10 Steps to Minimize Student Loan Debt

10 Steps to Minimize Student Loan Debt

10 Steps to Minimize Student Loan Debt

Before taking out a loan, students should do their research on colleges and understand about loans.

Learn to borrow wisely for college.

According to data from U.S. News, the majority of students in the class of 2023 borrowed money to pay for college: With an average debt of around $30,000, 64% of graduates took out student loans. According to experts, taking on this kind of debt occasionally can be a prudent investment, but, before doing so, students should explore all other options for funding and financial help for education. They should carefully assess how much borrowing is acceptable. These ten suggestions can assist students in avoiding all borrowing or in keeping their debt from student loans at a bearable level.

Enroll at a community college.

The location of a student's college can have a significant impact. Students can gain credits while attending community college and then transfer to a four-year institution to complete their degree more quickly and for less money. For example, the average cost of tuition and fees for in-state, in-district students at public two-year institutions in 2021–2022 was $3,800. This information was gathered from the College Board's annual survey, Trends in College Pricing and Student Aid. According to data from U.S. News, the cost of attending a private four-year college is considerably more expensive, costing $38,185 per year, compared to the nearly treble in-state annual tuition at a four-year institution, which is $10,388.

Consider attending a no-loan school.

Financial aid and student loan rules may vary between schools. Some universities provide free tuition to students with household incomes below a particular amount. Others are "no-loan" institutions, which means they adhere to the principle of supporting all of a student's financial needs without the use of student loans. The University of Chicago in Illinois and Columbia University in New York are two instances of them.

Estimate college costs.

Tuition is just the beginning of the costs associated with attending a college, whether it be a community college or a four-year institution. Books, accommodation, meals, and transportation should all be taken into account by studentsMcCarthy. Using a net price calculator is an excellent approach to determining a college's estimated net price, which represents the amount that students will have to pay after financial aid is taken into account. 

The U.S. Department of Education's College Navigator tool, which includes financial aid information like the typical amount of aid offered, is something students should use, according to Karen McCarthy, vice president of public policy and federal relations at the National Association of Student Financial Aid Administrators. Instead of visiting each school's website and trying to discover their financial information, McCarthy advises using the College Navigator, where you simply input the name of the institution and all the information is displayed.

Maximize other funding sources.

Students can determine how to pay for their expenses once they have determined their total charges. Before using student loans, applicants should first consider grants, scholarships, and college savings plans, according to experts. Students must first complete the Free Application for Federal Student Help, or FAFSA, in order to be eligible for financial aid. Despite this, the annual Sallie Mae/Ipsos poll, How America Pays for College, found a drop in FAFSA completion rates over the previous two years. According to Rick Castellano, a Sallie Mae spokeswoman, "Families are typically bypassing it because they assume they won't qualify for aid." "In actuality, almost every family who submits an FAFSA will be eligible for something. When it comes to paying for college, the last thing your family wants to do is leave free money on the table."

Start a side hustle or get a part-time job.

Every dollar spent on paying for education helps offset costs and reduce borrowing. In order to make money that can be used to pay for college tuition or, later on, student debts, several students and recent graduates have turned to websites like YouTube and TikTok. For those who can juggle work and studies, regular part-time jobs are also a possibility. Many fast food chains, for example, give tuition support to employees so they can get paid for their lessons. The amount of the reimbursement may be capped by the employer.

Limit living expenses.

Tuition and fees are set by colleges, so budgeting for those expenses should be simple. Housing, food, and entertainment costs are different matters. According to a survey by the College Board, the average estimated annual budget for full-time undergraduate students in 2021–2022—which included tuition, housing, books, transportation, and other personal expenses—ranged from $18,830 at public two-year colleges to $55,800 at private nonprofit institutions. Although it may be alluring to eat out every night or rent an expensive off-campus apartment, students who want to avoid or reduce their student loan debt should try to be as thrifty as they can.

Borrow only the amount needed.

Student loans are not gratuitous funds. The longer it takes for you to pay off your debt, the more you borrow. Consider turning down any excess loans before you sign anything. Consider how much debt you're willing to take on, what goals you have, and really what comes after graduation, advises Castellano. "Because the last thing you want is to graduate from college and feel like your debt is now overwhelming," the author explains. The National Student Loan Data System allows borrowers to keep track of all of their federal loans, including any outstanding interest.

Understand the payments.

Student loan repayments must be made at some point, even if the majority of federal student loan repayments, interest payments, and collections have been suspended since March 2020. Students should understand not just the terms of repayment but also how much they will be required to pay back. The payback calculator provided by the U.S. Department of Education estimates the monthly payments for federal loans under various repayment programs.

Know your salary expectations.

Students should estimate their expected earnings after graduation once they have an idea of their predicted payments in order to assess what is affordable. To lessen their future financial burden, experts advise students to strive for debt that is less than their expected starting wage. Use tools like PayScale or the interactive labor market outcomes tool of the Federal Reserve Bank of New York to learn more about pay for various professions and think about which majors have the highest starting earnings.

Evaluate student loan options.

According to Jan Miller, president of Miller Student Loan Consulting, LLC, "it's typically advised that a borrower take out all the federal loans they can first before going to private" due to their alternatives for repayment aid. Examine private loan offerings if there aren't enough or no federal student loans accessible, but keep in mind that they could have higher interest rates and longer repayment schedules.

Find out more about college financing.

For additional suggestions and guidance on how to reduce the cost of education, visit the U.S. News Paying for College center. Consider this advice from borrowers and experts on how to repay student loans for those students who do take out loans. To stay up to date on the news related to student loans and other topics, like and follow U.S. News on Facebook and Twitter.

Tips to avoid or reduce student loan debt

  • Enroll at a community college.
  • Consider attending a no-loan school.
  • Estimate college costs.
  • Maximize other funding sources.
  • Start a side hustle or get a part-time job.
  • Limit living expenses.
  • Borrow only the amount needed.
  • Understand the payments.
  • Know your salary expectations.
  • Evaluate student loan options.

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