Student loan debt is at a record high and every year reports and media headlines show that the problem is only getting worse. Loans may be a fast and convenient way to get money for a college education, but taking out too many loans and/or not having a solid payment plan in place can result in negative financial consequences that are felt long after the cap and gown have been hung. Debt—or at least overwhelming debt—doesn’t have to be part of the higher education equation, however. This guide explores the various ways students and their families can finance a college education, from well-known avenues such as scholarships and grants to newer strategies that have emerged in the last decade to sources that many students simply forget to tap into. Also included is an interview with a financial aid expert and tips on how to effectively lower the overall cost of a college degree. With the right knowledge and proper planning, it is possible to graduate with manageable debt and, in some cases, eliminate it completely.
Sean Martin is Director of Financial Services at Connecticut College in New London, Connecticut. Prior to his current position, Sean worked for 10 years as Athletic Director at Fairfield University and Boston College, and in the Financial Aid department at Wesleyan College, where he most recently served as Senior Associate Director.
Student loan debt can have lasting consequences, but it’s one that can be partially or entirely avoided. The trick is to identify alternate funding sources and there are several out there available to both undergraduate and graduate students. Below is a list of potential funding sources.
Crowdfunding is a way to raise money—and awareness—for a specific project or venture, usually through an online platform. It’s a concept that is popular among the start up world, and many young people have recently adapted this method to raise money for a college education. The concept has actually been around in one form or another for decades, but it took the Internet to make it more practical and widespread.
Crowdfunding websites began showing up in the early-2000s and exploded a few years later with sites like Kickstarter and Indiegogo. Since then, crowdfunding to pay for college has taken off in a big way. Education crowdfunding sites are now plentiful and provide platforms for students to employ a variety of methods for raising cash for college or paying off student debt. Here’s a look at some of the most popular and how they work:
What is it: GoFundMe is a donation-based funding site dedicated to charity and personal money raising. Students or others can launch campaigns to pay for college-related costs including tuition, books, fees, living expenses, and to pay off existing student loans. Because GoFundMe is donation-based, funds raised here need not be repaid.
What is it: The Indiegogo platform is open to anyone that wants to raise funds to finance a project, including paying for education. Funding decisions are borrower- and lender-driven and Indiegogo does not decide which projects are worthy and which are not. Individuals simply set an amount to be raised, explain the purpose of the funds, then activate their campaign. The platform works on a reward-based system, meaning that donors may receive a gift in exchange for their donations.
What is it: Piglt (pronounced “piglet”) is a crowdfunding site specifically for education-related campaigns. Borrowers (called “Dreamers”) create video campaigns to explain their projects to lenders (“Believers”). Dreamers offer incentives in the form of unique skills, abilities, or products in exchange for funds. Dreamers may raise money for practically any education-related project, including payment for tuition or existing student loans, or to fund academic activities such as classes, seminars, or mentoring programs.
Active military and veterans enjoy plenty of higher education benefits. Here’s a look at the most popular options:Tuition Assistance
The Army, Navy, Marines, Air Force, and Coast Guard each offer a tuition assistance program for its service members. Tuition assistance covers up to 100 percent of college tuition and fees to a maximum of $4,500 annually. Benefit and eligibility details vary by service branch.
The Post-9/11 GI Bill is available to service personnel, Reserve and Guard members, and veterans who served for at least 90 consecutive days on or after September 11, 2001 or were honorably discharged with a service-related disability after 30 days of continuous service after September 11, 2001. The maximum payable educational benefit depends on the service member’s length of active duty service. Eligible individuals may receive up to 36 months of educational assistance, which can be used to cover the cost of not only postsecondary education expenses, but also on-the-job training, flight schools, tutorial assistance, certification tests, and licensing fees.
The Post-9/11 Bill may also cover the entire cost of in-state tuition and fees at public postsecondary institutions that participate in the Yellow Ribbon Program. Unused educational benefits may also be transferred to a spouse or dependent, based upon the service member’s agreement to serve an additional four years.
The military may partially or fully repay a service member for his or her student loans. Loan repayment is handled differently by each service branch, but in most cases, programs are open to enlisted personnel only. Other eligibility factors include occupational specialty (MOS), terms of the service member’s contract, and loan status (loans cannot be in default).
