college debt

How to Lower Your Debt in College

Most students want to pay off their college debt as quickly as possible when they graduate. It is also a prudent decision since it sets you up for long-term financial success. In addition, paying off or reducing student loan debt improves your debt-to-income ratio, which is an essential aspect of maintaining a positive credit history and credit score.

According to Investopedia, the average student loan debt was $38,792 in 2020. However, in 2021 of November, collectively, they owe $1.58 trillion. On average, 34% of students borrow money to go to college. 

This fact is why it is essential to set a plan to pay off your debt because your wallet will appreciate it. In addition, when you make your last payment earlier than expected, you pay less interest over the lifetime of your debts, saving you more money for the future. Several repayment methods are available for borrowing federal student loans, but they may not be appropriate for everyone’s circumstances.

Before accelerating your student loan payoff, you must first establish a stable financial foundation, such as saving for an emergency and managing other debts like credit cards. No matter how badly you want to pay off your student debts, it would help if you reevaluated your other expenses as well because it’ll take time to pay a significant debt. 

Here are ways you can look into to lowering your debt in college. 


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How to Lower Debt in College

Choose the Right College to Accelerate Your Graduation

Finding the right college to go to can be hard when you have a hundreds-to-thousands of options to look at. Of course, you want to go to a renowned school, but you also want to save and not carry significant college debt on your shoulders. 

Determining the cost of tuition and all other charges, such as textbooks, materials, living expenses, transportation, and any additional fees, can help you save money in the long run. In addition, it would help to research your top college selections’ cost, lifestyle, and career potential. Finally, before deciding, you should always examine the benefits and drawbacks of each college.

If you’re having trouble deciding on a college to attend, you should look at your top options and rank them by tuition. Then, do some research to see if there is a program to graduate early with minimum cost. Finally, see whether classes fill up quickly and what alternatives are available.

You also want to think about a private vs. a public college too. According to the US News, the average debt of graduates from a private institution was $32,029 compared to a public college, which was $26,627 in 2020.

The last thing you want on your shoulders is graduating with a ton of debt. You should always do your due diligence and talk to a professional about your career path and options. 

Research for Scholarships and Grants 

Before you become overwhelmed by the cost of tuition and living expenses, you should always look into all of the grants and scholarships offered by your top college selections. Most of the time, they cover 25% of your tuition. Some even provide outstanding programs that can help you pay for your education. 

Next, look into your financial aid opportunities. Before you resort to student loans, make sure you’ve exhausted all of your grant and scholarship opportunities. Fill out the Free Application for Federal Student Aid (FAFSA) as soon as possible and begin exploring for scholarships and grants on the internet or in your college department. You want to do your diligence when applying for grants and scholarships because education is NEVER free. 

Research has shown that the average amount received from FAFSA is around $9,000. So, you don’t want to miss that kind of opportunity. 

Finally, determine how much you would need to close the gap and whether having a job will help. For example, working at the campus coffee shop, bookstore, or help desk can save you a few thousand dollars but may harm your GPA as well. 

Make an Effective Graduation Plan

Once you pick your major, you should look into your graduation requirements and see if the tuition is calculated per semester, per quarter or per unit. Every major is different, and for some majors, you can graduate in two or three years instead of four years. 

You can also try to take transferrable units and summer classes at a local community college to save money if you want to. Some universities, for example, will allow students to take general ed classes at community college and transfer credits. That’s how you can make the most of your time while also conserving money, which is especially important if your school charges tuition per unit.

Budgeting and Saving to Reduce College Debt

You want to experience college life, but you don’t want to become too heavily indebted or bankrupt in the process. College is already as expensive as it is, and you want to make the most of your money when you are there. The average cost students need to spend is around $1,400 to $2,100 a month. If you want to save more, you can find places or money phone apps where you can get fantastic prices or discount on food and beverages for certain nights out. 

You don’t want to eat out every day, though, because it can cost you more than $4,000 a year. You don’t want to build more debt, right? 

To begin, you should make a reasonable budget. By listing all your income out from financial aid and job earnings, you know how much money you have to spend. It would be best to start with the necessities like tuition and fees, books, rent, groceries, utilities, personal items, transportation, and health insurance. Next, you can include any minimum credit card and debit payments in your budget.

You could also reduce your living expenses by living at home or renting an apartment off-campus, which can save you a couple of hundreds of dollars each month. You should start budgeting and cut costs you don’t need. By doing so, you can save the extra money to spend on other essentials. There are many ways to save when in college, but the doing part is always the challenge. You can meal prep, use student discounts, use coupons, ride a bike to campus, and so much more. If you do these simple things, your wallet will be very pleased. 

And with the money left over you can use the remaining funds to pay down your student debt. If you have a negative number, you must revise your budget to ensure that your income covers all your expenses.

Live Below Your Means

As students, you want to have fun and impress other people. However, if you do that, there will be no money left for you to spend. Living frugally can help save you money to pay off your debt faster. It is challenging to do when you are young, but you’ll realize how much you need in life if you practice this lifestyle. 

Tax Deduction

Did you know you can deduct the interest paid on student loans for tax purposes? The benefit is available for any loans used to pay for higher education costs (not just federal student loans). $2,500 is the maximum deduction for a year. 

However, you must keep in mind that students loan interest deduction is not for everyone because there is an income limit. For example, if you are a married couple who file jointly and the modified adjusted gross income (MAGI) is below $170,00, you can get part of the deduction. However, if you are single filers who file as the head of the household, you cannot qualify if your MAGI is $85,00 or more. 

Another option to investigate is the Lifetime Learning Credit. Students can claims up to $2,000 per year if they qualify.

Pay Your Tuition in Installments

Some students like to pay their tuition in installments, which is fine. However, it would help if you looked at your budget to see your options. If you can afford it, you can pay the tuition in installments to avoid spending a large sum of money all at once. Even the set-up or convenience charge will likely be much lower than the interest rate on student loans.

Work to Reduce Debt

If you can find a paid internship, on-campus jobs, side hustles, or part-time jobs, this can help you earn money to pay down your student loan. The average national salary for a college student is around $34,089. So, with some money, you can pay for many essential expenses. 

Even if it is a minimum wage job, you should still get it for the experience and make extra money. It is challenging and stressful when you are a student and trying to do everything yourself, but it’s the adult life as you get older. If you can get a job and start early, you’ll thank yourself later when you don’t have that much debt to pay in the future.

Student Loan Repayment

If you receive a large tax refund, bonus, or wage increase, do not squander it. Instead, use the money to pay down or prepay your student loans if you’re already out of school. Also, don’t fall into the mistake of procrastination if you have smaller student loan loads. If you prepay your college debt, you will pay them off earlier than expected.

Bottom Line 

You can lower your debt in college in many ways. First, you must find the strategy that works for you. Paying back your college debt doesn’t need to be difficult if you educate yourself on your finances. With proper planning, research, and awareness, students can pay their debt back in no time. It just takes time and consistency to be back on track. If you consider these suggestions in your financial planning, you’ll be in luck to pay off your debt in no time.

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Cindy N.
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Cindy (The Money Dreamer) started her blog, The Money Dreamer, when she realized the 9-5 job was not the lifestyle she wanted anymore. After designing for a while, she wanted a more meaningful life, which was freedom, so she decided to venture out. She took action so that she can live her dream life and decided to help people to live theirs by helping them how to save, budget, and invest.

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