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How To Reduce or Avoid Student Loan Debt: A Guide To Being A Debt-Free College Student

   Posted On: July 30, 2014  |    Posted In: Debt  |     Posted by: Broke Millennial®

I don’t have first hand experience with student loans, so I happy to introduce someone who knows a thing or two about how to handle them: Gary Dek. Gary is the founder of, a site focused on personal finance, career and education advice, and self-improvement tips. Below are his tips on handling student loans and paying for college without a massive price tag.

diplomasWith the rising costs of college and the overwhelming student loan debt most are graduating with, millennials are starting their professional careers with a negative net worth.

I was fortunate enough to attend a 4-year private university and graduate with only $13,500 in subsidized Stafford loans, which I paid off in 10 months. Although I did graduate a year early (note to high school students – those AP classes are worth thousands in the future), I still managed to get a $200,000 education for close to 5% of the cost. And no, my parents didn’t pay for the difference out-of-pocket.

Our host, Erin, did it even better – she’s never had student loan debt (or any other kind). Now that’s the kind of person you want to be taking personal finance advice from.

The following steps will help you avoid overwhelming debt and teach you how to reduce student loans.

Pick A Degree That Will Yield A High Paying Job

If you want to go to a prestigious university that will be expensive, plan to major in engineering, business, computer science, finance, or something that will help you land a job paying at least $50,000 a year after graduation. A decent salary will help you manage your debt.

Studying to be a teacher or artist at the same school will make it much harder to pay off your debt. If high-pay isn’t critical to your dream job, then consider the best public university you get accepted to.

If getting a diploma from a prestigious school is a goal, think about going to a junior college first to get your general education credits out of the way, and then complete your degree at the university of your choice.

Apply For Scholarships

One of the best ways to avoid student debt after graduation is to earn free money – scholarships. There are plenty of organizations giving away free money to those who are looking finance their education. Some scholarships are need-based while others depend on your academic achievements. Here’s how you can qualify:

Keep up the hard work all through college to maintain scholarships and be eligible for more!
  • Do well in school. If you have a high GPA (grade point average), you may be eligible to receive a scholarship directly from your university. Talk to the Financial Aid Office (FAO) to discuss what types of scholarships are available and if there is paperwork you must fill out to be considered. For private, third-party scholarships, some companies give money to students who come from lower socio-economic backgrounds. This is called a need-based scholarship based on your parent’s income. However, there are also opportunities for academic scholarships, or a combination of both. Even if you aren’t a freshmen but your GPA has been high throughout college, you may still be eligible.
  • Be a good athlete. Some colleges are more likely to give better scholarships to athletes than those who excel academically. If you’re athletically gifted in a major sport, apply for scholarships at schools that value your skill. Keep in mind, though, that Ivy League universities do not offer athletic scholarships.
  • Show your leadership abilities. Aside from physical prowess and academic success, being a volunteer, belonging to clubs, and having strong leadership skills is a plus when applying for scholarships. In fact, the group you volunteer for may have scholarship programs that only volunteers can apply for, thus significantly reducing the pool of competing candidates.
  • Are you a minority? If so, there are several scholarships simply based on your ethnic or religious background. Organizations like the NAACP, the Jackie Robinson Foundation, and State Farm Insurance can help lower your out-of-pocket expenses.
  • What’s your major? There are scholarships available for specific programs of study such as Spanish or Sociology. These scholarships usually require a minimum grade point average.

Look Into Grants

Government grants are a form of free money as well and are awarded depending on your financial need. They won’t cover your whole tuition, but compared to scholarships, loans, and work-study offers, government grants are the easiest to get. Just fill out the FAFSA application starting January 1st of every year to determine whether you qualify for the following school year.

  • The Pell Grant: Pell Grants are based on financial need, the cost of attendance at your school, and whether you are a part-time or full-time student. The maximum Pell Grant award is $5,550 per year.
  • Federal Supplemental Educational Opportunity Grant (FSEOG). Students who can prove that they have extreme financial need can be eligible for this government grant. It ranges from $100 to $4,000 a year.
  • The TEACH Grant. The Teacher Education Assistance for College and Higher Education Grant is offered by the federal government for students who plan on teaching at schools in low-income areas or in a “high-need field”. Within the first eight years after graduation, students are required to teach for four years or the grant will have to be paid back like a student loan. The program pays as much as $4,000 a year.

All this information can be found at

Research Loan Options

If you have student loans, there are ways to lower the amount of interest you must pay back.

