Paying for college yourself can be daunting, especially when the average student racks up $9,000 to $35,000 in debt each year. While financial experts recommend graduates pay off this overwhelmingly large sum within 10 years, most need more than 20 years to repay what they owe. Meanwhile, some professionals are still working to pay off student loans in their 60s and 70s.
1. Fill Out the FAFSA
Every year, roughly 20 million students fill out the Free Application for Federal Student Aid, and more than 65 percent of them receive support from federal loans and grants. The Office of Federal Student Aid provides this funding through more than 6,000 colleges and career schools across the U.S. to help students pay for school. First, however, you must submit a FAFSA application to determine whether or not you qualify for this kind of financial assistance.Receiving aid in the form of loans will only add to your total debt. However, if you score a federal Pell Grant, you likely won’t have to repay FSA. Instead, you can bank that money and use it to pay off the remainder of your tuition or student loans after graduation.
2. Apply for Scholarships
In many American families, parents’ income and savings cover 44 percent of yearly education costs, while scholarships cover 25 percent. Of course, academic achievers and sports enthusiasts may receive a full ride through scholarships alone. However, unless you’re in the top 1 percent of your class, receive an exceptionally high score on the SAT or ACT, and are incredibly involved in extracurriculars, the odds of you receiving a full scholarship are slim to none.Still, there are billions of dollars worth of free money out there. You simply have to know where to look and be willing to put in the work to apply. Even if you don’t have good grades or an impressive batting average, you can score more financial aid from local businesses, nonprofits, and religious and ethnic organizations.
Talk to your financial aid officer or school counselor to determine which scholarships are worth the time it takes to submit an application. If you can secure one or two awards, you’ll be able to pay off college debt quicker because you’ll have less of it to worry about upon graduating.
3. Get a Work-Study Job
Whether you had dreams of spending your summer at the lake or in an office gaining experience as an unpaid intern, you might have to pass on these opportunities and get to work. After all, you need income from a real job if you want to pay off college debt by yourself. In this case, a work-study opportunity might be the best option.This government program can provide you with part-time work while enrolling in school to help offset education expenses. Plus, if you pick one that’s relevant to your major, you’ll gain tons of experience in your future career field, which could be even more valuable than earning a huge salary. But, of course, who said you couldn’t intern and get paid, too?
4. Start a Side Hustle
A work-study job might not generate enough income to pay off college debt quickly. However, a part-time side hustle may offer a solution. Nearly one-third of Americans already have one, including almost half of those under age 35. Whether you love making jewelry or walking dogs, your interests and hobbies can probably generate some extra dough each month.5. Talk to Your Employer
If you find a job that’ll pay for all or most of your tuition, take it. Unfortunately, this kind of perk is rather hard to come by, although it is becoming more common. In recent years, hundreds of companies have added employer tuition reimbursement programs to their employee benefits packages in an attempt to attract new team members. Pioneered by Starbucks in 2014, these programs and scholarships have been adopted by the likes of Apple, BP, Best Buy, Disney and JetBlue.Talk to your employer if you need financial assistance. While most won’t fund master’s or doctorate degrees, they may be willing to cover your undergraduate endeavors. Moreover, some will pay for your education outright, while others will reimburse you for the remaining tuition at the end of each semester. Finally, others might offer one-time grants or renewable scholarships, so it certainly doesn’t hurt to ask about your options and eligibility requirements.
6. Stick to a Budget
Creating and sticking to a strict budget is another great way to save money and pay off your debts. This strategy will require sacrifice, compromise and patience, especially if you owe a few thousand dollars in student loans.For instance, you might have to give up coffee runs and shopping sprees to pinch pennies and prioritize paying down debt. However, these small behaviors will add up quickly so you can get back to that happy realm of guilt-free spending sooner.
7. Look Into Tax Credits
If you’re still in school, there are two tax credits you should take advantage of: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). The former is worth up to $2,500 per year, while the latter is worth up to $2,000. Most parents claim the AOTC for their children while they’re in college. However, if your legal guardian isn’t paying for your classes, they might be willing to gift the credit to you.Otherwise, you can get free money for tuition, books, fees, and school supplies with the LLC. In addition, unlike the AOTC, this credit doesn’t require you to enroll in a minimum number of classes, and there’s no limit to how many years you can claim it. Thus, whether you’re pursuing a graduate or undergraduate degree, you can get an extra $2,000 a year to cover education expenses.
8. Adopt a Two-Step Strategy
Conventional wisdom tells those with a small loan balance to pay it off quickly. Meanwhile, people who owe a lot should take their time paying it down. However, a student in either situation would be better off combining the two approaches and developing a two-step system.First, pay off as much of your student loans as quickly as you can during the early years. Then, switch to an income-driven repayment plan. This arrangement will guarantee student loan forgiveness after 20 to 25 years. However, it’s important that you only make this transition when the benefits of forgiveness match the costs of compounding.
9. Refinance Student Loans
Sometimes, refinancing your student loans is the best way to pay off your debts by yourself. This option involves trading in your current loans to a private lender in exchange for a new one that’s cheaper and easier to repay.For instance, once you qualify for refinancing, you can choose a new loan term for five, 10 or 20 years, which may decrease your monthly payment. Moreover, you could apply with a co-signer or score a lower interest rate, both of which may reduce your amount of debt overall.
10. Consolidate to a Federal Direct Loan
If you received federal loans instead of private ones, you could find even easier repayment plans by applying for a direct consolidation loan. This option lets you pay off your federal student loans, so all you’re left with is one payment to one lender each month. In addition, it comes with a fixed interest rate so you can budget better and minimize the risk of default.Serendipitous Savings
Students and graduates who want to pay off their debts in record time would be wise to keep an eye on the news and take advantage of serendipitous opportunities to save.It’s now been more than a year since borrowers have had to pay interest or even make payments on their federal student loans. Although the moratorium is set to end in October, the Biden administration is considering extending the pause.
It would be in your best interest to keep making payments and save money on compound interest. However, choosing your next best move will depend on what the United States decides to do next, so remaining flexible and open to new possibilities will be essential as the situation develops.
