5 Ways Around the Student Debt Trap

We all want the best education for our children, but what if you can’t afford the perfect one? Do you saddle your aspiring college student with $50,000, $75,000–$100,000 in student loan debt upon graduation?

There are ways to avoid the student debt trap and still give your child a decent education.  True, compromises will be necessary, but with the cost of a college education spiraling out of control, there may be no other choice for many parents.

Try any one or a combination of the following.

1. Spend the first two years at a community college

This is a method that cuts the overall cost of a college education dramatically.  A student can spend the first two years at a community college, then transfer to a four year school to complete a bachelor’s degree.  Public colleges and universities will accept the transfer credits though it can be a bit harder if the ultimate destination is a private institution.  The student will earn an associates degree upon graduation, and it can also be a perfect transition for students who aren’t quite academically ready for the college world.

As an example, let’s say that you live in New Jersey, and your daughter wants to attend Rutgers University.  Tuition and fees for one year at Rutgers (off campus/commuter) is just over $12,000.  If she were to attend nearby Middlesex County College for the first two years, tuition and fees are about $4,800—less than half the cost of Rutgers.  Almost $15,000 will be saved on her college education, but after four years, her degree will be from—Rutgers University!

2. Attend an in-state school

Attending school in-state might limit educational options, but it can also save a fortune.  For example, for a Georgia resident attending the University of Georgia (living on campus) the cost for one year is just under $20,000.  But if the same Georgia resident crosses the state line and attends the University of Florida, the annual tab will be in excess of $40,000.

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The difference between the two schools over four years is more than $80,000—how much of that will be paid for out of student loans?

If your child’s major requires a public university located in another state, consider having her take a year off from school to establish residency in the state where the school is located.  Inconvenient?  Maybe.  But saving $80,000 may be worth the effort!

3. Live at home and commute

student debt trap

How can you avoid the student debt trap?

By living at home and commuting to school, tens of thousands of dollars on a four year college education can be saved just by eliminating room and board and travel expenses.

Room and board at the University of Illinois (Urbana-Champaign) was $9,714 for the most recent school year.  If you pay that for all four years you’ll have added nearly $39,000 to the cost of your child’s education and perhaps to his student loan debt.

If you live in a large metropolitan area there are probably a number of colleges and universities within commuting distance.  A good public university in your area can save even more.

4. Work your way through

Not only does working your way through school help to lower college costs—and the resulting student loan debt—but it can also provide something many college graduates don’t have: work experience.

There are three different ways this can be arranged:

  1. Attend school full time, work part time
  2. Work full time, attend school part time
  3. One year on, one year off

The last two arrangements will lengthen the time it takes to complete a degree program, but that time will have been traded for less student loan debt and more work experience, both of which can give a young person a better start in adult life.  In addition, a person who has worked during the college years might find a smoother transition into work life than one who makes a cold shift from school to employment.

5. Set a specific student loan limit and work within it

Instead of borrowing any amount needed to cover the costs of college, set a limit on how much you think your child will reasonably be able to pay back shortly after graduation.

You can use any metric you like, but one that I like is to limit the amount of college debt to the average first year starting salary expected upon graduation.  If you expect your child to earn $35,000 in the first year out of school, the student loan debt should be limited to $35,000.  That’s a maximum—less will be even better—and it’s important to use the average income as a basis, not the upper range.

Remember, one day all that debt will have to be paid back so you have to be certain that it’s an amount that will be within the child’s future means to do so. Setting a limit will also help guide you into using some of the other alternatives above.

What other ways can you think of to avoid the student debt trap?

About kevinmercadante

Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids and can be followed on Twitter at @OutOfYourRut

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  1. Given that to transfer from community college requires more classes, it may be cheaper to start at a university and take summer classes at community college. You could still graduate in in 3 years.

    • You probably need to check the specific programs and see what is needed. Some community programs work with city and state schools to transfer credits relatively seamlessly where you wouldn’t need more classes.

      You reminded me of another way to help eliminate student debt – aim to graduate before four years. Some schools, like city or state, charge per semester for full-time rather than per credit. Taking extra classes can help you knock off time, saving you from paying more tuition. Also, by graduating quicker there’s less of a need for housing.

  2. These are all great ideas. But I think the best way is to build up your own skills. Make yourself so valuable that foundations will trip over themselves to give you scholarships.