Student Loans

Student loans can have a devastating impact on your financial future if they get out of control.  It is frightening to see schools hand out FAFSA (Free Application for Federal Student Aid) forms to new students as if it were candy.  I have witnessed this myself when we were visiting colleges for my sons.  There was no thought needed.  Just fill out the forms and get the aid.  That is scary.  It is the same cavalier process we saw during the housing crisis (mortgage loans were being handed out like candy in that case without regard for the ability to pay back too – seems eerily similar doesn’t it).  The most dangerous debt is often incurred for graduate school, as those tuition rates are often extremely high and they add up quickly.




Some options to consider to avoid or drastically reduce the amount of student loan debt are:




  1. Take some AP classes in high school and earn college credits while in high school.  This will save you both time and money in college.  See your high school administrative office to find out about what AP classes are offered.
  2. Live at home and take your first two years of college at a local community college to get your general education credits out of the way. After that transfer to the four year college and complete your degree there.  Your degree will be issued from the four year college and you will have saved a lot.  Be sure to check with both colleges to confirm which classes will transfer over to make sure your plan will keep you on track.
  3. Before determining what school you are going to and degree you should do a basic payback calculation to determine if the degree is worth the cost. This is one of the most important things that is not being done by many that are taking on student loans.  I think many students feel they will be making lots of money after college so they are not worried about the debt.  In other words, they are taking a wild guess and are not taking a few minutes to do some basic math.  This is a business case for your investment.  If the cost of the degree is too high compared to the earning power you will receive, it is not worth the investment.  Look for a more inexpensive school or be prepared to be saddled with debt for years or even decades!  To do a basic calculation divide the amount of student loan debt you will have at graduation by your starting expected annual salary.  If the debt is more than two times your expected annual salary you are in very dangerous territory.  You should aim for debt less than one year of salary.
  4. Room and board is one of the significant costs of college. Be careful here.  Try to be as economical as possible.  The best would be to find a place to live (ie: rent a house or apartment) and then rent out rooms to other students so that you can try to live for a reduced rate (others help pay most of your housing cost).
  5. Buy used books or rent your books (if that is an option) rather than buying new books. The savings can be significant.  Some students wait to buy books until the teacher actually assigns something for the book.  What often happens is that you buy a book that is listed for a class and then you never actually use it for the class.  Although it can be difficult and challenging, some students have figured out how to share books to reduce the cost.  You can also use a site such as to sell your book directly to another student at a better price for you than you could get selling your used book back to a bookstore, and the buyer gets a better price than the bookstore would charge them for the used book.
  6. Help you child or grandchild out. Open a 529 college saving plan when they are born and deposit $50 a week (or about $200) per month.  That is $10 per work day.  If you invest in an S&P 500 or similar equity index funds you’ll likely have approximately $80,000 for college when the child is college age.
  7. For real estate investors, one approach is to make a down payment to buy a rental property before you child is age three. You take out a 15 year mortgage and have your tenants pay off the mortgage for you over the next 15 years, which is the age your child will be ready for college.  You then have a paid off property that you can either sell and use to pay for college or borrow against the property and have the tenants pay for your child’s college education.
  8. Become an RA (Resident Assistant) in the college dorms for one year or more and get free housing, free food and more for those years at most colleges
  9. Scholarships are out there. It is a numbers game.  The more you apply for the more you will likely get.  Some sites to search for scholarships include:,, and Also has a relatively inexpensive monthly subscription service that allows you to get lots of matching scholarships. Also try
  10. For some, joining the ROTC in college is an option to get college paid for. Learn more at
  11. Work in college to help pay for college while you are there. For the typical student, you should be able to work up to 15 hours per week during your college semesters without it impacting your performance in school.
  12. Do CLEP testing and earn college credits. By just taking a test you can get credit and save the time and money of taking the class. Also DSST exams can get you college credit as well by taking a 90 minute exam and paying about $85.
  13. The Evans scholarship is an amazing scholarship. You qualify by being a caddie for two years in high school.  If you qualify after going through a series of interviews you can end up getting a full ride to a university (you get free tuition and get free room and board by staying at an Evans scholarship house).  For more information try:
  14. Many medium and large companies offer tuition reimbursement for some or all of your education. One approach is to be working before completing your undergraduate or graduate degree and see if your company can help you pay for it by utilizing their tuition reimbursement program.
  15. After getting their degree some have moved to lower cost of living states (that still have good salaries) in order to pay their debts off faster. In other words, instead of arbitrarily living where you want to live, give some thought to the impact on your life if you are able to pay your debts off much faster by living in a lower cost of living area, if only temporarily for a few years or so.
  16. College is not for everyone, and is not always the most financial beneficial option either. The skilled trades are in dire need of new employees.  Becoming an electrician, plumber, CNC operator or other skilled trade can result in a very good pay much more quickly than deferring pay for four years or more while going to college.




Related Article: Yes you can be a Student without a Student Loan!




If you already have student debt here are some things to consider:




  1. You might qualify for an income based repayment (IBR) plan which would allow you to get debt forgiveness if you qualify.
  2. If your student loan debt to annual income ratio is greater than 2:1 you need help. Try The Student Loan Planner
  3. Decide you are going to aggressively get the debt behind you by not inflating your lifestyle and instead throwing as much toward principal as possible to extinguish the debt. Refinancing might be an option to consider.  If that applies to you one option is
  4. You might get debt forgiveness if you qualify. If so you will likely have to pay tax on the forgiveness.




Welcome To SmartMoneyToolBox

Hi, my name is John. I am a CPA who has worked in both public accounting and private industry since my career began in 1990. Building financial security is a marathon - not a sprint. It’s not a get rich quick formula. If you provide the effort, SmartMoneyToolbox will supply the tools!

Pin It on Pinterest