Guest Post by MoneyforCollegeProject, which is a website devoted to teaching you about college financial aid, student loan debt, and the best methods for graduating from college with an understanding of personal finance.
Go to college whatever the cost!
Sounds like good advice, doesn’t it? Obviously the benefit of your college degree will pay off huge dividends for you in the long-term, right?
Not exactly.
Attending college without a regard for the cost of your investment is a big mistake. This is the mindset that student loan lenders want you to have, and this is how they have made so much money in the past couple of decades.
As of June 2011, student loan debt has overtaken credit card debt in total volume. This means that while people are cutting back on their consumer expenses and spending less on their credit cards, student loans are still flying off the shelves!
Graduating college debt free is an admirable goal. If you keep that as your goal, your focus will be on reducing costs, rather than taking out student loans without a care for the total cost. With that goal in mind, here are some legitimate ways to find free money to fund your college education.
How to avoid student loans
Your first step will be to submit a Free Application for Federal Student Aid (FAFSA). This is the “one-stop-shop” to apply for all types of federal student aid. This includes the Pell Grant, FSEOG, and many other federal grant programs. These grants will be administered through your college financial aid office, so it pays to become best friends with them!
You should also pay attention to any state supported scholarships. Many states offer academic scholarships to entice students to stay in-state for college. Many of these scholarships are sponsored by the state lottery programs and can pay as much as your entire college tuition (see the Hope Scholarship in Georgia for instance).
Your next step will be to look for local scholarships to apply for. I highly recommend going local rather than nationwide. The probability of your winning a local scholarship over a large, national scholarship is significantly higher. You also have the benefit of knowing that you are being supported by your local community as you pursue your educational goals.
Another excellent way to pay for your college education is to get a job while in college. This could be a twofold boost because, depending on the job you find, you will earn money, as well as add to your work experience and resume. Many small businesses started during college years have gone on to be super successful (Facebook anyone??). With the ease of entry to online income generating programs, there really is no excuse not to make some money online while in college. Start a blog, do some freelance writing, sell stuff on Ebay, or buy and sell on Craigslist. The options are endless!
The last source you might try is to look for athletic, academic, and military scholarships within the school you wish to attend. Most schools have full scholarships programs where they will pay you to attend. If you are an athlete, an academic whiz, or interested in the military, you should check out the programs offered at the school you are considering.
Student Loans: The Last Resort
Once you have exhausted all of the free sources of financial aid, and you have started earning some extra money to pay for your education, you may need to resort to student loans.
Student loans, in moderation, really can be a good tool to help you pay for your education.
You should start out by pursuing Direct Stafford loans through the federal government. These are loans you qualify for through your FAFSA. If you qualify for the Subsidized Stafford loan, you will receive the loan interest free while enrolled in school. This means that technically, you could pay it off before you graduate and it would be an interest free loan.
You might also get an Unsubsidized Stafford loan, which would begin accruing interest as soon as the loan is disbursed, even though required payments are deferred until 6 months after you graduate.
Federal loans are the absolute best type of student loans. No question.
As an undergraduate student, the only other type of loan you can apply for is a private student loan. I would stay away from these if at all possible. They usually carry variable interest rates, have less than stellar repayment options, accrue interest once disbursed, and often require minimum payments while in school.
Parents also have the option of taking out private student loans, or they can take out a Parent PLUS loan through the federal government. This is a guaranteed student loan taken out on behalf of the student. The interest begins to accrue as soon as it is disbursed.
What to do?
Receiving a college degree is hard enough if your only worry is going to class and passing your exams.
However, often times paying for your college degree is just as difficult and stressful as earning your degree whether it is an online degree or an in-class program.
I tell students every day that their best resource is their college financial aid office. This office is always busy, but they are the only ones on campus who have the means to help you pay for your college education.
You should pursue and exhaust all of your free money sources first. Then you should try to earn as much money as possible to help pay for your education. Finally, you should look to student loans as a last resort.
If you manage your loans while in school, and keep them to a minimum, you will be well prepared to begin repaying them as soon as you graduate!
This will let you focus on the more important financial decisions in your life such as getting your first job, and figuring out what to do with your college degree!
