Many people will tell you that you can’t get a good job without an education – a college education. Unless you are lucky enough to receive a generous scholarship or help from family, you may be left paying for school on your own and you may need to take out a few student loans – or a lot of them. Unfortunately, the cost of tuition continues to rise each year and the average salary for an entry-level job just isn’t enough to pay off student loans for many people. If you are thinking about starting school, or if you already have, do yourself a favor and follow some of these simple tips for minimizing your educational debt while you are in school so that your loans are more manageable when you graduate.
Shocking Student Loan Statistics
According to the most recent reports for 2016, the total amount of student loan debt in the United States is about $1.23 trillion and that number is divided over more than 43 million Americans. The average graduate for the class of 2016 will be graduating with more than $37,000 in student loan debt – that number is up by a full 6% from last year. When it comes to student loans, there are a wide variety of different types and each type of loan has its own interest rates and rules for repayment. Direct loans make up the largest chunk of student loan debt with a total over $840 billion divided over nearly 30 million borrowers. Next comes FFEL loans with over $363 billion and nearly 18 billion borrowers.
As if these statistics weren’t shocking enough, consider the fact that more than 70% of four-year college graduates left school in 2012 with student loan debt and 66% of graduates from public colleges graduated with debt. For private nonprofit colleges, nearly 75% of graduates left with an average of $32,000 in student loans and graduates from for-profit colleges left with an average of nearly $40,000 in debt for almost 90% of graduates. Even community college graduates often have to take out student loans to help pay for tuition and books and, in some cases, living expenses while in school.
Before You Start School
They say that prevention is the best medicine. Not only is this the case for medical problems but it may be true for student debt as well. If you take the time to map out your future (as much as the future can be planned, anyway), you can enter school with a plan to reach your goals while minimizing your debt. The first thing you need to do is to start saving money as early as possible. During high school you should try to take on a part-time job in order to build up a savings account – you can then use that money to cover some of your expenses during school so you don’t have to take out as many loans, or you can use that money to pay off some of your loans while you are still in school (before they begin to accrue interest at a higher rate).
It is also a good idea to really think about what field you want to enter and make an effort to choose the best program available that will also be the most cost-effective option. Think about whether graduating from a $40k-a-year school will really set you off on a better foot upon graduation than a state school or a community college degree. For some industries, the college you graduate from plays a major role in determining the type of job you are able to get, but this is not the case for many fields. If you can get the same degree at a community college and accrue half as much debt, by all means go for it! You should also make an effort to apply for as many scholarships and educational grants as you can to cut down on your annual tuition costs.
Tips to Avoid Accumulating Too Much Debt
If you are careful with your planning you can start your college career with a good bit of money saved and you can minimize the amount of student loans you have to take out. While you are in school, there are also some things you can do to help minimize you debt:
- Pay Your Interest Each Month – In many cases, you will be able to defer payment on your student loans as long as you are in school. Depending on the type of loan, however, they may still accrue interest during deferment. Try to pay off that interest each month to cut down on your total amount of debt upon graduation.
- Look for Other Sources of Funding – If you need to pay your tuition for the next semester or you find yourself in need of a new computer, consider alternative sources of funding before you go and apply for more student loans. Scholarships and grants are often limited to tuition expenses but you may be able to find some that can be used for whatever you happen to need.
- Talk to the Financial Aid Office – Take advantage of your school’s financial aid office to see if there might be places where you can save money. Perhaps one of the student dorms is less expensive than the others or you might be able to take one of your classes online during the summer instead of paying regular tuition.
- Go Federal Before Private – If you have to take out loans, get as much as you can out of federal loans before turning to private loans. Federal loans typically offer more options for deferment and some of them even offer low interest rates or no interest while you are in school.
These are just a few of the options available to you that can help you to minimize your student loan debt. It is all about taking advantage of opportunities to pay down your debt before it starts to accrue interest (if you have that type of loan) and to make smart use of your loans, not taking out more than you really need.
Avoid These Things to Save More Money
In addition to following the tips above to help reduce your educational debt during school, there are also a few simple things you can do to save the money you do have. Try to avoid getting a credit card during school because you will likely just rack up more debt on top of your student loans. If you do get a credit card, make an effort to keep your balance low or pay it off each month, if you can. It is important to have good credit so having a credit card isn’t necessarily bad, as long as you use it responsibly.
You can also save money by sticking to a budget. Write down all of your expenses and keep track of the money you spend each week and each month on things like food, clothes, transportation, etc. After tracking your costs for a few months, take a closer look to see if there might be areas that you can pare down to save a few extra bucks. Avoid going out to dinner too often, choosing to prepare your own meals at home. If you live on-campus and your tuition includes a meal plan, take full advantage of it instead of spending your own money on food. When it comes time to buy text books, purchase them used if you can or split the cost with a classmate and share the books.
You may not be able to avoid graduating with student loan debt, but there are some simple things you can do to minimize your debt while you are in school. Paying off your student loan interest and making smart use of your loans while in school can help to ensure that you graduate with a manageable amount of debt or, if you are very lucky, little to no debt at all.