How to Avoid Student Loan Debt and Win at Paying for College

Student loan debt is a huge drag on our economy! Students are leaving school with more and more debt every year, adding up to well over $1 Trillion in total outstanding student loan debt!  Unfortunately, this massive debt hurts the overall economy. It keeps people in bondage for decades, preventing them from affording what they want and need to get by in life. 

Too many students fail to count the potential costs when they take out these loans.  They truly believe they have no other options available.  Usually, by the time they realize what a burden student loan debt will be, it's too late!

I believe more people (parents and students both) need to get educated about the consequences of student loan debt.

This article covers how you can totally avoid student loan debt in the first place! Yes, it takes some planning, work, and maybe some sacrifice, but it's tremendously better than paying off college loans for the next 20-30 years.

I'll cover what parents and student both can do, even if you're getting a late start saving for college.  I've also included an excellent resource at the end to help out.

Avoiding Student Loans -Parents

First, I'll address the parents:

Obviously, it's best to start saving for your child's college expenses as early as possible.  I've even talked to people over the years who started saving for their child's college fund before they even had children!

These are what you would call “proactive” parents to say the least.

Unfortunately, most of us are not that proactive.

If you didn't start saving before your child was conceived, it's ok, take a deep breath.  Quit worrying what the overachievers are doing and concentrate on your own situation.

The goal is to just do what you can do right now.

Save for College Automatically

Start by figuring out how much you want to save each month.  Then have it automatically deposited into an account just for that purpose (a 529 plan or an Educational Savings Account).  You can set up these accounts at any online brokerage.  It's easy to set up and just takes a few minutes.

I prefer to use Vanguard because of their low fees and large variety of investment options.  My Vanguard 529 plans for each of my kids grew very nicely over the years!  We're currently paying cash for both of their college educations!

The best way to set it up is to contribute a regular percentage of your income (usually about 3%) every month. Have it automatically deducted so you don't have to think about it every time you get paid. When you use a set percentage, your contributions increase as your pay increases over the years, growing the account even faster.

Think Outside the Box

Or you could do something different.

Get a part time job or a side gig.  Put all the money you make from that into a college account, and let it grow.  Working a side gig for only 2-3 years when your child is young gives that money money time to grow significantly before it's time for college.

This is an awesome way to save because it's only a sacrifice for a short period of time, but reaps huge rewards as your child gets older.

Getting a Late Start Saving for College?

If you've gotten a late start on college saving, obviously you'll have to save money quicker if you want to avoid student loan debt.  You could still get a part time job or a side gig, but you may have to do it for a longer period of time.

Or, if you save out of your earnings from your regular job, you'll need to kick up the percentage a bit (maybe 5-10% of your pay).  You could even do a combination of the two to save even more aggressively.

No matter which method you use, the earlier you get started, the better, because the money has time to grow through investing.

Asking Relatives to Contribute

In some cases, you may have relatives that express an interest in helping your kids with college.  If so, that's great!  Take advantage of their willingness to contribute as early as possible so the money will have time to grow.  Relatives (or anyone else) can contribute to college savings plans at any time.

Create a Student Funded Roth IRA

Setting up a Roth IRA for your child can work to your advantage.  If your child has a job during their teenage years, they can contribute to a Roth IRA, which later can be used to fund college expenses.  You can even contribute to the Roth IRA for your child, as long as total contributions for the year don't exceed how much they made for the year.

Of course, there are contribution limits and other rules that need to be followed.  You can get a rundown of all the Roth IRA rules here.

Talk to Your Child About Community College

A great way to reduce college expenses for the first two years is by attending community college.  Credits earned there typically transfer easily to most in-state schools.  Tuition is usually around half the cost of a four year college.

Also, more states are starting to pay for community college.  My home state of Tennessee pays the entire cost for two years of community college.  As long as you meet the minimal requirements the state sets forth, community college here is free! Check with your state to see if they have a similar program.

Students: What You Can do to Avoid Student Loan Debt?

Now for the student:

What if your parents didn't save money for your college, or didn't save enough?  There are strategies you can use also to keep from taking out student loan debt and putting a damper on your post high school future.

Decide You Don't Want Student Loan Debt

The first thing you should do is to get into the mindset that you want to totally avoid student loan debt, no matter what.  It's so easy to give into the mentality of borrowing now and paying back later.  But if you go down that road, it will seriously hamper your financial life for the next 20 years.  Avoid student loans at all costs!

Work Your Way Through School

Don't be afraid to work your way through school.  A lot of people actually do this (read about this guy) , but you don't hear much about them. In fact, studies show that students who work 20 hours or less per week make better grades!

Also, it looks better on your resume' when you're looking for a job after graduation.  Employers are much more willing to hire someone with the fortitude to work their way through school rather than someone who didn't.

Nobody will tell you working your way through school is easy.  But it beats 20 years of struggling with student loan payments that limit your freedom like a financial ball and chain.

Apply for Lots of Scholarships

Another strategy is to apply for every scholarship you can find.  Make applying for scholarships into a part time job.  Create a profile on sites like Fastweb.com or Scholarships.com and apply for every scholarship you qualify for.  Get with your high school guidance counselor. They always have a list of scholarships you can apply for.  You can even check out this post on weird scholarships.

There is a lot of scholarship money out there just waiting to be used, and many of them are not based on grades.  Just make filling out applications a systematic part of your daily or weekly routine.  You may just be surprised at what you get!

Go to an Affordable School

You can also go to a cheaper college.  You don't have to go to an elite private university to get a good education.  State schools are usually much cheaper and allow you to get your degree without spending $50,000 a year for it.

Don't be afraid to spend your first two years going to community college, then finishing at the college of your choice.  You'll save a ton of money on tuition, room, and board that can go toward your next two years of college.

Be Different

Let's face it, if you think and act like everybody else, you'll get what everybody else does- namely tens of thousands of dollars in student loan debt!  Is that a burden you really want to deal with for the next 20 years or so?

Don't let student loans do that to you.  No matter what some people say, YOU DON'T NEED IT!!!

Be original.

Be different.

Don't think like the crowd.

When you do what everyone else is doing, you get what everyone else is getting.

Make a plan.  Find a way.  You can do it!

There is a great book I recently read that will show you all you need to know.  It's written by a guy who actually made a plan to pay for his own education and made it through debt free!  You can find it at the link below:

“Debt Free U: How I Paid For an Outstanding Education Without Loans, Scholarships, or Mooching Off My Parents” by Zac Bissonnette

Currently paying off student loans? Refinancing might lower your payments significantly. Read this post to find out how.

Question:  How do you plan to pay for college? Will you use loans, scholarships, cash?  Tell me about it in the comments.