The cost of college increases every year. Even in a good economy, the cost of school places many students in debt. The requirements for student loans have become more stringent, and many students graduate from college with an average debt of $25,000, a significant increase in debt over past decades.
According to some reports, almost 90% of college students have to live with their parents after graduation. With hard work, perseverance, and ingenuity, you can diminish your student loan debt before you enter school, during school, and after you graduate.
The following tips will help you graduate from school with less debt, and make it easier to pay off the debt incurred while enrolled in school.
Consider the Investment-Return Payoff of the School
When you choose a college, consider the return on investment of the school. For example, if you attend an Ivy League school and major in business, engineering, pre-law, or pre-medicine, then you will have a high earning potential after graduation. The amount of money you make in your career may mitigate the debt you assumed, if you performed well in school.
On the other hand, if you attend the same school, but study teaching or social work, you will have a lower return on investment. Governments and nonprofits have limited budgets, so they can’t pay professionals a higher salary just because they attended Harvard. To reduce or eliminate student debt, students anticipating lower-paying careers should consider state schools.
Your future career success is determined by how well you perform in school, the networking connections you make while in school, the hard work you put into getting a job, the area where you live after graduation, and the job market. Regardless of where you attend school, if you perform well, network, work hard, and live in an area with a thriving job market, you will increase your likelihood of finding a job after graduation. It may take time to get that first job, or to work your way up the corporate ladder, but patience, hard work, and a positive outlook can certainly help.
Ultimately, if you don’t think that attending a more expensive school will improve your earning potential, job security, or advancement opportunities, you may want to reconsider your school choice. Sometimes you have to give up name recognition for a more financially fit future. Some of the best schools in the country include state schools and inexpensive private schools. If you have your heart set on a high-tuition college, consider the option of attending a community college for two years, and then transferring to your preferred university to obtain your diploma.
Look into College Scholarships
Many organizations can help you find ways to make college more affordable. Entities including the federal government, Fortune 500 companies, nonprofits, and even your university offer scholarships to students to help them pay for school. Scholarships do not have to be repaid. Some ways you can receive scholarships include:
- Academics. Schools want students who will excel academically, and who will represent the school adequately when they enter the workplace. Other firms also want to offer bright, underprivileged students the opportunity to succeed. Look into available academic scholarships, and take advantage of them. Scholarships are generally offered to incoming freshmen, but if you have maintained a high GPA through college, you may be eligible for additional scholarship opportunities.
- Athletics. If you excel in a sport, you may be eligible for a scholarship. Athletic scholarships are often more substantial than academic scholarships. If you broke your high school record for the 400 yard dash or consistently pitched 94 mph your senior year, find schools that offer scholarships that recognize these skills. Not a gifted athlete? Some private companies like Kellogg’s have offered $20,000 scholarships to students who could make a single half-court shot. Ivy League schools, however, do not award athletic scholarships to students.
- Character. In addition to raw talent and brilliance, some scholarships recognize students who demonstrate specific core values and principles. Students who volunteer, or who demonstrate strong leadership, may be eligible for these types of scholarship opportunities.
- Minority Scholarships. Many organizations such as ABA Diversity Scholarship, Allison E. Fisher Scholarship, and the AT&T- WGU Native American Scholarship Fund, offer opportunities for minorities to attend college. Look into different programs for your religious or ethnic background to see what options can save you money on tuition.
- Field of Study. Some organizations offer scholarships to students interested in pursuing a specific major. They may have additional requirements, such as a minimum GPA, but they offer scholarships to students just for pursuing a major, such as Spanish or linguistics. These scholarships encourage students to consider a different field of study.
Learn More About Grants
Like scholarships, grants do not have to be repaid. Grants are awarded based on need, and the amounts awarded differ based on the demonstrated need of each individual applicant. Grants act as a supplement to other forms of financial aid, including loans or part-time work. Associations, federal and state government, private organizations, and schools are just a few of the entities that award grants to college students. Types of grants include:
- Pell Grants. Provided by the federal government, these grants are awarded based on financial need, and amounts vary in part based upon the expected family contribution. Students can use a Pell Grant to help mitigate the cost of college at more than 5,000 schools.
- Federal Supplemental Educational Opportunity Grant (FSEOG). The federal government awards the FSEOG to students in exceptional need. The amount of the grant varies in part based upon the expected family contribution.
- Teacher Education Assistance for College and Higher Education (TEACH) Grant. The federal government awards TEACH grants to students planning to teach school to students in low-income areas. Graduates must teach for four years within the first eight years after graduation, or the grant reverts to a student loan.
Understand Student Loan Options
Ideally, you have selected a school that allows you to minimize or completely rid yourself of any student debt. For students who must take out a student loan, look for ways to reduce the amount of interest on these loans:
- Difference between a variable and fixed rate. Fixed rates may be higher initially. However, if you expect interest rates to rise, you may not want a loan with a fluctuating interest rate that increases if these rates increase.
