MoneyTalk

10 Ways to Avoid or Minimize Student Loan Debt

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According to a New York Federal Reserve report, student loan debt now totals over 1.3 trillion dollars – nearly double what it was just 10 years ago. With the average graduate leaving college with $37,000 in student loans last year, you may wonder what chance your child has of getting through college without accumulating a massive amount of debt.

While there is nothing you can do about rising tuition costs, there are other measures you can take to help your upcoming student prepare for a college education without the ball and chain of student debt.

1. Start Saving Early

Your teenager can use the time they have living under your roof to save money well before leaving to college with a part time job during the school year and the summer months.  Take advantage of direct deposit offered by their employer and teach them to maximize their savings with an allocated amount going into a college savings account each pay period. While it is difficult to know how to calculate the overall cost of college, our college savings calculator can get you started in developing a savings plan. Earning and saving money early always means more opportunity when it comes to making decisions about college.

2. Take Advantage of College Classes in High School

If your teenager’s high school offers advanced placement courses encourage them to sign up for all the courses they qualify for and can handle. Depending on the AP courses they take along with their score on the exams, these courses can count as college credit, and enable your kids to get a head start on college without its associated costs.

Some high schools also offer dual/concurrent enrollment courses that offer college credit for students. Although you can expect the workload to be greater than a typical high school class, these courses also offer students a jumpstart in their college classes before even graduating from high school. Just make sure the classes they sign up for will be accepted for credit at the college your student plans on attending.

3. Apply for Scholarships and Grants

If your student has exceptional grades, or has been involved in many extracurricular activities, they will most likely be considered a scholarship candidate when their college application is received, however, scholarships are also available outside of the university through a variety of places. Mayors scholarships, community scholarships, and minority scholarships are among a variety of other scholarships offered to upcoming graduates. Make sure your student doesn’t delay visiting with their high school guidance counselor to learn about scholarship opportunities available to them.

While scholarships are often merit based, grants are usually based on need. While neither grants or scholarships need to be paid back, there is effort involved in applying to see if your son or daughter will qualify for the money. The U.S. Department of Education offers several types of grants for college students depending on eligibility. Begin by helping you student fill out the Free Application for Federal Student Aid form to see what grants or scholarships they may be eligible for.

4. Look for the Cheapest College Options

If your student attends a public school in your state, they will probably pay less in tuition than a private school or most out-of-state universities.  In fact, the difference between in-state and out-of-state tuition costs can be quite astonishing.  According to the College Board, the 2016-2017 average published in-state tuition and fee prices from public four-year colleges and universities range from $5,060 in Wyoming and $6,360 in Florida to $15,450 in Vermont and $15,650 in New Hampshire. Compare that to the highest average published out-of-state tuition and fees at public four-year institutions in Michigan ($34,850) and Vermont ($36,820). The lowest prices are $11,470 in South Dakota and $16,220 in Wyoming. In most cases, staying local will save your student a bundle of money in tuition.

Even if your student dreams of attending a university far away from home, starting at a local community or state college for a year two with plans to transfer to their preferred school can make the most financial sense. Just make sure they enroll in classes that will be accepted for credit when it’s time to move on.

5. Research Careers and Majors Early

With the costs of college only increasing, your student will greatly benefit from a mapped out 4-year college plan to get in and out of college as quickly as possible. This means deciding on a career with its corresponding college major early. While in high school, have your student take a career aptitude test to get a better understanding of their interests and abilities. Taking the time to do some job shadowing in the careers he or she may have an interest in can give them an in depth look at the day to day tasks that accompany those professions.

Taking time to research the demand in the marketplace and the expected range of salary in their careers of interest can also go a long way in making the most informed decisions before registering for college classes. Although things may change, having a plan in place will at least will give him or her the momentum and drive needed to fast track college and start into their chosen career as soon as possible.

6. Work During College

If your upcoming college student needs or wants to work through college, they are not alone. According to a 2017 report from National Center for Education Statistics, among undergraduates in 2015, 43% of full-time students and 78% of part-time students were employed. Working through college to pay for school and living expenses is a reasonable way to get through school without accumulating the massive amount of debt now plaguing most graduates. Encourage your student to start the job search early, especially for on campus work opportunities, to have the greatest success at finding a job to fit their schedule.

7. Maximize the Number of Classes Each Semester

If part time work is not an option for your student then encourage them to take as many credits that they can manage as a full-time student. Usually when a student reaches 12 credits they are considered a full-time student and their tuition is capped. This means your student can take 18 credits and not be charged any more for the 6 extra credit hours. While some colleges require permission to register for more than a full course load, and may charge more for extra classes, stacking as many credits as your student can handle each semester will get them through college quicker and with less expense.

8. Reduce and Track Academic Expenses

Books can take a large chunk out of a college budget. When the options are available, make sure your student considers renting textbooks and avoids purchasing new when the required books can be bought used from other students. If renting or buying used isn’t an option, your student can resell the books back at the end of the term. A quick email to a professor can ensure they only buy books and supplies they really need and confirm if an older edition of the book can be used in place of the one preferred. Also, have your student compare the cost of renting or “checking out” a laptop from the college for free or at a minimal cost, and when purchasing supplies look at options for student discounts.

Check with your accountant to determine whether your son or daughter should continue as a dependent on your taxes or if they he/she should claim their own deduction. Understanding this will help to determine who receives the educational expenses and credits for tax purposes. Careful tracking of educational fees and tuition expenses will help ensure the greatest benefit when it’s time to file taxes. Start here to determine how to calculate tax deductions.

9. Cut Living Expenses

Careful consideration of your students housing options can pay off big time when trying to avoid college debt. Since housing costs are typically over 50% of students living expenses it is wise to look at all options. Forgoing on-campus living for the shared cost of rent off campus with one or several roommates can save your student hundreds of dollars a month.  If home is not far from campus, your student might want to consider commuting the first year. Living at home will save money on housing, utilities, and food costs making college much more affordable.

Transportation is another large cost when determining college living expenses. Unless a vehicle is needed for work, your student might want to leave their car at home. Not only will this save money, it will keep them from the responsibility of being a chauffeur to their friends and roommates.

10. Use a Monthly Budget

Proper money management is crucial in avoiding debt, and a well-planned and followed monthly budget is a necessary part of money management. Teach your upcoming college student about how to write out and follow a monthly budget well before they leave to college. Balancing incoming money with outgoing expenses and having a system of accountability will help keep overspending at bay.  Look here for ideas on helping your student prepare a budget for college.

The student loan crisis affects millions of Americans and isn’t going away soon. However, early preparation and money management skills can go along way at teaching your upcoming student how to avert taking on unnecessary debt during their college journey.  If your student has already accumulated student loan debt, look at the difference it can make by adding a little extra money to their monthly payments with our student loan early payoff calculator.

What are some things you or your student have done to avoid excess debt in college?

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