Student loan debt represents one of the major causes of indebtedness in the US. Most recent graduates walk away from college with the heavy burden of debt on their shoulders.
Key Points:
- Build a college fund early and budget your income around it.
- Always file your FAFSA as early as possible.
- Research your student loan thoroughly before signing on the dotted line.
Based on data from the U.S. Federal Reserve and the Federal Reserve Bank of New York, StudentLoanHero.com reported the following statistics:
- 44.7 million Americans have student loan debt
- The total student loan debt in America is a staggering $1.71 trillion
- Among the Class of 2019 (the most recent class for whom statistics are available), 69% of students took out student loans and 14% of parents took out federal parent loans
- 48% of borrowers who attended for-profit colleges default within 12 years, compared to 12% of public college attendees, and 14% of nonprofit college attendees
According to a Brookings Institute 2018 report, around 40% of students will likely default on their student loans within a couple of years.
Proper foresight, attention to detail, planning, and commitment can keep your student loan debt under control and make your financial future brighter. There is plenty you can do to ease the burden of student debt, even before you go to college.
Your options to minimize the impact of your student loan are numerous.
The good side of student debt is that it’s predictable. If you budget well, exercise self-control, and stick to your financial commitments, you can prime your finances to better absorb the impact of student debt. Here are some tips to avoid student loan debt.
Start Saving for College Early
Saving for college should start well before the first tuition bill is due. By taking a part-time job during high school and saving up your earnings, you can put a significant dent in the student loan debt that you will later incur.
You may not be able to avoid student loan debt altogether, but every dollar you save up will take you closer to being debt-free after you finish college.
Create a budget and determine how much of your part-time job earnings should go toward your college fund each month. In addition to taking you closer to your goal of getting an education, this approach will also teach you financial discipline early.
Degree-shop and Compare Prices
Choosing your college well can make a difference worth thousands of dollars in your tuition costs. You may be tempted to go to one of the hyped-up Ivy League colleges. But before you commit, you should compare prices for the same degree over several different state-, private-, and community colleges. You may have a change of heart.
Another trick is to go to a community college for a year or two and then transfer to the school of your choice.
Score High on Your SAT/ACT
If you do well in high school and score high marks on your SAT or ACT, you may entice the college of your dreams to want you as a student. A good SAT score makes you much more likely to receive funding and scholarships.
Scholarships can help you save significant money on your tuition. They may even help you avoid student loan debt altogether.
Don’t Forget to Fill Out Your FAFSA
Filing your Free Application for Federal Student Aid as early as possible makes sense for several reasons.
- You will find out early whether you qualify for a grant or a federal aid program.
- You will know ahead of time what kind of aid you may receive.
- You will gain early access to the often limited funding your college can give you.
Always file your FAFSA.
File your FAFSA even if you think that your family earns too much to make you eligible for aid. Don’t forget to re-file every year to communicate your updated financial situation.
Thoroughly Research Your Student Loan Options
If you have to resort to a student loan to pay for college, make sure you get a reasonable deal. You may want to avoid private student loans and stick to federal loans, if possible, because the federal student loan program limits the amount you can borrow each year. Private loans do not have such limitations, making it easy for you to sink deep into debt. Federal loans also offer you protection programs in the event you lose your job, or other circumstances occur that make you eligible for the program.
Some other factors to consider before you apply for a student loan are:
- The repayment rules, penalties, and restrictions
- The cost of the loan in interest
- The nature of the interest (fixed, variable)
- Your monthly payments
Don’t forget to estimate your post-graduation income and match it up against the monthly payments you have to make on your student loan.
Don’t Leave Home for College
Living on campus may seem like part and parcel of student life for many. It is also incredibly expensive. Most students fail to anticipate the financial strain on-campus living entails.
If you can avoid living on campus, you can save thousands of dollars a year. You can use that money to pay for college and minimize the amount of student debt you have to handle.
Stay Out of Credit Card Debt
If you underestimate the cost of tuition, on-campus living, and everything else student life entails, you may end up turning to your credit card to plug up the holes. In addition to piling up student debt, you get stuck with expensive consumer debt as well.
If you have already accrued credit card debt that is too much to handle alone, ClearOne Advantage can help. ClearOne Advantage’s Certified Debt Specialists are standing by at 866-481-1597 to help you design a plan that fits your budget. Contact us today to get a free savings estimate.
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