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Many people want to attend college, but funding a post-secondary education can be difficult. In fact, according to CNBC, 70 percent of college graduates have loans, and many students graduate with almost $30,000 in student debt. Student loans are available from banks and credit unions. Federal student loans are from the U.S. Department of Education and have fixed interest rates and flexible repayment options, but still require interest be repaid on the loan 6mount.
When graduates have student loan debt, whether federal or private, it can impact their ability to make big purchases such as buying a home or even saving for retirement. If they aren’t able to make their payments on time during their repayment terms, it can affect their credit scores and damage their credit history. The decision to take on student loan debt, whether it’s a federal loan or a private loan, shouldn’t be taken lightly.
Even with financial aid, it can be difficult to make educational ends meet. If you can’t close the college funding gap with student loan options alone, or if you hope to reduce the amount you borrow while you’re in school, student loan alternatives can help. Here are six ways to pay for school in addition to federal and private student loans.
6 Student Loan Alternatives
1. Apply for (More) Scholarships
There are thousands of scholarships available for college students—and this is money you don’t have to pay back. With a scholarship, you don’t have to worry about having a monthly payment when you’re no longer in school. Scholarships come from a variety of sources, including:
- Educational institutions
- Nonprofit foundations
- Nonprofit organizations
If you want access to need-based scholarships from your school or state, fill out the Free Application for Federal Student Aid (FAFSA). Many schools use the information on the FAFSA to determine whether your family’s income level makes you eligible for additional scholarships.
You can also apply for merit-based scholarships, which look at what you’ve accomplished with your academics, extracurricular activities, and other criteria that don’t rely on income and need.
Additionally, there are scholarships based on specific characteristics and traits, such as religion, gender identity, and even hair color. Look for niche scholarships. They might have smaller awards, but they also have less competition and could be easier to get.
Check with your college to find out if there are departmental or major honor society scholarships available. Some schools also offer automatic tuition breaks for maintaining a certain level of academic performance after your freshman year. Look into these programs for best results, and remember that you can keep applying for scholarships during your sophomore, junior, and even senior years when you’re an undergraduate student.
The more scholarship funding received, the less student borrowers will need to take out in loans and ultimately have to worry about repaying.
2. Work-Study Programs
Federal Work-Study is a program that allows you to work certain jobs on campus to earn money. You are essentially guaranteed a job, and earning money on this basis can help you offset some of the costs of attending school. In order to apply for Federal Work-Study, you need to fill out the FAFSA and check the appropriate box.
Realize that there are restrictions to Federal Work-Study. You might be limited to the number of hours you can work, and you might only be cleared to receive a set amount of money. Understand the restrictions of these programs before you get started.
Schools might have their own work-study programs as well. In some cases, working for the university can result in reduced tuition. For example, you might work part-time or full-time and receive a percentage-based discount on your tuition. These arrangements reduce how much you have to borrow in student loans, as well as allow you to earn a little extra money for living expenses.
3. Apply for Grants
Like scholarships, grants don’t have to be repaid. Grants are most often given by federal government organizations and state governments, universities, and nonprofit foundations. In many cases, grants are based on financial need, so you need to demonstrate income restrictions that make paying for school a hardship. Federal grants are somewhat similar to federal student loans, because of the need-based element, but of course, there’s no concern about repayment options since this is “free money.”
When you fill out the FAFSA, any grants you qualify for will be included with your financial aid package from the school. If you still think you need more grants, check to see if you meet the criteria. There are some grants available for children of soldiers killed in action, as well as grants for those who intend to become teachers.
You can also apply to different educational foundations for grants to help you attend school based on what you want to do when you finish or based on the need you have. Check the criteria for these types of grants and make sure you meet it before moving forward with your application.
4. Work Part-Time or Saving
Another way to reduce your need for student loans or to close a college funding gap is to work part-time. If you can make more finding your own job, rather than working on a work-study basis, you might be able to reduce your future obligations.
You can look for work on-campus or off-campus. As you look for work, carefully consider what you need to do in order to be successful at it. In some cases, your school workload might not allow you to work as many hours as you would like. Time management is essential if you work part-time while attending school.
Making sure you have a good summer job can also help you reduce the need to borrow or close a college funding gap. Work long hours over the summer and save up so you can put more money toward tuition and other expenses when the next school year rolls around.
Another option is to take a year off from school and work in order to save up money. If you have an opportunity to get a good job for a year or two, and you know you can save up, this can be financially beneficial.
However, it’s important to carefully consider lifetime earnings and return to school if getting your degree will increase your earning power in the long run. It can be hard to go back to school if you get used to working, so be careful about this option.
Finally, if you haven’t started college yet, consider working while in high school, or delaying your college enrollment by a year or two in order to save up money. You can use a 529 plan or some other account to build up money to pay for school and reduce your need for student loans.
5. Employer Sponsorships
You can increase the effectiveness of your job by looking for an employer who’s willing to help pay your tuition costs and meet the obligations of your loan terms. Some employers offer tuition reimbursement, paying for part of your higher education in return for a set amount of time at their company.
Additionally, some employers are willing to pay outright for you to return to school to get an advanced degree. You might have to commit to remaining at the company for a certain number of years, however, or repay part of the amount paid on your behalf.
These employer sponsorships can be a big help to your bottom line and to your career, so consider working for these companies.
6. Income-Share Agreements
An income-share agreement, or ISA for short, is a contract with a company that allows you to receive the money you need in return for a percentage of your future income.
Unlike student loans, repayment for this contract doesn’t begin until you leave school and have a job that meets a specific income threshold. Once you’ve met the pre-determined income threshold, a percentage of your gross income will be repaid to the company.
These contracts typically come with a cap on the amount you can pay, as well as a fixed repayment term.
Paying for school can be overwhelming. However, there are plenty of options beyond federal and private student loan companies. In fact, it often makes sense to start out by looking for alternative sources of money before you turn to student loans. Consider scholarships and grants before turning to student aid in the form of loans.
If you have the time and ability, working at least part-time can also enable you to save up. Chances are, you’ll need student loans to help pay for at least part of your college costs. However, there are options to reduce the amount you borrow so you can graduate on firmer financial footing.
Author: Miranda Marquit