- Private vs. government loans. Government loans offer more flexibility for students, allowing them to defer student loan payments until after graduation. They provide lower rates along with a lengthier payback period. Unlike private loans, most federal loans discharge your debt due to disability or death. For these reasons, it makes sense to exhaust your federal loans options before exploring private loans. However, you may still need to utilize private loans since federal loans typically do not cover all of the expenses and fees incurred at school.
- Get a co-signer. If a parent or another adult co-signs your student loan, you will most likely receive a better interest rate. However, you must be confident you will pay off your loan, because your co-signer will be responsible for your debt if you miss a payment.
Explore Other Options & Opportunities
Get to Work
Having a job while in school may help you in the long run. You can still enjoy college, and your grades don’t have to suffer when you have a job. If you manage your time well, you can work while still rushing a fraternity, dating, partying, running for student council, and excelling in school.
Granted, you may have to cross some items off your list, but you will also become more efficient with your time. As a college student, you are more than qualified to work at a restaurant, video store, or your school cafeteria. In addition, your post-graduation resume benefits from including job experience. Even if the job is completely unrelated to your degree, it still demonstrates responsibility and commitment to a prospective employer.
If you want to minimize your debt and receive some relevant work experience at the same time, you may want to set your sights higher. Schools typically offer work-study programs. If you want federal work-study opportunities, you need to apply for these opportunities using your FAFSA application. Work-study jobs may require 8 or more hours a week. Many of the jobs don’t require you to do much more than answer questions, or file books and papers. You can often study for class while you work, and supervisors in work-study programs try to be flexible about school commitments.
You should also consider paid internships and co-ops. You can pursue these opportunities during the school year or during the summer. Either way, they can help you obtain experience, and make some money on the side. Your school’s career center will have information on these opportunities. They can also help you structure a resume and find leads at job fairs and other career-related events. Remember, these experiences will provide you with some extra cash, and they will give you the experience you need to land a job after you graduate. In fact, you may learn more from a co-op experience or an internship than you do from your classes.
Talk to Your School
Schools, like many businesses, have some room for compromise and negotiation. If you applied for scholarships, grants, and loans and found part-time work, but still can’t afford the cost of school, contact the college administration. They may be able to unearth additional funds, possibly in the form of grants or unused scholarships, to help you pay for school. Start by talking to your school’s financial aid office and your advisor, to see if they can offer you any additional assistance.
Find Affordable Housing
Depending on the school you attend, you may find that it is less expensive to live off-campus than to live in the dorms. At my school, the cost of living in the dorms was roughly $500-$700 a month, depending on where you lived. Those of us who found off-campus apartments were almost always able to save money, especially if we shared the rent with roommates. Students with roommates sharing a three bedroom apartment or house each paid as little as $300 a month for rent when I was in school.
If you live in the dorms, you may be required to purchase a meal plan. At my school, the average cost was about $10 a meal. The cheapest meal plan you could purchase was $1,900 a semester. Off-campus students were given a major break on their meal plan, paying only $6 or $7 a meal. Off-campus students weren’t required to purchase the meal plan, so the college used competitive pricing to provide students with an incentive to eat at the school’s dining facilities.
Of course, most off-campus students didn’t bother getting a meal plan, because they could prepare their own meals to save even more money. By making our own meals, we could afford the occasional splurge at a restaurant, and still paid less than students using the discounted meal plan.
Some schools won’t allow freshmen or sophomores to live off-campus. As an upperclassman, you may want to seriously think about finding an apartment for rent with your buddies, boyfriend, girlfriend, or even a stranger, if it can help you save on housing.
Become an Entrepreneur
Many college students end up living the American dream right out of their dorm rooms. These days, you can start a business with a computer and an Internet connection. Of course, you don’t want to invest too much money into your business. If the business doesn’t succeed, you could find yourself in even more debt. Some low-cost side business ideas for college students include: tutoring, computer programming, designing websites, blogging, starting an eBay selling business, refurbishing computers, and doing consulting work.
Consider your own gifts, and the skills you learn in school when deciding what business to start. My sister sold used textbooks given to her by friends on Amazon. Some of my friends started a virtual center to help students from China improve their English-speaking abilities while studying in the United States. Another group of students from my alma mater started a business that became one of the 40 fastest-growing private companies in the state of Massachusetts. Business ideas that sprout in college can grow into a lasting business venture after graduation.
Be smart with your money. Before you buy triple-topping pizzas, or pay for midnight beer runs, think about the costs. Make a budget and try to stick to it throughout your time at school. Don’t open any credit card accounts if you know you cannot pay the balances in full every month. You’ll want to avoid debt and improve your credit score rating in college.
Graduating from college with extensive debt can seem overwhelming. Fortunately, if you start making the right decisions about paying for school early in your college career, then you may substantially reduce your debt by the time you graduate. Borrow less, spend less, and create a supplemental income. That way, you can graduate from college without having to worry about being completely broke.
How did you pay for college, and what would you do differently if you could re-do the process?