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5 ways to minimize your child’s student loan debt

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Sending your child off to college is hard enough without adding the potential burden of thousands of dollars in student loan debt. Here are some ways you can help minimize the amount of student loan debt your future college student will have after graduation.

Save
Assuming you have no high-interest debt, an adequate emergency fund and are on track for retirement, it can’t hurt to start putting some savings away, especially if your child is still young enough to benefit from years of savings and investment earnings. It’s likely you won’t be able to save for the full expense of tuition and room and board, but it could help with a portion of the expenses. For example: if you start saving at birth and earn a 6 percent average annualized rate of return, you would need to save about $674 a month to fully fund four years of a college education currently costing $25k a year and growing at an average inflation rate of 6 percent … and that’s just for one child! Needless to say, few parents can afford to do that, but anything you can put away helps.

Encourage your child to take AP Classes
Advanced Placement classes, if offered by your child’s school, can be a great way to earn college credits in high school while possibly improving the odds of receiving merit-based scholarship money. In some cases, your child may not even have to take an AP exam to get college credits. If your school doesn’t offer an AP class in a subject that your student is particularly strong in, see if they can take the exam anyway. Taking these steps in high school can help your child graduate early and save a whole year’s worth of college expenses.

Compare net costs
It’s easy to get sticker shock when looking at the annual costs of many schools but hardly anyone pays list price anymore. In a study, 87 percent of freshman entering a private college last year received some form of institutional grant or scholarship with the average student getting a 44 percent discount off the published tuition. For a better basis of comparison, you can use the school’s net price calculator to estimate what the cost will be after factoring in financial aid eligibility. Don’t be surprised to find that an expensive private school with lots of money for aid may actually cost you less than a state school.

Consider a community college start
If even the net costs are too high, another option is for your child to start at a community college and then transfer to a four-year school for the degree. This can save not only tuition (many cost less than $2k for a full-time semester) but also room and board as your child will likely be commuting from home. If they do well at the community college level, they may also be able to transfer into a school they may not have otherwise have gotten into. That’s a win/win solution.

Explore alternatives to student loans
To supplement the college’s financial aid program, try searching for other scholarships online. Most are based on talent, academic merit, or association with a particular group, but you never know what you might find. Be wary of scholarships that ask you to pay a fee, though, as legitimate scholarships will not require you pay any money to receive the award.


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Deidre Davis

Deidre Davis is the Vice President of Marketing and Communications at MSU Federal Credit Union. MSUFCU's headquarters are at 3777 West Road East Lansing, MI 48823. Contact Deidre ad deidre.davis@msufcu.org or (517) 664-7877.