How students can graduate without debt

Graduate without debt

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Credit Sesame discusses steps you can before and during your student years to graduate without debt.

It’s easy to believe that you can’t get through college without a load of debt. In fact, 30% of students graduate from a two- or four-year degree program debt-free. And another 25% graduate with $20,000 or less in student loan balances. How do they do this?

Student loans by the numbers: who owes what?

Student debt isn’t the shattering six-figure problem that news outlets make it out to be. Undergrads dependent on their parents are only allowed $31,000 in federally-backed student loans, and independent undergrads (usually over 24 years old) max out at $57,500. According to the Brookings Institution, students whose college debt exceeds those amounts at graduation have nearly all borrowed for graduate school. And only 6% of borrowers owe more than $100,000.

However, where you go to school matters. Just 12% of graduates of public four-year schools owe $40,000 or more, while 34% graduate without student loan balances. Private school students fared a little worse, with 20% of four-year grads owing $40,000 or more and 25% having no student debt. And for-profit schools? Just 12% of students graduated debt-free, while 48% carried loan balances of $40,000 or more after graduation.

What about two-year programs? Fully 59% of those earning associate degrees from community colleges graduated debt-free. However, only 12% of for-profit students finished their associate degrees unburdened by loans.

Is college still worth it?

Is all this debt for higher education worth it? In the past, it was common knowledge that college grads earned significantly more over their lifetimes than their non-degreed counterparts. And higher education was generally considered worth the price, even if one had to borrow. But is that true today? The Education Data Initiative recently published some interesting numbers about student borrowing and earnings by education level. Here’s what they uncovered about the monetary benefit of higher education and how much people borrowed to get there:

DegreeMedian Annual IncomeEarnings Advantage Over High School Grads (30 Years)Average Borrowed
Some college, no degree$46,748$202,440$15,236
Associate’s Degree$50,076$302,280$21,123
Bachelor’s Degree$69,368$881,040$28,708
Master’s Degree$81,848$1,225,440$75,333
Research Doctorate$99,268$1,778,040$123,695
Professional Doctorate$100,048$1,801,440$211,817

According to the National Center for Education Statistics, those with only a high school diploma and no higher education earn about $40,000 per year. It is likely of value to attain some higher education that doesn’t result in a degree–perhaps in the form of trade school, certificate, or diploma programs. You can see from the numbers that higher education conveys a lifetime earning advantage even after financing your degree.

That said, graduating without a pile of debt is always better.

Pick your school wisely

As noted above, for-profit colleges tend to generate higher student loan balances. According to the Journal of Financial Economics, students at for-profit colleges pay more for their educations, experience lower graduation rates, and earn less after graduation. Unsurprisingly, these students default on their student loans at much higher rates than other students.

So, an easy way to dodge some significant student debt bullets is to avoid for-profit institutions. Students who graduate with the least amount of debt tend to follow this playbook:

  • If you’re still in high school, try getting as much free college credit as possible. Advanced Placement (AP) classes help students test out of many general ed requirements in college. And many schools allow eligible juniors and seniors to take at least some classes at their local college or university for credit at no cost.
  • Get your lower division classes out of the way at your local community college. Just make sure your credits will transfer to the four-year school of your choice.
  • Complete your degree in-state at a four-year public university or a low-cost alternative. Note that some of the most expensive private universities can be cost-effective because their grants are generous. And some out-of-state programs offer reduced merit-based tuition to students from neighboring states.
  • This college scorecard from the U.S. Department of Education ranks colleges and universities based on how much they charge for tuition and the overall cost for students. Use it to compare the costs of specific career or vocational programs and the schools that provide them.
  • Seek out tuition-free schools or no-loan schools.

Choosing the right school is important, but it’s just the beginning.

Choose a degree program that delivers

Assuming you’re not attending college just for social opportunities, you’ll want to consider how well the degree you pursue recoups its cost. Research potential careers with the U.S. Bureau of Labor Statistics (BLS). You’ll see what education and experience they require, the size of the job market, and how much you’re likely to earn right away and down the road.

That’s not to say you can’t choose a low-paying career because you love it. Just be aware and look for ways to keep your debt small or get it forgiven through public service or a similar route. Here are 4-year degrees and their annual incomes that present bigger loan repayment challenges:

  • Theology and religion $36k
  • Social services $37k
  • Family and consumer sciences $37k
  • Psychology $37.4k
  • Leisure and hospitality $38k
  • Performing arts $39k
  • Early childhood education $40k
  • Elementary education $40k
  • Special education $40k
  • Miscellaneous education $40k

Fortunately, given that many of these lower-paying degrees are in education, teaching in low-income districts for five full-time years can get some or all of your student loans forgiven.

FAFSA is your friend

There are many scholarships, grants, and subsidized loans available. And the Free Application for Federal Student Aid, or FAFSA, is your one-stop shop. It gives you access to federal student assistance, and many colleges and private scholarships also use the form to find programs for which you qualify. The financial aid office at your college is another good place to find help with tuition and other costs. The U.S. Department of Labor also maintains a searchable list of scholarships at its CareerOneStop.

Other sources of tuition money include employers, religious and other organizations, clubs you or your parents belong to, relatives, and even crowdfunding. Consider selling everything you won’t need when you start school and putting the proceeds toward your first semester.

Working and living

If you’re pursuing a degree to increase your lifetime income and job satisfaction, you may have to give up some extracurricular college experiences. Like dorm food, pledging a frat, or drinking your weight in beer every day. You can sidestep a ton of debt by living at home while in school and working part-time to cover your costs. If you’re already on your own, avoid the most expensive places to go to college. Move to a college town with a low cost of living.

Your school’s financial aid office might help you reduce what you owe. It’s called a federal work-study job and is available to students with financial needs. Your school organizes these part-time jobs, which can be on-campus or off-campus. If you get an off-campus job, it will likely involve doing community service work for nonprofits or government agencies, and you’ll earn at least the federal minimum wage. There are two really good things about work-study jobs: first, the money you earn won’t make it harder for you to get financial aid. Unlike other part-time jobs, it won’t affect your eligibility. Second, these jobs are made to fit your school schedule, so you won’t have to choose between work and class. It’s a good idea to apply for a work-study job early because only a limited number are available.

Create a budget that won’t require credit cards to meet your expenses. (Keep one for emergencies if you’re disciplined enough to leave it alone.) If you’ve never lived alone, do some research so you won’t be caught off-guard by the cost of food, transportation, and other necessities.

Enjoy the ride

If you’re on your own and working full-time, check with your employer about tuition reimbursement. Did you know that about half of employers offer some form of tuition reimbursement for graduate or undergraduate students? Typically, reimbursement rates depend on your grades. If you have suitable full-time employment with an excellent benefits package, there’s no reason to rush toward graduation. Take fewer classes, enjoy your work-life balance, and eventually, you’ll get there — with valuable work experience and without crippling debt.

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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

Gina Freeman
Gina has been writing consumer-centric content in the personal finance, business and investing for nearly 20 years. She loves making challenging or even “boring” topics accessible and helping readers feel educated and confident in their decisions.

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