Student Loan Alternatives

Student loans can help pay for a college degree, but they may not be your first choice if you’d like to keep education debt to a minimum. You have several student loan alternatives that could help with managing the costs of going to school.

Alternatives to student loans include grants, scholarships, and work-study programs. You might also use savings or income from a part-time job to pay for school. 

The good news is you don’t have to limit yourself to just one of these options. Here’s a closer look at several of the best ways to pay for college apart from student loans. 

In this guide:

• Scholarships
• Grants
• Work-study
• Part-time work
• Savings
• Income share agreements
• Employer sponsorships
• Payment plan
• Crowdfunding
• Matched-savings programs
• Is one of these options better than the others?
• What can you do if these options don’t cover all your costs?

Scholarships

Scholarships are financial awards you don’t need to repay. That makes them attractive alternatives to student loans. 

Categories of scholarships include the following:

• Merit-based, which are based on academic achievement or skill, such as athletics or the arts
• Need-based, which are granted according to financial need
• Niche, which may be awarded based on factors such as gender, ethnicity, or course of study

Scholarship programs may have specific requirements you need to meet to apply, such as maintaining a minimum GPA or having red hair. Some scholarships may be more competitive or selective than others. For example, the prestigious Rhodes Scholarship is awarded to just 32 U.S. students per year. 

The amount that scholarships award can vary widely, from just a few hundred dollars to all expenses paid, as is the case for Rhodes Scholars. 

Funds may be paid to the school or the student, depending on the program. Scholarships may be offered by:

• Private foundations or nonprofits (ex: Gates Millennium Scholars Program)
• Public companies (ex: Generation Google Scholarships)
• Government entities, including the U.S. military
• Community or service organizations, such as Kiwanis International
• Local small businesses
• Religious organizations
• Colleges and universities

Certain scholarships may require you to reapply or recertify each year to maintain eligibility. For example, New York state’s Excelsior Scholarship program is a need-based scholarship that allows eligible students to attend SUNY or CUNY tuition-free. Students who qualify must recertify their income annually to continue receiving the scholarship.

Grants

Grants are similar to scholarships in that you don’t need to repay them in most cases. Many of the same types of entities or organizations that offer scholarships can also provide grants. Some are merit-based, and others are awarded to students based on need or special considerations, such as field of study.

You must apply for grants individually or by completing the Free Application for Federal Student Aid (FAFSA).

For example, filling out the FAFSA gets you automatic consideration for federal Pell Grant funding. Other federal grants include:

• Federal Supplemental Education Opportunity Grants
• Teacher Education Assistance for College and Higher Education (TEACH) Grants
• Iraq and Afghanistan Service Grants

Like scholarships, most grants are disbursed to the school, though some programs may provide funds to students if part of the money is to be used to cover living expenses. Competitiveness and eligibility requirements vary based on which grant you’re applying for. 

As we mentioned, most grants don’t need to be repaid, but a service commitment may be required. 

For example, TEACH grant recipients must commit to teaching at an approved school for at least four years. Otherwise, their grants are converted to Direct Unsubsidized Loans, which they must repay with interest.

Work-study

Work-study programs allow you to work and earn money to pay for college. You might consider work-study as an alternative to student loans if you have room to commit to part-time work. 

The federal work-study program is open to undergraduate, graduate, and professional students enrolled full- or part-time with demonstrated financial need. If you’re interested in work-study, check with your school’s financial office to see whether it participates in the program. 

Federal work-study recipients must earn at least the federal minimum wage, though some jobs may pay more. How much you earn can depend on:

• Your level of financial need
• When you apply
• How much work-study funding your school has available

Jobs may be on-campus or off-campus, and the Department of Education prefers that students do work related to their field. 

Your work hours cannot exceed your federal work-study award, and you must be paid at least once per month. Payments are sent to you directly instead of to your school. 

Other notes about work-study include:

• Most schools require you to find and apply for an appropriate job.
• Funding is distributed on a first-come, first-served basis, so it’s wise to apply early.
• Being approved for work-study does not guarantee you’ll find a job.
• You’re responsible for using work-study funds to pay your education costs.

