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Closing the Wealth Gap

How to Minimize Student Loan Debt at Each Stage of Education

Financial aid has become the main way for most people to afford higher education. But while financial aid does enable college attendance, sadly, the average student will owe approximately $30,000 in debt after graduation.

Student loan debt obligations have major, long-term financial implications. They can force you to work longer in jobs you don’t enjoy, limit your ability to qualify for mortgages, and make saving for long-term financial goals — like retirement — a significant challenge.

You don’t always need financial aid to attend your chosen university. At each level of your education, you can take action to reduce your dependency on student loans.

Before college

Before you pursue higher education, first ask yourself why you’re doing this. Does the type of job you want even require a four-year degree? Is there another, less expensive career path in which you may be interested?

Next, determine the potential return on investment (ROI) of college and perform a break-even analysis. Will your desired degree enable you to earn a lifelong salary that equals several times the complete cost of attending college? In addition to ROI, calculate how many years you’d have to work at your new job to pay for the education. 

You can also save a lot of money by earning college credit early, before even setting foot on campus. Look into AP classes or dual enrollment programs that offer college credits.

During college

Once you’re in college, you’ll want to get in front of your expenses. To better understand the costs you’ll face, make a detailed list of the initial and ongoing expenses you’ll expect to pay year after year. Can any of them be reduced or eliminated altogether?

See if you can accelerate your graduation by taking a few extra credits per semester, taking online courses, or enrolling in summer semesters. You may be able to compress your timeline by as much as a full year.

Reduce the amount you owe by looking into possible grants, scholarships, and work/study programs. Check with your local student resources department for available options.

Another way to keep your costs down is by minimizing your living expenses. Consider living at home or getting a roommate to help reduce housing costs. You can also buy used textbooks, accept hand-me-down furniture, and take advantage of every student discount that’s offered.

After college

After graduating, it’s time to start paying back your student loans. Accurately calculate how much you can afford to pay toward your loans each month, balanced against the rest of your living expenses.

When paying back your loans, minimize the amount you pay by strategically paying down the loan with the highest interest rate first. When that’s eliminated, tackle the one with the next highest interest rate, and so on.

You can save even more by exploring refinance and consolidation options. Thousands of lenders offer opportunities to refinance contracts at lower interest rates or alternate terms. If you’ve got several loans, consolidating them into one new loan with a lower interest rate may be worthwhile.

Finally, if you’re struggling to pay back your student loans, don’t be afraid to ask for help. You can contact the lender to change the due date or explore other repayment arrangements.

Plan ahead

Don’t get caught in the clutches of student loan debt. Plan ahead financially at every stage of your education to minimize how much you’ll need to borrow. The more you do now, the less you’ll have to worry about when you graduate, and the sooner you can move into adulthood.

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