Crystal’s Comments: I hated the idea of having many student loans, so I worked multiple part-time jobs and grabbed as many scholarships as I could. I ended up owing my parents $8000 by the time I graduated. Not too bad…
What do you think of student loans?
My son is graduating this year, so we will be pursuing alternate financing in earnest. Our college counselor also told us there is another form that can be filled in besides the FAFSA that some college request that allows you to explain other circumstances. (In our case, these schools will take into account that we have two other kids in private high school.)
I have learned that if you plan on applying to an incredibly popular state school like University of Michigan, good luck getting money from the school itself. That is where external scholarships are so important.
I HATE student loans and I am glad that I was able to avoid them.
I got scholarships and worked a lot to avoid it. It’s also important to implement a frugal lifestyle. Managing your finances now will go a long ways (as you said in different words).
Your opening line, “Go to college whatever the cost!” gets to the heart of the problem! It seems to be ingrained in the population like some sort of deeply rooted cultural norm. Unfortunately, it’s the same notion that contributed to the mortgage meltdown in the way people felt that you always needed a bigger house, what ever the cost.
And just like the mortgage mess, before the blow up no one–not buyers, not the lenders–seemed to be the least bit concerned about how anyone would pay back the debt afterward. This is optimism at it’s worst! Don’t worry about the cost, don’t worry about the debt, just go for the prize!
I was lucky enough to not have to take out student loans for my undergrad (thanks mom and dad) or graduate degrees (thanks University of Florida).
My husband did have to take student loans to subsidize what his scholarships didnt cover, but after 10 years in school (he does have 2 minors, 1 B.S, and a PhD) he only had $30k in loans….and he is paying those off at a good clip.
@Everyday Tips — best of luck with that! It always pays to talk directly with the financial aid office. The FAFSA is simply a game of numbers, but a real person in the financial aid office can make empathetic decisions and help you find the best resources available!
@20′s Finances — you are exactly right. Learning a frugal lifestyle and managing your money while in college will pay off big dividends down the road. Congrats on no student loans!
@kevin — Thanks! If more people thought like you, we would likely have less debt, and more productive citizens living in this country!
@Michelle — it sounds like you and your husband both got out very unscathed from student loans. here is to getting them paid off soon!
I second Kevin’s comment on “Go to college whatever the cost!” I hate this type of thinking, especially in 2011 where a college tuition guarantees nothing anymore.
Hi Jeffrey, I can’t claim credit for that brilliant remark. I was quoting the first line of the original post. But thanks anyway!
I think your point about people going for the student loans first is right on. I cobbled together several scholarships to help pay for my college tuition. One I received, no one else had even applied for!
I was lucky enough to avoid taking out any student loans. I’m definitely for working your way through college. But if you need to take out a loan to go to school and you are actually committed to going to school and graduating I think it’s worth it.
Student loans are some times the only option for a lot of people, you should take one only if you are actually committed to get your degree and find a good job.
In my late 40s I went back to get the degree I could not obtain as a young woman. With work-study, grants and scholarships I got four years of education (and some living expenses) covered completely.
I thought then, and think now, that going deeply into debt for school is a really bad idea. Had I not been able to get the funding, there would have been no degree.
The high-school guidance counselors telling the kids “go to school at all costs” — well, let’s just say that the school looks GREAT when it can boast that X percent of its grads go on to Ivy League schools.
Will they be there to help the kids pay back their loans?
I wrote an MSN Money column about graduating with zero debt. In it I profiled three students who had done just that, using a real grab-bag of tactics. Some of the readers left comments that indicated they’re of the “whatever the cost” mentality. One duckling said something along the lines of, “You’re suggesting we give up on our dreams. But when is giving up the right answer?”
Myself, I think education is a good dream to have. Graduating with $60k in debt and slim job prospects is more like a nightmare. If you’re servicing that much student debt each month, how long before you can ever afford to have a home, a car, a family or anything else you want/need?
You can get an education, maybe even an outstanding one, without ending up in the poorhouse. I wish that all the “dream school” students would look up student loan repayment calculators online and plug in their projected loan amounts. Maybe seeing “$1,200 per month” might bring them up short.
Not always, though. A professor I interviewed said she tries to tell students that. They inevitably reply, “Oh, but I’m going to get a good job when I graduate.”
