Paying For College: How To Reduce Student Debt

by Alexis A. on 2012-10-0812

Kids grow up fast, too fast in most cases. At least faster than you can get their college tuition saved up. And doesn’t it seem like every year, college tuition increases to the tune of 6% or more? We’ve taken a look at some of these concerns in a few recent articles on the subject of affording student loan payments and college costs.

In most cases, I’m doing well to make sure that every bill I have is paid for every month, while I sock some money away for retirement, and defer some funds for college tuition.

It always felt like there was a tomorrow and time left on my kids’ college funds, at least until I took my rising freshman daughter to a high school orientation. Now, that tomorrow feels like yesterday and I’m under the gun to find a way to pay for her college education costs, I’ve been contemplating my options. If you’re finding it hard to fund college, are loans the only way to go?

We’ve seen how a lot of people want to get a college education, even to the detriment of their future finances (no thanks to heavy student debt). We’re all assured by the idea that on average, a college graduate is expected to make up to three times more than a high school graduate. But how tough is it to afford college? While it is important to plan for the future and set aside cash to pay for the multitude of expenses that go along with getting a higher education, there are also a plethora of avenues you can utilize to help defray the burden. Ideally, having a 529 savings account or other educational savings fund should take care of the expenses, but for many families, this isn’t enough; many parents are driven to look for additional financial resources to cover the gaps. We’ve discussed some of these ideas in the past, but I’d like to address a few more ways I’m thinking of handling this particular financial goal.

paying for college, reduce student debt
Image from Seattle Pacific University

Ways To Pay For College: Free Money Options

1. Fill out the FAFSA. We’ve mentioned this before: the Free Application for Federal Student Aid is the basis for any financial aid program. As a matter of fact, every federal and most state financial aid packages encourage you to complete this form. The form asks you a series of questions that evaluates your current financial condition and determines whether or not you are eligible for any need based programs. It’s a good idea to complete the form, whether or not you think you qualify for need based aid.

2. Apply for scholarships or grants. There are quite a number of scholarships and grant programs out there that you can consider for your child, but do your due diligence with these. While the best part about winning a scholarship or grant is that the money is free and you never have to pay it back, the downside is that it can be time-consuming to pursue such programs (plus you have no guarantees of qualifying for the free money). And there are scholarship scams to watch out for.

3. Consider a Federal Work-Study Program. This one allows you to use some sweat equity towards fulfilling your financial obligation. Plus, it’s a really good way to spend some quality time with your child, whom you can have toiling away beside you.

4. Find out about state scholarship programs. Most states have a lottery scholarship where any permanent resident of the state qualifies for an award, based on academic performance. You should also check out the school’s financial aid office for school sponsored aid packages.

Low Interest Options

1. Apply for a PLUS loan. This is the loan product that is available to parents of college age children. Yes, you have to pay the money back and yes there are interest fees, origination fees, etc., but they are somewhat easier to obtain than traditional personal loans since they are backed by the federal government and the cost is much lower than other loan products. You will need decent credit, steady income and potentially a co-signer.

2. Have your child (of majority age) apply for student loans. This one gets a little tricky, but stick with me here. Consider having your child apply for a traditional Stafford Loan. This type of loan may be easier to pick up given that there are no credit or income requirements to qualify. They have one of the lowest interest rates available and payments do not have to commence until 6 months after graduation. The best way to use these is to take them out and begin making payments on them immediately to prevent interest from building.

Practical Tips & Ideas for Reducing Student Debt

1. Take community college and advanced honors high school courses. If your child can be proactive, it can save your family some money. How about having your child earn as many credits as possible through his or her high school curriculum (where the courses are free) and community colleges where tuition is generally cheaper than most universities? So if your child is a good student, it can pay off! Also, many community colleges have articulation agreements with major universities that allow students to complete the first two years of study in any major and then transfer the credits to the university. This may be a reasonable compromise for those who want to eventually graduate from a well-known university.

2. Buy used. This means textbooks, furniture, clothing and anything else you can get away with. Textbooks make up a huge portion of the bill when it comes to getting a college education. Buy used books and sell them back at the end of the term to lessen the impact: for instance, certain sites exist to help you avail of this type of service. Also consider e-books, which may be significantly cheaper than hard copies.

3. Buy a bus pass. While having a car on campus is a huge convenience, it’s clearly not the most affordable way to get around. In most cases, students can purchase mass transit passes for around $20 a month.

4. Attend college in the state of your permanent residence. It’s no secret. Not only is in-state tuition cheaper, but most state schools show preferential treatment to in-state applications when it comes to accepting new students.

Paying for college is tough, but with a little diligence and a lot of hard work, you can reduce the amount you will owe, making the transition for your child from high school to college much less challenging, at least financially.

Created June 22, 2010. Updated October 8, 2012. Copyright © 2012 The Digerati Life. All Rights Reserved.

{ 12 comments… read them below or add one }

yesiamcheap June 22, 2010 at 8:31 pm

Any thought about what to do if you already have gone past this point in the process and now find yourself with a ton of debt and underemployed? A lot of us are in that boat. Beyond consolidating at a low rate and making sure that you make all of the payments on time, do you have any advice?

U. Romilion June 23, 2010 at 7:57 am

I love your list of all the thingst we can do, Alexis, in order to afford our kids’ college. The only thing I would add on the list is –although you sort of imply to in your point on attending a college near home – is to select a college that you can realistically afford.

Like for everything else in life, there is an upper limit for the college fees you can pay. This is no different from the situation with your house, car, traveling, and all other categories of spend. You can use your own resources and get more from the bank, but still there is a limit over which you shouldn’t go, provided you want to continue a happy financial life too.