  • Know the difference between a “variable” and “fixed” interest rates. While a fixed rate might look more expensive upfront, as interest rates increase in the future, variable rates will increase with no ceiling. While the interest rate environment in the United States may be artificially suppressed for the next couple years, remember that your student loan has a 10-year term. Do you believe we will have low interest rates for the next 10 years? I don’t, and would recommend a fixed rate.
  • Know the difference between private and government loans. You can defer government loans, such as a Stafford or Perkins loan, so that you won’t have to start making payments until you graduate. Government loans tend to be cheaper and more flexible. If you become disabled or die, the government will forgive the loan. It’s in your best interest to use government loans instead of private loans, but if you find your expenses aren’t fully covered, you might have to consider a private loan. Fortunately, as of 2014, the U.S. government is doing its best to compete against private lenders and push them out of the market.
  • Have someone co-sign for you. Most of the time, you really don’t have a choice. Since students have little to no credit, lenders require a co-signor. Remember, though, that if you miss a payment, the person who co-signs will be responsible. This is one reason life insurance agents try to encourage young adults to buy life insurance since a death benefit will pay off the student loan and avoid it becoming a parent’s liability. Frankly, the risk of a young, healthy adult dying is slim, so instead of buying even the cheapest term life insurance policy, take the cash and pay down your student debt as quickly as possible.

Other Options to Reduce Student Debt

31833_412558826136_3194986_nGet A Job. With proper time management, you can work while going to college. You may have to manage your time better and forgo a few parties, but when you graduate and find you have little to no debt left over, you’ll be glad you took care of business.

Working through college will not only help you become a better planner, but your future job search will benefit from your past experience. Even if your part-time job during school is unrelated to your chosen career path, holding down a stable job demonstrates responsibility and reliability.

Work-Study Programs. Assuming your FAFSA results offer you a work-study program, you will have a chance to get a job on campus. With work-study, you will be paid to do office work in a department or lab. Some students may even be able to do research with a professor.

The best part about work-study is that down-time allows you to study for classes. For more information on work-study, discuss your options with a student advisor at your school.

Paid Internships. Another way to mitigate your student loan debt is to get a paid internship. A lot of majors require an internship anyways, so you’d be killing two birds with one stone. Not all internships are paid, but you’ll still get valuable experience that will look good on your resume and help you to find a better summer internship or job. Meet with your academic advisors, professors, or the career services center at your school for more information.

Live Within Your Means

Living in affordable housing and being thrifty with your money is really the first step towards making your debt less overwhelming. While living in a college dorm may be convenient and give you ample opportunity to make new friends, sometimes it isn’t the most cost-effective housing available. You may have to spend up to $1,000 a month to live on campus, but with good roommates, you could be paying as little as $400 a month for rent in an off-campus apartment.

Along with your dorm expense comes a required meal plan, which averages about $10 per meal. That’s over $200 a week for crappy dorm food. If you have an apartment with a kitchen, you can spend less than $200 a week on groceries for you and your roommates. If you all pitch in on groceries and cooking, you will save thousands. Just don’t sacrifice your health to save a few dollars.

Finally, resist the urge to splurge on expensive meals, alcohol, and other things you really don’t need. Have a budget in mind to help you avoid credit card debt. If you thought student loan debt is bad at 7% interest, imagine how financially devastated you’ll feel with credit card companies charging you up to 30% in interest fees.

Use Your Entrepreneur Skills

While you’re in college, utilize your special talents or skills to supplement your income. Charge students for tutoring, website design, become a freelance writer, start a personal finance blog to educate others on financial responsibility, or sell products on eBay or Amazon. Not only will you earn decent money, but you’ll develop real-world skills future employers will appreciate. And who knows, you may just come up with the next big thing.

Student Loans Are An Investment In Yourself

While a lack of research and planning can result in overwhelming debt, don’t skip a college education because of financial issues. Consider your degree an investment in yourself that will pay dividends for the rest of your life. College is worth it for most people, and there are options and opportunities available to help reduce or altogether eliminate student debt.

Start a savings account, be frugal with your money and apply for scholarships and grants. If, after exhausting all of your efforts, you still find that you can’t cover your entire tuition and school expenses, talk to your school. The university’s administration will work with you to find financing in forms you may not have thought of or couldn’t access on your own. Make an appointment with a financial aid advisor/counselor for more assistance. The office may even have extra funding left over for the year!


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37 responses to “How To Reduce or Avoid Student Loan Debt: A Guide To Being A Debt-Free College Student

    1. Oh, this is going to bug me, but I know there is a blogger who donates to a tuition free school because her mom went there. They’re a great option for some, but like you said, can be really hard to qualify for.

    2. I think an education is always worth investing in, assuming you get a value. I’d pay $250K for a Harvard Law Degree if I wanted to get into IP Litigation because I know I will earn it back in no time. So it isn’t about the money – it’s what your money gets you.

  1. My husband wanted to get a graduate degree but we didn’t want to get into debt. He found a work-study program offered by the department of the private university he was attending and got his degree for only the cost of the books and was actually paid a stipend! Not only was it a great situation financially, but it was good for him to get the hands-on experience simultaneously.

    1. Seems like the best way to get a grad degree if you aren’t giving up a high paying job. Congrats to your husband.

  2. The student debt problem begins with financial education more realistic expectations. Every college decision should be made after performing some basic return-on-investment analysis. As a lawyer with a tremendous amount of student debt I’m currently busting through, a little ROI analysis ten years ago would have went a long way.

