We often talk about how to pay back loans after we owe them—but here’s how to minimize your loans BEFORE you graduate with that diploma.
If you’re a recent or current college student, or simply someone who follows the news, you know all too well that student loan debt in the U.S. has reached staggering proportions.
Couple that with tuition rates rising faster than inflation, a depressed job market, no legislation in place to make higher education more affordable and the fact that most loans only require minimum monthly payments, and it’s clear the problem is only going to get worse.
So what can you do to avoid feeling like you’ve been punched in the gut when you graduate? Here are a few ideas:
1. Save early
I wish someone had drilled this suggestion into my head early on. I justified frappuccinos from Starbucks on my way to class and late night beer runs by telling myself I’d worry about my bank account balance later. By the end of freshman year, I had blown through the meager sum of money my parents had saved for me to go to school and was about to take on my first loan.
Walking out of the financial aid office with a promise of $5,000 being delivered to my account felt great, but I knew it was time to change my behaviors. If you’re not saving—or at least being frugal—right now, do whatever you can to change your habits NOW.
For me, that meant taking a part-time job. It enabled me to save about $50 a week. The key here was not just saving that $50, but putting it in a separate account and leaving it untouched. The weekly contribution amounted to $3,136 by the time I graduated three years later.
2. Take out manageable loans
A little-known resource for college-bound high school students and currently enrolled college students is the Student Loan Advisor application (find it at finaid.org). This free tool lets you look at the average starting salary for your projected major and suggests a manageable loan amount based on that salary.
3. Consider work exchange programs
Many federally-funded programs offer college students the opportunity to work in low-income areas or developing industries in exchange for loan forgiveness or aid.
While some of these programs work like a typical part-time job would, others are in areas beneficial to the community (like working at a homeless shelter) and result in the university’s work-study funds being allocated directly to your loan. Every school is different, but if you’d like to read up about the Federal Work-Study (FWS) programs available at your school and find out what types of employment may be available to you, you can read more on the Department of Education’s website.
4. Change schools
Community colleges perhaps aren’t as glamorous as a four-year institution, but they offer a much more affordable way to get an education. Even better, you can still transfer to a well-known university after two years at community college.
Taking general education requirement courses at a community college for two years will help keep tuition costs low—to say nothing of the savings you can build if you can live at home. In most cases, receiving a diploma from a prestigious four-year school only requires two years of enrollment, meaning you can still receive a diploma in the field of your choice from a bigger-name school.
5. Use credit cards with cash rewards—carefully
Some credit cards give you cash back every month, and it can really add up. Take that cash back and put it directly into your loan payoff plan for an easy boost.
But be careful; this only works if you’re in a position to pay off your credit card in full every month. If you think student loans are bad, the interest rates on credit cards are much, much worse, and you should never let your credit card balance balloon in the name of paying down student loans.
6. Go with philanthropic service
Philanthropic organizations like AmeriCorps offer recent graduates the opportunity to earn up to $5,500 for each year of service. AmeriCorps works with health and educational organizations around the U.S. to provide philanthropic services to those in need and distributes loan reimbursement through a Segal Education Award to participating post-graduates. These reimbursements may only be applied to student loans or to the tuition of a post-graduate program.
Additionally, if you’d like to commit to more than a one-year term of service for additional funding to help pay off your loans, you can enroll in a two- to five-year program with the Public Service Loan Forgiveness Program (PSLF). They offer complete loan forgiveness options to graduates but require longer commitments. More information about this organization can be found at the PSLF branch of the Federal Student Aid website.
A final option to consider is Teach for America, a subsidiary of the AmeriCorp blanket. This two-year contracted program offers both a salary and loan stipend. The school district you are assigned to teach in will pay a regular salary for your teaching service, and Teach for America will award you a stipend of up to $11,000, which you can use to pay down your student loans.
As brutal as student loans are, college is an incredible way to learn and move toward a better career. There’s no magic bullet for getting rid of loans, but by planning ahead or restructuring your current post-graduation plans, you can greatly minimize the headache.
Oliver Denton is studying computer science and also works part-time as a tech writer at MegaHowTo, an online repository of useful guides. You can follow Oliver on Twitter.