In order to qualify for financial aid (including loans and grants), students and their parents need to complete the Free Application for Federal Student Aid (FAFSA®). The FAFSA® determines “Expected Family Contribution”, which is the amount each family is expected to contribute toward a student’s education. This form is used by nearly every university to determine student eligibility for aid and to create individualized financial aid packages. A division of the U.S. Department of Education, Federal Student Aid is the single largest source of financial aid in the country, providing over $150 billion in federal loans, grants, and work-study funds to more than 13 million students annually.Eligibility for financial aid
Specific eligibility requirements for federal financial aid vary by program, but students can use the following checklist as a starting point.
Scholarships and grants are one of the most traditional and familiar methods of financing a college education. Both are excellent sources of funding since there is no requirement to pay them back. Although the terms “scholarship” and “grant” are often used interchangeably, scholarships are generally thought of as merit-based awards, while grants are made based on the recipient’s financial need.
Scholarships are non-government educational awards that can be used to pay for college-related expenses such as tuition, books, and fees, and do not need to be repaid. Students can find such opportunities through some of the following entities:
The best way to avoid huge student loan debt is to start saving early in order to avoid having to rely on student loans. Students and parents who create a financial plan early on and start saving through education-related savings programs will find themselves saving a fortune in college costs. Below are some steps students and families should consider throughout the college journey.
529 Plans are tax-advantaged savings plans that encourage future college students, their parents, and just about anyone else to start saving for college early. Every state and the District of Columbia has at least one 529 plan available to its residents. Plan details and eligibility requirements vary widely, but there are two basic types:
Prepaid tuition plans allow savers to purchase college units or credits at participating colleges and universities at current rates and use them in the future.
College savings plans allow savers to establish accounts for designated beneficiaries to pay for their college expenses.
Advanced Placement (AP) classes allow high school students to complete college-level courses and earn college-level credit. Earning AP credit reduces the number of credits students must complete in college, which in turn can shorten the amount of time to graduation and reduce the total cost of earning a degree.Take online college courses to get a head start.
A huge number of four-year institutions (and some two-year colleges) offer degrees online allowing students to avoid the costs of moving to away from home and paying for a dorm room or apartment. High school students can also take online college courses to get a head start and reduce their time to graduation.Find a job.
Many high schoolers find part-time and summer jobs in their hometowns, mostly to pay for personal expenses, extracurricular activities, and fun. Instead, prospective college students can use that income to help defray the cost of college.
The lure of the open road can be pretty enticing to a student right out of high school, and that’s OK. Just remember to stay within the borders of your home state when considering a public college or university as in-state tuition rates are significantly lower than out-of-state rates and state resident students can save a bundle compared to those coming from outside for the same quality-level education. Some states even offer tuition-free college for students who attended high school in-state and go on to attend a local college or university.Take advantage of state and/or regional tuition discounts.
Not all colleges and universities charge out-of-state students higher tuition rates. There is a growing trend of schools offering tuition discounts to students coming in from across state borders.Consider fixed-tuition degree programs.
One of the biggest problems with a questionable economy is predictability. It’s hard to tell how time will impact the costs of college. With that in mind, a significant number of schools are offering fixed tuition programs as a way for students and their parents to lock-in current tuition rates and avoid increases in the future.Live at home to avoid campus-housing costs.
For students and families on a tight budget, the savings from living at home and not paying room and board expenses at a university can add up quickly, in a good way.
Reducing the time it takes to graduate can save money. Most colleges and universities today offer accelerated degree programs and courses that allow students to do just that. Accelerated courses are shorter in time length but not in material covered, so students will need to be diligent in their studies and not fall behind.Take summer school classes.
Summer school classes allow students to earn a greater number of credits quickly, reducing the time it takes to graduate. Tuition during the summer is often less expensive than the traditional school year and is another way for students to save money.Work as a tutor.
For high achieving students, working as a tutor allows them to earn income while helping their peers.Get used or shared textbooks or rent books.
One of the bigger “sticker shock” items for college students is the cost of textbooks and other class materials. Students can fight back by purchasing used textbooks, sharing textbooks with classmates, or renting them through programs offered by groups such as Chegg.Create a budget and think outside the box to cut back on spending.
Practice thrift. Smart spending saves money. Stay home and cook. Cut coupons. Don’t use credit cards. Skip the gym membership and workout outdoors on your own. Attend free events on campus for entertainment. Take advantage of student discounts. Get together with your friends and buy groceries in bulk. Change your cell phone plan. You get the idea. There are number of ways that college students can cut costs. Even a small discount can help and over time, it all adds up.