  3. I am currently in college and try to work as much as I can. I don’t have a choice in that matter because I need to provide for myself. I like setting aside a certain amount of money (if I can) for school and my savings.

  4. I find the cost of US education to be ridiculously high. I studied in Montreal and the government subsides quite a bit of the costs, more so than any other province. The current cost for a semester at a Quebec university is about $3K.

    It must feel discouraging for grads here coming out of school with a mountain of debt and having a difficult time landing their first career job.

    1. Quebec overall does a great job of subsidizing education, especially if you graduate from McGill. I believe they were ranked top 20 in the world last year.

  5. Living within your means is HUGE! I so wish I had done this better when I was in grad school- I’d have a lot less debt now if I had done this! That’s the biggest thing I would change from my 20s 🙂

  6. I chose to go to a smaller, more expensive college, which seems crazy, but hear me out: the college was more expensive, but they gave me a massive scholarship and the cost of living there was low! I graduated with about $12K in student debt, which isn’t bad considering the cost of the education!

    1. Sometimes it just makes sense. I have no problem investing six figures in an education, as long as it isn’t for a career that peaks at $50K a year. For example, if the goal is to work on Wall Street at a bulge bracket firm, then going to a random but inexpensive school that these firms don’t recruit from makes no sense. My thought has always been – if you can get accepted to a prestigious school, you go. You don’t go to an expensive school because it is expensive. Students should be proud of their school’s rankings, not the cost.

  7. I too finished my 4 year degree in 3 years. I took dual credit classes at the local community college (tuition free) while I was still in HS, that way when I went to my 4 year university after HS graduation I was technically a sophomore already with 30 credit hours. I also worked my tail off at a couple part-time jobs, took as many credit hours/semester as possible and tried to live cheaply. When I finished college I only had about $8k in student loans. Other than the CC debt I got after my divorce, I got through college pretty well and had much, much less student loan debt than many of my peers.

  8. I definitely agree with choosing a career that his a high starting salary, especially if you are going to a private school. Those classes are a little more difficult, but it’s well worth the effort as you’ll have a quick start to your career. Very informative post.

  9. I went to a private school, and I am paying for it now. I wish I would have gone the cheapest route by getting all of my prerequisite courses done at a community college. I looked into get my Masters degree with the thought I would be making more money, but I never did. Financially, it just isn’t in the cards right now.

  10. I’m from the UK and the recent rise in tuition fees has really put a lot of people off from going to university (college), reading articles like this is a breath of fresh air and is really encouraging for those who aren’t too sure about going. It seems there’s always tactics you can use to get around having no money for 3/4 years!

    Keep on posting!

  11. I was lucky enough to be able to still work full time and go to school at night. I work in the blue collar industry so I don’t miss those days. I remember falling asleep in class a lot, but I’m glad I did it because I graduated without any student debts. I thought about going back to school to get a bachelor, but it seem like it’s getting more expensive. I will probably go back to school when I’m done working oversea.

  12. Great tips here. I think I ended up with about 15% of my overall cost of education in loans… from undergrad. My big mistake was grad school and those cost of living loans. That, and getting a degree that was really useless in the real world for obtaining jobs that provided a high income.

  13. Thanks for this valuable and informative post. I found such a great ideas here which can be great choice for reducing or avoid student loan debt problems and become a debt free college student.

  14. it is strange to know that Success nowadays depends on the amount of loan you get from a financial institution. If you could manage a good amount then you can get success.

  15. These are all generally good suggestions, but we continue to exist in a society where the paradigm is still focused around controlling the amount of debt people incur to go to college and not focused on how colleges can become more efficient and offer debt-free solutions to prospective students. I graduated with $50k+ plus in debt and, while I wouldn’t give back the education I received, I would have definitely taken advantage of a lower-cost option had a viable one been presented to me/been available at the time.

    For what it’s worth, here’s one school that’s doing something very different, something I hope people pay attention to:

  16. Yup I actually had exactly the same terms – instead of paying the loans with money – duty work is to be rendered.

    It’s actually pretty convenient cause it gives you both the experience costless payment for loans.

  17. It’s great that you know what you want to do and how to achieve that. Going to college and racking up debt when you have no clue what you want to accomplish is really a waste. I think there are good life lessons anyone can learn by attending college, but going into debt for life lessons isn’t very smart. Like some of the other commenters, you give me hope for the future generation.

  18. I agree that looking for scholarships and grants is a great way to reduce student loans. Even if they don’t cover the whole cost of tuition, any money that you’re not borrowing will reduce what you’ll have to pay back later. However, if you do go through with student loans, being smart and doing your research before deciding on where to get them is essential. Thanks for the article.

  19. It is no secret that college is not cheap. The price of education is continuing to increase year after year. Federal student loans can be a great way for students to get help paying for school, but they do not always cover the entire cost, and depending on the college, students are graduating with tens of thousands of dollars in debt — with no hope of paying it off anytime soon. And turning to private loans is even worse — as they typically come with much higher interest rates, fees for late payments and other concerning features that make them less favorable to federal loans.

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