Part-time work 

Getting a part-time job is another alternative to student loans you might consider if you don’t qualify for federal work-study. You can earn money in your spare time to pay for tuition, fees, books, and other education expenses. 

If you’re considering part-time work, it’s helpful to weigh all the options. Those include:

• Traditional part-time jobs, such as working at a retail store or waiting tables
• Paid internships
• Paid apprenticeships

All three could put money in your pocket to pay for school, but an internship or apprenticeship might be more appealing if you’re hoping to flesh out your resume. A paid internship or apprenticeship can allow you to earn money for school while gaining valuable experience related to your field of study. 

Internships and apprenticeships can open doors after college if you can transition to a full-time role with the same organization. You may at least be able to get a glowing recommendation or referral from your internship or apprenticeship supervisor, which could make landing a job after college easier.

However, openings for internships or apprenticeships might be limited or competitive, depending on your field of study and where you attend school. You might consider applying for traditional part-time jobs as a backup option if you can’t secure a spot in an internship or apprenticeship program. 

Savings

Bootstrapping your education with personal savings is another student loan alternative you might pursue. Whether this is feasible depends on your financial resources. 

A 529 plan is a tax-advantaged way to save for college. Collectively, Americans have an estimated $464 billion saved in these accounts. Suppose your parents contributed to a 529 college savings plan on your behalf, for example. In that case, you could use those funds to pay for qualified education expenses, including:

• Tuition
• Fees
• Books
• Room and board, if you’re attending school at least half-time

If you don’t have a 529 plan to draw from, you could still rely on other savings to pay for school. However, that might mean delaying your education plans or supplementing savings with student loans if you don’t have sufficient cash to foot the entire bill. 

Income share agreements

Income share agreements are alternatives to student loans that allow you to get help paying for school in exchange for a percentage of your future earnings. You make an agreement with a lender, company, or school from which you receive money for college and pay it back later when you start your career. 

The upside of income share agreements is you’re not taking out a traditional loan, so you don’t need good credit or a cosigner for approval. No payments may be required until you reach a certain income level, and you might pay less to borrow than you would for federal or private student loans. 

However, you don’t have the advantage of income-driven repayment plans like with federal loans. You’re still creating debt to pay for school, and the amount you’ll repay is uncertain until you find a job. 

These programs don’t convey the same benefits and protections you’d get with federal student loans, which include:

• Income-driven repayment plans
• Loan forbearance
• Deferment programs

Federal loans also have low, fixed interest rates, which can make budgeting for payments more predictable. 

Employer sponsorships

Your employer (or your parent’s employer) might offer student loan alternatives, including scholarship programs, tuition assistance, and tuition reimbursement. Scholarships are attractive if you’re looking for free money for school, in addition to enjoying your other employee benefits or perks. 

Companies that offer scholarships to employees or their family members include the following:

• Chick-fil-A
• Amazon
• Taco Bell
• Wells Fargo (for dependent children of employees)
• Burger King

Other companies offer tuition assistance or reimbursement instead of scholarship funds. Both can help pay for school, but many tuition reimbursement programs require you to pay for schooling yourself, with your employer paying some of that money back to you. With tuition assistance, your employer pays the school.

UPS, for instance, offers tuition assistance of up to $5,250 per year to eligible employees. On the other hand, Home Depot reimburses employees up to $5,000 per year for education costs. If you’re interested in scholarships, tuition assistance, or tuition reimbursement, check with your human resources department to see what might be available. 

Payment plan

Your school might allow you to set up a payment plan to pay tuition, fees, and other costs in installments. Rutgers University, for instance, allows students to make interest-free monthly payments toward their tuition bill. 

Payment plans don’t require you to take out loan funds, and you don’t need a cosigner to get approved. You can schedule payments to be deducted from your bank account automatically and keep track of payments using an online dashboard. 

A payment plan could be an excellent alternative to student loans if you can keep up with your monthly payment obligations. If you get financial aid at any time while enrolled, you can adjust your payment plan to reflect that. 

Remember:

• You may pay a fee to enroll in your school’s plan.
• Paying by credit card may require an additional processing fee. 
• Charging payments to a credit card could leave you with more expensive debt to repay. 
• Not all schools offer the option to pay tuition in installments. 

