Students in this category only file with their personal tax information and can qualify for much more aid as a result of much lower income. Being an emancipated minor is one of these criteria. Check with your state to see how this works for you and make sure to fill out the form after you complete emancipation.
13. Get Married
There is more than one way to be declared independent. Marriage is one of those ways. If you have already found someone that you want to spend the rest of your life with then it can pay off in grants and scholarships.
You will have to provide tax info as a couple to be evaluated. So make sure that you don’t marry someone that is TOO wealthy or you will price your family into student loans.
14. Consider Homelessness
I told you it was going to get more extreme the farther you read. I had to really debate whether this or marriage was a more extreme step but since marriage is awesome I moved homelessness down the list.
It sounds terrible but if you have a large enough vehicle and a place where you can hook up to run a space heater in the winter then you can save a fortune in rent and utilities. Where I live, a YMCA membership for a single person is $40 a month and less for students. That will get you a good shower and place to workout all in one.
If you have friends then you can split costs of food and maybe have a place to crash on a couch from time to time. If you can go to school with a mini-van then you will have even more room to stretch out.
Keep the Student Loan Debt Away
So basically the goal is to get through college with a degree and accumulate as little student loan debt as possible. When Amy and I exited college with no student debt it put us years ahead of our peers when it came to our finances. Even ten years after getting married we have friends who are still paying of their student loans.
They are a good tool if you use them right or refinance when you get out, but not using them properly can get you into long term payments. If you have any good tips on avoiding or reducing student loan debt then leave them in the comments or hit me up on twitter @SavingFreak.