Dream on.
I agree with Donna and the myth of making tons of money after college. I was actually out with a group of people a few months back. One of the people out was generous with drinks. Then this person laughed and bragged about how OSAP (the government student loan program) had given her more money than she needed. I didn’t want to be “that guy” at the table so I didn’t inquire. She then started to laugh about how she would worry with the loans when she was making money after college.
The reality is that college graduates won’t make all that much money right off the bat. Even the ones that do won’t be impressed with what happens when you have to pay back loans.
I chose to work my ass off in college so that I wouldn’t graduate with any debt. As a result of this, I’m writing this comment from Warsaw, Poland, as I’m traveling through Europe for a few weeks. Student debt will only hold you back from enjoying your life in your mid-20s.
@Donna Freedman and all– I don’t know that I specifically touched on this point in my article, but your point on the myth that a job and high salary are guaranteed after graduation is one of the reasons that student loans have become such a burden.
One of the major campaigns I have been trying to tackle on the campus where I work, is a financial literacy strategy. Helping to educate students about creating a budget, learning personal finance, and the fact that they will have to repay their student loans once they graduate and how expensive that will be (and yep, unfortunately many college students do not believe they actually have to repay their student loans!)
It’s a very uphill battle, but one that I am very convinced needs fought.
Thank to everyone for their comments!
fortunately I was able to get through college without much debt. I appreciate what was said here because it is a mistake to get into college without thinking about the investment. I feel like that’s what I did initially and it wasn’t helpful. Thankfully it didn’t bite me too bad in the end, but one should think of the repercussions for better or worse with the investments. I’d also say that even with FAFSA & grants, it can still be challenging for some to pay for college without taking out some student loans.
@MoneyforCollegePro: That professor I interviewed said when she asked students how they were paying for college, the reply was invariably, “Oh, I have financial aid.” When she pressed them on the percentage of loans and grants, some of the students were hazy on the details. They didn’t know exactly how much they would owe upon graduation.
Scary.
The trouble is that the repayments seem so far away, and you’re young and optimistic enough to be SURE you’re going to unlike all those other poor saps stiffed by the sluggish job market. They’re average. You’re SPECIAL.
Commenter MD makes an excellent point, too: It isn’t just a question of making payments each month. It’s that every penny of your paycheck is spoken for and there’s no room to do anything else. (Unless, of course, you want to buy that round of drinks with a credit card. Ack.)
One of the people I interviewed for that MSN Money piece had worked as an engineer for a couple of years but wanted to do something else. He was able to take a job at a nonprofit, which paid considerably less than his engineering gig, because he had zero debt. He told me he felt like he owned his own life.
People who graduate deeply in debt can’t say that.
I hope that students listen to your good advice about financial literacy. The ones who do will be glad they did.
I am proud to say that I was able to finish college without spending too much. Scholarship grants, part-time jobs, and spending less on clothes and books helped a lot.
I am proud to say that I could not finish college without spending too much. Scholarships, part-time and less money for clothes and books helped a lot.
The likelihood of your captivating a restricted scholarship over a huge, national learning is considerably higher.
I think the very first (and most fundamental) action to be taken is to tax all income students receive from their parents and/or loans and demand payments be made by students for loans immediately as they receive them. This would immediately hit students and they would have to consider the costs of their education much more. Perhaps this is too harsh but I’m just so frustrated that no one seems to think ahead with these types of things.
A little off-topic perhaps, but certainly, with the world flirting with serious and extended global depression, we’re particularly worried regarding the student loans default circumstances.
We believe it must get a whole lot worse as time goes by, and the spectre of a fully employed (or not) graduate body laboring the rest of their specialist lives away, merely to pay off sizeable student loans, involving debilitating interest rates, is the stuff of which horror movies are made. Then let’s not talk about all those who wrestle to obtain work, default their student loan and find themselves lumbered with bad credit scores for the subsequent 7 years, powerless to even scrape together a cell phone contract! it’s serious insomnia stuff!!
And if it’s this terrible in the US of A, what’s the prospects of those in the land of the Acropolis?
Anyway, The best of British luck to you…
…and the warmest of wishes
Lui Ko
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