I Want to Minimize the Cost of College. What Are the Best Next Steps?

In a recent survey 66% of college graduates reported they had regrets about taking on so much debt in student loans, especially for degrees with fewer job prospects. Others wished they had looked for ways to minimize their debt, made better decisions about how they used their loan money, or done more research about the salary they could expect in their field of study. Planning ahead is the key to reducing the costs of college, whether its saving in advance, looking for scholarships and grants, or researching majors before enrolling. 

If you have children that you want to help pay for college in the future, or are planning to go or are in college yourself and want to minimize the costs, here are several tips to make that student loan debt as small as possible after graduation.

(1) Save in a 529 account. Start early and let it grow and compound. Every dollar you save now is a dollar you won’t have to borrow. Contributions are made with after-tax dollars, invested based on the timing of when you expect to need the funds and all investment growth is tax free when used for education expenses. 

(2) Save in a Roth IRA. Even though this is a retirement account, it can be used for education expenses as well. Like the 529, there is no income tax deduction since the contributions are made with after tax dollars, but there is no tax on the investment growth when withdrawn for qualifying expenses (like college tuition) after certain restrictions are met.

(3) Estimate your costs and run them through a loan repayment calculator (like this one: https://studentloans.gov/myDirectLoan/repaymentEstimator.action). This will help make you more aware of compounding interest and how much more you’ll be paying back than what you’re borrowing. That’s a good incentive to borrow as little as possible now.

(4) Look for scholarships through the school, your community, employers and on the internet. Some may be based on need, income, merit, or the intended degree. Apply for any and all that you can. Every little bit counts.

(5) Take college courses in high school. These are available through dual enrollment programs with a local community college or through AP (advanced placement) classes. Some credits may not transfer depending on the college and the degree, so ask questions in advance.

(6) Consider the career prospects for different majors prior to entering college (research, job shadowing, skills and interest surveys, etc). A major where the industry is thriving and jobs are available makes it a lot easier to pay off any loans quickly after graduation.

(7) Attend a trade school or start at a community college and then transfer. Living at home (if possible) while attending local schools saves a LOT of money. Check with the school you want to transfer to determine what credits will count.

(8) Consider both public and private colleges. Public schools (especially in-state) will almost always have lower tuition but private schools may offer more scholarships that offset the difference. 

(9) Check on work study programs and part time jobs to offset tuition and/or housing costs and give you a little extra spending money along the way. Tuition paid now is a loan you don’t have to pay back with interest later.

(10) Watch your spending and don’t open credit cards. Buy used textbooks or use online versions and ask for student discounts on everything. If you think student loan interest rates are bad, credit card rates are many, many times worse and card companies love to offer cards to students.

(11) Apply for grants and loans through federal (FAFSA) and private programs. Only borrow what you absolutely have to and keep expenses as low as possible. Understand what loan forgiveness programs are available for certain career tracks (teachers, medical field, etc.) and pay very close attention to the rules and qualifications.

(12) Check for education reimbursement or tuition assistance programs with your employer if you are already working.

(13) Student loan repayment assistance is a part of some benefits packages. After you graduate and begin looking for a job, check with potential employers about whether they offer this type of benefit.

There is a lot of great information on the FAFSA (Free Application for Federal Student Aid website – https://studentaid.ed.gov/sa/fafsa) including checklists for preparing for college at different ages, a tool for exploring career options, the types of aid available and more. Furthering your education is an investment in yourself and doesn’t have to cost a fortune or be a burden for many years after you graduate. Do your research and be vigilant with your time, money, and every dollar you borrow.