I know this feels tough for a lot of folks. After all, we are talking about our kids’ future, and who of us want to go cheap on that! The point is really about finding that right balance, though. Yes we’ll need to do our best especially when our kids future is at stakes, but wrecking the rest of our lives by overly ambitious choices doesn’t help anyone, not even our kids. Luckily, kids are smart and understand this. They too know that the financial resources of their parents have an upper limit, and they sure tend to want to find a solution that works for all in the family.

Interesting enough, the college we actually choose may also make much less difference than we think. In a study comparing the financial success of kids who had same level of marks in high school but went through different colleges, the conclusion was that the choice of college had almost no impact. Sure enough, the jobs these kids landed after college varied a fair bit and were indeed affected by the choice of college. Similarly the college they went to had an impact on the type of career they ended up going through. However, the money they ended up making was virtually the same, no matter which college they went to. (Too bad I just cannot seem to find that study right now, will do some more searching and come back with a link if I find it).

So, I would say: select the best college you can realistically afford – with your own money and/or the right amount of student loan – and that’ll do. With this you can expect your kids to turn out just as great as they ever could, and you’ll be great too!

U. Romilion June 23, 2010 at 8:22 am

Just cannot find a link to the study I mentioned in my previous comment, but found something else instead. The message is the same though: what really matters is the kids themselves and profession they choose, and the choice of college matters only a little. See this article.

Kosmo @ The Casual Observer June 23, 2010 at 9:10 am

Romilion – very good point. Personally, I’m a graduate of a public university. When I was hired, I began my career with about 20 other people hired for the same job. (It’s a very big company).

Some of the people in the group went to public schools, some went to private colleges. A friend of mine, who graduated from a private school, commented that we achieved the same goal (landing a good job with a quality company) – and that he simply paid more money to achieve the goal.

If you really want to help your kids maximize their education, emphasize the importance of learning rather than just the importance of test scores. I knew a lot of students who would avoid certain professors because they demanded a lot of their students. Not that they were unfair, but simply that they demanded a lot. I quickly realized that for the price I was paying, it made sense to maximize the amount of learning en route to a grade, not minimize.

I took two tax classes in college. After I took the first one, they shuffled the content of the courses. Half the content from course 2 was now in course 1, and vice versa.

The second course was an elective – not a specific requirement for any major. So everyone in the class was there because they chose the course. The first day of class, the prof explain the shuffling, and gave us the following options:

1) Take course 2 as currently laid out. You’d miss half the material that had previously been in the course, and half the content would be review from course 1, but it would be an easier route.

2) Do self-study of the missing material for the first half of the semester. Meet with him once a week. He’d quiz you on the material. You’d take tests by yourself. This was the more difficult route, but ensured that you wouldn’t miss any content.

How many people chose option 2? Yep … just me. Aced the class AND learned a lot.

ConsumerMiser June 24, 2010 at 8:06 pm

Great article on how to pay for college. I love the various options you present for parents and students. This is one of the best blogs I have read in a while on this subject. It looks like quite a bit of comments have been generated too which I will have to catch up on.

My wife told me that it will cost about $100K per year to go to Yale in about 14 years (I believe this is tuition, room, board, fees, expenses, etc.)!. She used one of those online projection programs.

CreditShout June 25, 2010 at 2:20 pm

I’m a senior in college now, and I have followed your practical tips all three years and will continue to. I also took advanced placement classes in high school to earn college credit. Loans are usually a must have, even if you are going to a less expensive state school, but the interest rates are usually very low and you are given more time to repay the loans AFTER you graduate. College doesn’t have to be expensive, but many people neglect to take any of these useful tips into account.

Jim@Tent Camping Tips June 28, 2010 at 7:37 am

Great advice – bookmarked this article!

I don’t recall half these options when I was of “college age”. To be honest, the only course of action that I thought was available was community college. I didn’t know how / where to find info on scholarships and grants.

National Debt Relief Program June 30, 2010 at 3:38 pm

Let’s also not forget that Uncle Sam offers student loan consolidation for federal student loans. Peace.

Kyle Andrew August 4, 2010 at 7:15 am

Actually there is another way to finish college without student loan debt, it is called Straighterline. offers students a low cost opportunity to get a year or so of college for a small fraction of the price of 4 year or even community college tuition rates. You have to check it out to believe it.

Editor: The site you are referencing seems to be down.

TheCollegeHelper September 15, 2010 at 6:08 pm

Great tips for college-bound high school students! In addition to all of the things that you mentioned, here are a couple items that students should AVOID in order to keep their college debt low:

1. Avoid using their credit card to pay for classes. Credit card debt is more expensive than ever, given the recent changes to interest rates and other fees that many credit card companies are now charging. Credit cards should be used for emergency purposes only.

2. Avoid private loans, if possible. These loans carry variable interest rates that can reach up to 20 percent, like credit cards!

Silicon Valley Blogger October 26, 2011 at 2:55 pm

Some interesting resources I’ve gathered on this subject. To follow up on private student loans, check out some of these sites:

The Institute for College Access & Success — this is a non-profit that advocates and supports the cause of making education affordable and available to anyone.

American for Financial Reform — this is another grassroots organization that is fighting for reform in our banking, corporate and financial systems, and is seeking more transparency in our government’s financial arms.

I will make sure to make mention and keep abreast of resources such as these, as and when I find them.

Daisy@Everything Finance October 11, 2012 at 9:30 pm

I worked throughout college, most times full-time. I also went without buying the textbook in classes I didn’t need it in, and didn’t go out of my hometown for the first few years. It was hard and I didn’t do amazingly in the classes that I found difficult, but I did okay and I got my degree and I have abotu half the debt of that of my peers. I am happy with my decision to do so. Now that I’m not working AND going to school it’s quite the adjustment.

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