For parents and students alike, college is a big and exciting step. But for most families, college also means debt. Recent statistics show more than 44 million people have $1.5 trillion in student loan debt.
Whether you pursue loans, invest early in a 519 plan, or get help through scholarships, higher education still comes with some sticker shock. That’s why it’s important for families to consider early on how to cover college costs as possible without tapping student loan debt.
1. Don’t wait for college to start saving
Neither parents nor students need to wait for college before they start saving.
Students who are able to work during high school can get a head start on saving. Try to put your earnings where it counts. A high-yield savings account will accrue interest, maximizing your savings before college. One place to look is online. Online banks are able to offer higher interest rates — many above 2% — and are available no matter where in the country you go to school.
For parents, saving can begin right away. These days, many parents start thinking about saving for college even before their children are born. You can open a 529 plan in most states now. The account works similarly to a Roth 401(k) or Roth IRA. The account will fluctuate with the market, accruing value over time until you are ready to use it for educational expenses.
2. Do well in high school
Many schools will give scholarships specifically based on grades and extracurricular activities in high school.
Beyond that obvious benefit, doing well in high school can allow students to earn some sneaky credits before college even starts..
Advanced Placement (AP) classes can be taken during high school for real, tangible college credits. Depending on the high school, students can take AP classes in subjects like foreign languages, computer science, chemistry, biology, environmental science, calculus, history, economics, psychology, English literature, art, music and more.
Be sure to look up your preferred college’s AP class policy to ensure your credits will count.
3. Fill out the FAFSA
The Free Application for Federal Student Aid (FAFSA) is just that – free. So there’s no downside to filling it out. Every household should fill out a FAFSA, even if you think your family’s income is too high to qualify for aid.
Form Your Future, sponsored by the National College Access Network (NCAN), said more than $24 billion in financial aid goes unclaimed by college students and their parents every year. A large chunk of that is the FAFSA.
Therefore, it’s best to fill out the FAFSA early. Different schools will have different deadlines for the form, and different pools of money they can distribute. So it’s best to get your FAFSA completed as promptly as you can.
The FAFSA can result in both grants and loans. Grants are free money that will not need to be paid back. However, the FAFSA is also used to determine the size and types of loans you can take out.
4. Avoid student loans
If you want to avoid debt, you need to avoid student loans as well. They often come with difficult terms that lead many into debt after school.
CNBC reports that “the average college graduate leaves school $30,000 in the red today, up from $10,000 in the 1990s.”
Student loan debt is only getting worse. According to CNBC, in the first quarter of 2019, more than 6% of students who had a loan owed more than $100,000. That 6% figure is an increase from 2017, when the rate was 5.4%.
While there are multiple options for refinancing loans and repaying them, the best bet is to avoid them altogether, if possible.
5. Consider community college
It’s tempting to reach for a dream school immediately when thinking of higher education. That leads many to overlook the many benefits, especially financial, of going to community college.
Students can spend a year or two at a community college and earn credits while saving money (some community colleges are even free!). Community colleges are simply much more affordable. And transferring to a college later may even end up proving easier than getting in right out of high school.
Along with financial benefits, community college might give you some time to breathe and find your path through higher education while knocking out some easy general requirements. You can earn an associate’s degree or professional certification and save money while you’re at it. Students who continue living at home while going to a local community college also save big on fees like room and board.
6. Look into state schools
If community college isn’t appealing, investigate state schools. Again, a student can go to a state school for a few years and then transfer later.
Public universities and colleges will likely cost less than a big private institution. Plus, in-state tuition can save literally thousands of dollars a year.
In some states, average in-state tuition is less than half of what out-of-state tuition can be. In 10 states an out-of-state student will pay three times what an in-state student will pay.
7. Keep applying for aid
Once you’re in school, you shouldn’t give up on applying for scholarships and student aid. The all-important FAFSA needs to be filled out every year. It’s worth continuing to do it so you can keep on receiving help, regardless of family income.
There may also be other scholarships and forms of aid that kick in after you’re already in school. Check with your institution’s financial aid office to learn about scholarships and other programs that can help defray costs.
For example, some students may be able to work for the school itself while enrolled. Many colleges and universities have jobs on campus. Your earnings can go toward paying for tuition and other fees.
Other schools may have official work-study programs. These may or may not be tied to a student’s field of study. They also can take place on or off campus, depending on the type of work.
There is a federal work-study program that helps students earn money to pay for schooling. Check to see if your school participates in this program and how much aid it can offer.
8. Live at home
Many students underestimate how expensive living on campus can be. Between room and board, meal plans and other fees. If you’re able to avoid campus housing, you could live off campus and save money. You may need to live with relatives or roommates, and you’ll have to buy your own food (and likely cook it yourself too). These small sacrifices can add up to huge savings when you’re trying to pay for school at a lesser cost, with or without student loans.
For parents, this could mean allowing your child to go on living at home while they attend college. But with room and board being such a huge expense, living at home is a major money-saver.
If the student does live on campus, don’t forget about your 529 account. Room and board fees are a qualified expense that this account can help pay for.
9. Avoid credit cards
When student loan debt and the related stress starts to pile up, many parents and students turn to credit cards for short-term relief. While a credit card managed well can give you a leg up in your financial life, many find it difficult to avoid splurging and running up debt they can’t afford to pay off quickly or at all. The long-term consequences can mean a mountain of debt that could negatively impact your personal finances and credit score.
If it’s possible, it may be wise for you to avoid using credit cards, especially for things like tuition payments. The interest on credit card debt is typically significantly higher than on student loans. So in a pinch, it is still better for both students and parents to rely on a loan rather than a credit card.
USA Today reported that many graduates burdened with student debt are relying heavily on credit cards to pay for everyday expenses, with some needing to borrow from 401(k)s and take out other loans to make their card payments.
Explore all options
There is no one surefire option to paying for college without student loans. You can (and should) start thinking about the problem as early as possible. For parents, this could mean opening a 529 account as early in the child’s life as they can. A mixture of scholarships, grants, work and creativity could offer a solution.
If your family hasn’t saved enough for your college tuition, it can really pay to explore options like community college and AP classes to earn cheap credits before committing to a big school with big costs. Only by staying open to a broad range of choices will you avoid the burden of student loan debt.