10 Great Ways to Avoid Student Loan Debt

When the average student graduates, she’s almost $30,000 in the hole. That’s some education, all right.

More than 44 million students are now up to their caps and gowns in student-load debt — to the tune of $1.5 trillion. That makes student loans the second highest debt category, behind only mortgage debt.

However, not everyone has to go in debt to earn a degree. Savvy students can avoid decades of repayment pain by planning their college expenses to help them emerge from their respective institutions financially unscathed. Here’s how:

Seek free money first

Your high-school accomplishments can pay off big time in the form of free money.

“Start by looking in your local community; private businesses and philanthropic organizations alike,” suggests financial aid expert Abril Hunt. “The dollar amounts may be a lot less than national prestigious scholarships, but several smaller scholarships can add up. Organizations like the local Rotary, Masons and other fraternal organizations often offer renewable scholarships. Look for scholarships in your field of study and also in areas of personal interest. Not all scholarship donors require a 4.0 GPA.”

Save before college

I didn’t come from a wealthy family, and I started working part-time at age 15. If I had saved my earnings I would have been able to put a reasonable chunk of money toward my private-college education, which, in the end, cost just over $100,000 in tuition, room and board.

“Every dollar you save is about a dollar less you’ll have to borrow,” adds Mark Kantrowitz, publisher and VP of strategy at college-comparison site Cappex. “Every dollar you borrow will cost about two dollars by the time you repay the debt.”

Choose an affordable school

We don’t always do what makes the most financial sense if there’s a promise of prestige attached.

“The reality is, college expenses depend heavily on how expensive the university is,” explains Anita Thomas, senior vice president for Edvisors.com, a company which helps students plan and pay for college. “Individuals should try to max out free aid such as grants and scholarships first. But it’s also possible to find less expensive colleges that maximize your savings. Ultimately, tough dinner table conversations may be necessary along the lines of going to the college of your means, or the college of your dreams. The financial implications always start there. Always.”

Enroll at a no-loan college

Did you know that all Ivy League institutions have “no loan” policies? That doesn’t mean only the elite can attend. Rather, these schools want to help low-income students get a great education and enter the workforce with little or no student debt. Students must be eligible for the Federal Pell Grant, and their family’s annual income has to fall below a maximum threshold, usually between $40,000 and $60,000.

Borrow only what you need

Pay the interest while you’re in school so you’re not facing a looming amount of additional money that gets tacked onto your principal balance after you graduate and enter repayment, advises Thomas. Choose federal loans first to reduce college borrowing costs and engage in opportunities for income-driven repayment plans and possible loan forgiveness.

Take advantage of flat-rate tuition

If a school offers flat-rate tuition, taking an extra class each semester can save tuition costs over the long run because students pay the same amount whether they’re taking 6, 12 or even 18 credits.

Use tuition installment plans

Installment plans break up college bills into monthly payments. No interest is charged but there is an up-front fee that’s typically under $100.

Investigate repayment options

All federal direct student loans offer standard and income-based repayment as well as deferment and forbearance options.

“In the Pay As You Earn (PAYE) option, payments are limited to 10% of discretionary income. And forgiveness on the remaining balance is possible after 25 years,” explains Hunt.

Seek employer tuition reimbursement

“One of the most overlooked sources of funding for avoiding student loan debt is an employer’s tuition reimbursement policy,” says Ogechi Igbokwe, founder of OneSavvyDollar. “Currently, 54% of employers will pick up the tab for their employees education; the amounts vary by company. However, the IRS maximum is $5250. Any amount above $5250 is considered taxable income for the employee.”

Work part-time

I worked my entire way through college — so I know that it can be done.

“Working part time increases cash flow and exposes students to future job contacts,” Hunt says. “Students should take advantage of work-study funding, if offered, or look for other employment opportunities on campus. Student government often offers tuition discounts or stipends. Besides, work experience always looks great on a resume.”

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