Crowdfunding

Crowdfunding isn’t a traditional way to pay for college, but it might be an option if you’re looking for student loan alternatives. When you crowdfund education, you ask other people to contribute money toward your financial needs. 

There are a couple of ways to do that. 

Campaign site

First, you could set up a campaign on a site like GoFundMe to collect donations for college. You can set your fundraising goal and share part of your story to attract interest and donations.

Here are tips for a successful fundraiser:

• Set a realistic goal
• Use an attention-grabbing title to introduce people to your story
• Make your story unique and easy to read
• Include high-quality photos of yourself
• Update your fundraiser regularly
• Share it widely on social media
• Consider making yourself available to speak with for those who want to contribute but are wary of fraud

Setting up a fundraiser for education doesn’t guarantee you’ll get all the money you need to pay for school, but it could be a solid alternative to supplement other sources of college tuition. 

Peer-to-peer lending

Another option is to get a crowdfunded loan through a peer-to-peer (P2P) lending platform.

P2P platforms allow borrowers to set up a campaign and get funding from multiple investors. In exchange, you repay the loan with interest over a set repayment term. However, the rates you pay might be much higher than you could get with student loans or traditional personal loans, depending on your credit rating. 

Matched-savings programs 

Matched-savings programs allow you to contribute money—which someone else matches—to a special account. Government entities or nonprofit organizations may run these programs. 

Examples of matched savings programs for education include:

• Earn to Learn, which provides $4,000 toward college costs with a $500 savings commitment.
• CHA Workforce Matched College Savings Program for at-risk youth.
• Operation HOPE, which partners with parents of young children to help them start saving for college. 

Funding may also be available at the state level through Individual Development Accounts (IDAs).

These accounts allow savers to deposit money and receive matching contributions, which they can use for various purposes, including education in some states. 

Arizona’s Earn to Learn Scholarship, for instance, uses IDA funds to cover college costs for eligible students. Prosperity Now offers a locator tool to help you find IDA programs near you.

Is one of these options better than the others? 

When searching for student loan alternatives, it’s often better to focus on options you don’t need to repay first. 

So if you’re trying to prioritize how to pay for school using this guide, you might research the possibilities in this order:

• Scholarships and grants
• Work-study, part-time jobs, and savings, including matched savings
• Employer scholarships and tuition assistance
• Crowdfunding (excluding P2P loans)
• Payment plans
• Tuition reimbursement
• Income sharing
• P2P loans

The best alternatives to student loans are ones you don’t have to pay back, but it’s worth considering other options—such as employer education benefits, working while in school, or payment plans—if you don’t qualify for scholarships and grants that cover all your education costs. 

When considering any option to pay for school, ask yourself:

• Will I need to repay this, and if so, how much will it cost me?
• Are there eligibility requirements I need to meet?
• Is there a lot of competition for this type of funding? 
• How much money is available to pay for school? 
• Will this require any service or work commitments from me later? 

These questions can help you decide which student loan alternatives best fit your needs and financial situation. 

What can you do if these options don’t cover all your costs?

If you’ve exhausted all other avenues and still need money to pay for school, it might be time to consider student loans. 

Federal and private loans can cover education costs, though you will need to pay back what you borrow. 

Which is better: federal or private student loans? Here’s a quick comparison of the two.

Federal student loans

Private student loans

Low, fixed interest rates. Good credit is not required to apply for most federal student loans. Cosigners are not required for approval. Loan limits are capped, and the amount you can borrow depends on your year of school. Loan fees may apply. Borrowers can take advantage of income-driven repayment, forbearance, and deferment periods.  Loan forgiveness may be an option for eligible students.

Rates may be fixed or variable.  Most private student loans consider credit scores for approval. You may need a cosigner to get approved.  Loan amounts may exceed what you can borrow with federal loans.  Loan fees may apply. Private loans are ineligible for federal protections, such as income-driven repayment, forbearance, and deferment. Borrowers are not eligible for federal loan forgiveness programs.

It often makes sense to apply for federal loans first since they offer low, fixed rates. You can do that by completing the FAFSA. From there, you can research your options for private student loans to fill in the gaps and cover the rest of your education costs.