When your monthly student loan payment comes around, try to pay more than just the minimum amount. Every time you do, you are reducing the principal amount of the loan resulting in lower total interest paid. Borrowers who do this consistently can save thousands of dollars over the course of the loan.Don’t miss any loan payments.
Getting behind on loan payments can cause serious problems, particularly to credit ratings. A bad credit rating means that you may have to pay more for things you purchase in the future such as a car or house.Develop a budget and stick to it.
This can be a tough one for a graduate just beginning to collect a professional paycheck and wanting to cash in on all of those hard years of sacrifice in college. Dig deep, discipline yourself and put off the instant gratification for a few more years. The result will be more total gratification in the long run.Consolidate any debt.
If you have more than one student loan to pay off or if you have a student loan and other sources of debt such as credit cards or car payments, see if you can consolidate your debts into one smaller monthly payment. Consolidation may mean a lower monthly payment with a longer payoff time, but a longer payoff time is better than missing payments or facing a default.Explore public service careers.
Students with loans through the William D. Ford Direct Loan Program may be eligible to participate in the Public Student Loan Forgiveness (PSLF) program. The PSLF is a federal government program created to help professionals have their student loan debt forgiven in return for a period of full-time public service work. In order to have one’s loans forgiven, the borrower must make 120 on-time, full monthly payments under a qualifying repayment plan. Only jobs in specified Federal, state, and local public offices and some non-profit organizations designated by the IRS are eligible.
In the last decade and across the nation, student loan debt has become a concern among prospective and current students and especially recent graduates. Here are a few facts and statistics that illustrate just how serious student debt in the United States has become:
“If over the past three decades car prices had gone up as fast as [college] tuition, the average new car would cost more than $80,000.”Source: The Real Reason College Tuition Costs So Much (NYTimes.com, April 4, 2015)
The average debt load for a 2014 college graduate with student loan debt is $33,000, nearly twice as much as it was 20 years ago, even adjusting for inflation.
Average debt per borrower in each year’s graduating class.
Since 1999, the amount of student debt in the US has increased by 500 percentSource: The Huffington Post
Includes all graduate programs including PhDs. All figures in 2012 dollars.
Source:New America, The Graduate Student Debt Review, March 2014
CareerOneStop is a an online resource offered by the U.S. Department of Labor and has a scholarship, grant, fellowship, and internship database that is searchable by keyword, award type, location, level of study, and individual affiliations.
Here, students, parents, and policymakers can find information on college costs. There are also several lists of institutions based on tuition and net prices. All lists are in accordance with the Higher Education Opportunity Act and are updated every year.
The online portal for the FAFSA®, this resource includes a college search option, advice for filing out the FAFSA®, and customer service representatives that can help walk parents and students through the process.
Parents and students can get information about student loans, grants and federal work study through the US Department of Education.
Amazon allows users to buy and sell textbooks, as well as rent. eTextbooks are also available for purchase or rent. Students can take advantage of free two-day shipping by signing up for Amazon Prime (at 50% off the regular fee, after a free six-month free trial).
This site helps students find the lowest prices for new and used textbooks. Students can buy textbooks and save up to 90%, rent and return when done, or sell textbooks for cash.
Chegg offers an online marketplace for students to rent, purchase, and sell textbooks.
The Office of Federal Student Aid provides basic information on scholarships, grants, and other financial aid for military personal, Veterans, and their families.
Users can join military.com for free to gain access to news and information on government benefits, scholarships, where and how to find a mentor, and much more.
Funded by the Department of Defense, this comprehensive site offers information on all aspects of military life, such as deployment, employment, education, parenting, and more. Users can access free resources, products, articles, and tips, as well as call a confidential 24-hour line for services.
NMFA strives to represent service members and their families on Capital Hall, at the Pentagon, and Veterans Administration. Service members and their family members can find information and resources on various topics, including scholarships, education, careers, and much more.
This site provides information, news, and resources for veterans, service members, and communities. Visitors can find detailed information on the GI Bill, state benefits, and more.
The DOE offers information and resources on higher education specifically for military families and Veterans. Get more details on the Yellow Ribbon Program, Post 9/11 GI Bill, and other education benefits, programs, and services.