How to Reduce & Avoid Overwhelming Student Loan Debt

girl balancing booksThe 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.

rising tuition feesOn 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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
college grants scholarships tabs

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:

  1. 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.
  2. 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.
  3. 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:

  1. 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.
  2. 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.
  3. 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.

poor college student

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.

Live Frugally

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.

Final Word

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?

  • Chris Hake

    Great site..I just started a personal finance site and was wondering if you could post a link on your site. I have already posted one on mine to yours. Thanks…


  • CreditShack

    I suspect that tuition rates have risen sharply because student loan interest rates have been so low. With so much loan money floating around within students’ easy grasp, colleges & universities have hiked their rates knowing that students will find their way to the loan money. Tighten up the federal subsidy on student loans & increase the interest rate, and I’ll bet tuition costs will come down.

  • student

    Hi there,

    I think you have some decent points about rethinking that hefty loan for a BA, however, I’d like to point out the fact what you’re saying here doesn’t really help students who are just now coming out of school with $80,000 in debt. This post is basically saying, “What were you thinking? Sucks to be you,” and then gives us pointers on how we “should have” worked through school (which most of us did…if we had dad taking care of our living expenses, we probably wouldn’t be so much in debt anyway) and applied for scholarships (which we no longer can do unless we go back to school again..).

    My argument is, yes, ultimately it was my fault. I signed the promissory notes; I knew I was going to have debt. But what does everyone tell you when you’re 18? They say, “Achieve your dreams! Go to the school you want to! Study what you’ll ultimately love! It’s worth it!” And hell, you feel that way, too. And again, they told my generation to do this right before the economy crashed and credit tightened like a rubber band around our necks…. And due to these new circumstances, those same people that once told us to take that loan are now hypocritically tisking at our choices.

    So now, I have a salary of 37K and a student loan payment of &650 a month. You do the math. The government offers a few different options for federal loans, but what about private? Nothing. Nope. No wonder default rates for student loans right now are at 7% and climbing.

    My overall point is this: My problems are real, I’m facing them, and I’m going to pay off my loans no matter if I have to work 7 days a week in and out of a 9-5 and a restaurant. I’m just disappointed that I was directed to this link for words of good advice. It was just another guy who probably got lucky with a job in the 90s or early 2000’s and 20k in debt was a small hiccup. Thanks for nothing. I’ll send it to all the 18 year olds I know to remind them that 4 years to their dream college was worth it to previous generations, but not anymore for us.

  • chiksta

    i know some girls that are able to go to school for free just because they decided to be irresponsible and have child before they could actually afford them. so now they go to school 100% for free with fasfa grants. Yet they have completed not even 2 years and they already have $80000 in student loans when they go to a university that is less then $8000 a year. Smart enough for college but not smart enough to know the amount of debt that they are getting them selves into. its not because of rising tution that these kids are coming out of college in horrible debt its greeed. They live beyong there means and when there done spending they want everyone else to feel sympothy for them. if you borrow that much money then guess what you got to pay it back!!!!nothing is free

  • JB Frick

    Online or in local groups – please attend Dave Ramsey’s Financial Peace University. It will help you forever in your life – not only to budget and manage, but also to communicate to your loved ones about money. I am just an old lady who’s had money slip away and wish I had taken those courses.
    Our schools and colleges should teach better money intelligence and prevent students from getting over extended.
    Also, once you’re earning a good income, you must learn how to preserve it. Not just in 401k but other ways. My big mistake was thinking I would make 160k+ until I retired. I earned that amount in the 1996 to 2000 span, but never again – I’ve been in low brackets now for a decade and no uptick in sight. I wish I had preserved more of it. Also don’t put your money into things other people manage, like Wall Street or someone else’s project – just keep it in your own control.

  • Eve

    As previous commenters have noted, this doesn’t work. There aren’t that many scholarships out there, and often you have to jump through hoops for what, $250, when you need to raise 10 or 20 thousand? Grants go to breeders and those whose parents are in low income brackets. EBay business? Please. Have you used eBay/PayPal lately? Fees and shipping will eat up any profits you might make, not to mention how time-consuming it is to make listings and deal with a*hole buyers trying to scam you. I worked 2 part-time jobs through college, one retail at $8.50/hour, one work-study at $10, and I still ended up with huge debts and lower grades. I really wish I wouldn’t have bothered. Then I could have done the studying, extra-curriculars and networking that actually would have helped my career. Or you know what, maybe the message should be, if you can’t pay for college, maybe you shouldn’t go.Your special little snowflake self can just learn a trade, join the military, or join the service industry. There used to be this thing called a middle class but all the jobs for that went overseas…


    I’m not sure any of this is really that effective. Become an Entrepreneur? Maybe in some cases, but certainly not to pay for school for the masses. The reality is, school is such an overwhelming expense that the only way to cope is to plan ahead of time, well ahead of time.

  • James Burton

    This article contains some very BAD advice.

    “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.”

    NO! NO! NO! Avoid private student loans. Period. If you have exhausted your federal loan options, you need to look for a less expensive school. You have no protections with private student loans and truly are at the mercy of the lender. They will get their pound of flesh with interest and fees.

    Likewise, do not, under ANY circumstances, co-sign a student loan. (Federal student loans do not require a co-signer–ever.) You are on the hook of the student defaults and these debts cannot be discharged in bankruptcy.

  • Online Shqiptar

    Are you looking for a legitimate loan?contact:[email protected] I got my business loan there.

  • Michelle Nelly Brown
  • SyLvIa Zzz…

    I’m a teacher and I have witnessed a lot of kids go off to college too soon and fail out! Here is some advice for graduating seniors and their parents based on 15 years of observations.

    1. Make them work and pay for some of it.( they have to have some skin in the game)

    2. If they are immature and not self- reliant don’t let them go to a far off University.

    3. Have them talk to recent graduates to get advice/tips; they are much more likely to listen to them than you.

    4. A community college is a great place to save money and usually has professors who are teachers 1st unlike the research focused professors at Universities

    5. Don’t be frivolous with your cash. Consider things like $25/month car insurance (from 4AutoInsuranceQuote), $20/month mobile phone (TMobile), $15/month gym membership (Planet Fitness), and use apps like GasBussy to save money in other ways. College is expensive – save for it!

    6. Speaking of which – Don’t try to “Keep up with the Jones”. This dooms kids and forces them into the student debt trap.

    7. Don’t be afraid to let them fail. If you constantly bail them out you will be doing it for the rest of their lives and they will never grow as a person.

    8. Make them aware of the differences in earning power/job availability of different majors.

    9. The military, tech school, and apprenticeships are all viable alternatives to college.

    10. Do a cost/ benefit analysis if you are going to take on significant debt make sure it’s for a valuable degree. 60k debt for a chemistry degree is ok, 60k for Art History is not.

  • Monica Beal

    Some of the comments from others here are totally misrepresentative of the real facts, as well as this article is. Everyone should have the right to an education, and being wealthy shouldn’t have anything to do with that. It’s really irresponsible advice to say if you don’t have the ready cash you shouldn’t go to college. That is exactly what Pell Grants and Scholarships are for.

    The best advice is to focus on your education, choose a lucrative career field, and make the top grades so you can get the scholarships and you can minimize student debt. There simply is a misconception out there about who is more in debt. There are doctors, lawyers, surgeons and more who have never paid their loans back–now here is where the irresponsibility lies.

    If you want to better your life, go for your dreams and achieve something then go to college. Just make wise decisions! Remember, make the best grades, apply yourself to an internship and truly network. You should always be responsible about spending habits, as a student and as a career professional. If you want to learn more and get more positive information, feel free to email: [email protected]