Getting Through College Without Student Loans

According to statistics compiled by the U.S. Department of Education, two-thirds of college students today leave their alma mater with debt from student loans, and the average student loan debt amount among these graduates is a startling $23,186.

These student debt numbers go hand in hand with reports from the College Board that four-year public colleges and universities now charge, on average, about $7,600 in annual tuition and fees to in-state undergraduate students and nearly $12,000 a year to out-of-state students. Private non-profit four-year colleges and universities average more than twice that, costing students about $27,300 a year in tuition and fees.

With the average tuition cost of a four-year degree running between $36,000 and $108,000 — and that’s without counting non-tuition college costs like room and board, textbooks, transportation, and living expenses — it’s easy to understand why student loans have become such a common piece of a student’s financial aid package.

An increasing number of students who graduate with college loans, however, are finding it difficult to repay their student loan debt. Department of Education statistics show that nationally, about 7 percent of borrowers who entered repayment on their federal education loans in 2008 defaulted within the first year of repayment, and nearly 14 percent have defaulted within three years. (2008 is the last full year for which student loan default statistics are available.)

As consumer and student advocacy groups like The Project on Student Debt and the Institute for College Access & Success call attention to the spreading problem of ballooning student loan debt, spiking default rates, and the growing number of recent graduates who find themselves in need of debt help, some students are looking for ways to pay for college without taking on debt from school loans.

Graduating from college debt-free is certainly possible, but it can require some careful planning, creative financing, and potentially some adjustments in your college plans.

1) Pay as You Go

If your school offers tuition payment plans, consider eschewing student loans in favor of a “pay-as-you-go” model. By taking advantage of a school payment plan, you can pay for college in smaller installments, rather than as one big chunk all at once.

Many colleges and universities now offer monthly payment plans that allow you to spread out the cost of your tuition and fees over the course of the semester and pay for your college costs in monthly installments. You may be charged a small one-time or monthly fee when you opt for a tuition payment plan, but once you’ve earned your degree, you’ll be able to leave school with no student loan debt.

2) Scholarships & Grants

Spend some time each month searching for scholarships/" title="Search for college scholarships and grants">college scholarships and grants. There are several online scholarship search engines that allow you to search databases of awards for free. Scholarships and grants provide “free money” for college that, unlike student loans, you won’t need to pay back.

With the millions of private and public scholarship programs available, application deadlines fall year-round. To maximize the number of awards you can apply for, make sure to search continually throughout the year and not just during the summer, right before tuition bills come due and when your competition will be steepest.

3) Refusing Student Loans Awards

To qualify for federal grants, you’ll need to apply for federal college financial aid each year. When you apply for federal student aid, you’re likely to be awarded federal student loans as well.

Know that you’re not required to accept any student loans you’re offered. When you receive your financial aid package from your school, you can simply accept those awards you want — grants, scholarships, work-study — and refuse the loans you don’t.

Just keep in mind that refusing your federal college loans can have its drawbacks. Since federal student aid funds are limited and are often distributed on a first-come, first-served basis, once rejected, a school loan may not be available to you later that semester or year. If you run into a situation where you’re looking for financial aid mid-semester because expected scholarships or a part-time job didn’t materialize or you’re saddled with unexpected expenses and suddenly don’t have enough cash to make your monthly tuition payment, the federal loans you rejected at the beginning of the semester may no longer be available to you if you decide later on that you need them.

4) Avoiding Private Student Loans

In an emergency situation, if you need money for college and your federal loan options have dried up, you can still opt to take on private student loans to cover any remaining college costs you have. Private student loans are non-federal, credit-based loans issued by banks, credit unions, and other private lenders rather than by the government.

Private student loans don’t have the advantages of a fixed interest rate or the flexible repayment options that federal student loans do, but private loans are generally available year-round, as long as you qualify for the loan. However, given their often pricier and riskier terms, private loans should be used only as a last resort, when savings, scholarships, and federal college loans aren’t enough to cover your college costs.

5) Cutting College Costs

Reducing your cost of attending college will also reduce your need for financial aid and college loans. To save thousands of dollars on your college bill, consider attending a two-year community college before transferring to a four-year institution to complete your degree.

Your diploma will still carry the name of the four-year school you finish at, but you’ll have saved two years’ worth of higher tuition and fees. The average annual cost of a two-year public college is about $2,700, a significant savings over the $7,600 in-state rate at a four-year public institution, not to mention over the $12,000 out-of-state rate.

If spending a full two years at a community college doesn’t appeal to you but you still want to minimize the possibility of needing school loans, you can compromise by taking at least some basic classes and required survey courses inexpensively at a community college and then transferring those credits to your four-year institution. If you’re considering this approach, make sure you work closely with academic advisors at both schools to ensure that all the credits you earn as a commuter student at the community college will be applied to your primary four-year degree program.

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