With fall upon us, it’s time for the leaves to start changing, the air to start getting brisker, and of course, the students to return to the colleges. This is definitely apparent to those of us who live only two blocks away from a college, and had to deal with an entire weekend of students moving into dorms and frat houses just down the street. (Let’s not even start to talk about the houses nearby that are occupied by college guys; that could prove to be all kinds of fun…) Yes, college season has begun.
Of course, with college comes student loans, one of the biggest debts that many people will have to deal with throughout their life. I’m not going to try to dissuade you from taking on student debt in order to obtain a degree; if there is anything that can be considered ‘good debt’, I’d think that student loans definitely qualify. Even if all debt is bad (and I understand the arguments that it is), at least student loans are among the most understandable of types of ‘bad debt’ to take on.
Regardless of whether student debt is good, bad, or something in between, there’s one thing every financial adviser can agree: you should try to keep your debt to a minimum. Luckily for you, you’re reading a source of information on just how to keep that debt down to a minimum while still getting yourself a degree. That’s why we’re going to spend the rest of this article discussing
Ways to Minimize Your Student Debt
Before You Start
1. Find a School With Reasonable Expenses: The more your chosen school costs, the more you need to pay, whether through student loans or out of your own pocket. The biggest thing you can do to keep your student debt under control, then, is to attend an inexpensive college so you don’t need to take on a huge amount of debt. (Although, if you get into a school with a great reputation, the costs might just be worth it. But that’s beyond the scope of this article.)
2. Look Into Scholarships and Other Benefits: I’ll let you in on a little secret: schools don’t actually charge the full tuition amount to most of their students. To cut your costs, you can look into scholarships and grants to see if the school or other resources will provide you with financial support to attend classes. They might not be huge benefits (some are only for a few hundred dollars or so), but every little bit can cut down on the expense.
3. Consider (Carefully) Starting in a Community College and Transferring: One of the most commonly recommended suggestions for saving on college costs is to take a year or two in community college and transfer the credits to a four year institution to finish there. While this is a decent plan, use it with caution; you need to ensure that the credits will transfer BEFORE starting community college, if you aren’t going to spend more money (and more time) in the end.
4. Settle On a Major Before Starting Classes: One last thing before we get to what you should do at college: settle on your major before you starting attending class. When you change your major, you’ll add time to how long it will take to finish your degree and add money to the total expense. Stay in the same major and you’ll keep your expenses low(er).
While At School
5. Get Other Sources of Money: The more money you can get from sources other than loans, the less you’ll owe when classes are over. There are plenty of opportunities available, from working online to working for the university. Any job that brings in money can help you cover your expenses, although the latter also offer you a chance to:
6. Work Down Your Expenses: Your college job might offer benefits beyond mere paycheck. For example, Resident Assistants (the students in charge of running dorms) often have the possibility of getting free room and board in exchange for keeping undergraduates from causing (much) property damage. Worth considering.
7. Get Federal Student Loans First: Alright, if you’ve done everything possible to keep your expenses to a minimum, now you can consider student loans. While there are useful private lenders, you should start your applications with federal loans, which tend to be easier to get and easier to repay.
8. Take on Only As Much Debt As You Need: I hope I don’t need to say this, but the less debt you have, the easier it will be to pay off. Try to keep your student loans limited to what you need (and not merely what you want), and when repayment time arrives, you’ll be that much better off.
9. Pay Your Interest As It Accumulates: A quick note on types of loans: Subsidized loans have the interest covered by the lender while you are attending school, while unsubsidized loans do not. If you take on unsubsidized loans make sure that you pay off the loan interest as it accumulates, to avoid any compound interest when you finish your education. (Also, try to stick to subsidized loans as much as possible, although I realize that’s not always possible.)
10. Finish Your Degree As Soon As Possible: If you work to keep your time in school to the minimum needed, you’ll be able to keep your expenses low as well. Finish the needed coursework as soon as possible (and stick to that major you chose earlier), maybe even dropping a semester (or a year) from the time needed to get your degree with proper planning, and you’ll have that much less expense to pay back.
11. Take Advantage of Your Grace Period: For a short period after you graduate, your lender will generally not require you to start making payments. Use that time to find a job, start making payments, save up your money to cover future payments, and otherwise do what you can to make it easier to handle the payments when they are due.
12. Get Started Paying Back Your Debt As Soon As Possible (And As Much As Possible): Once you have a job lined up or your business starts bringing in dough, you should start to pay down your debt as soon as you are able. While you’re at it, if you have any money that you can put toward additional payments (and money that wouldn’t be better served paying down credit card debt, for example), you can use it to cut down the principle and thus, your future interest.
13. Look Into Deferment, Forbearance and Forgiveness: While you will hopefully have no difficulties paying back any loans you may take on, it’s still wise to consider deferment or forbearance when you are unable to handle the payments required. Both will delay your need to pay (not to get too much into the finer details, let me say that, if possible, you should try to get a deferment). You can also look to have some or part of your loans erased (or forgiven), although this generally this only applies if you are a teacher, in the military, or doing volunteer work.