I’m not a financial planner, nor have I ever played one on TV; however, I have been a college student who worked all the way through graduate school. I also finished in 1986 with less than $6,000 in debt, or just over $11,000 in 2010 dollars. This is still less than one-half of the average student debt today.
Although I am in no way unsympathetic to the issue of student debt, and like many, I am upset by some of its causes, I do want to share with those planning for college that there are certainly ways to prevent, reduce, and pay off student debt quickly. This humanities major did it; others have been able to do so. You, too, can avoid being oppressed with excessive education related debt.
Prevention
Ideally, the best way to wipe out student debt is not to incur it in the first place. Easier said than done, I know. However, there are some steps you can take to at least reduce expenses and increase income while going to school so that you don’t end up with excessive debt. Here are some suggestions:
• Consider all of the options you have in high school to begin college early at a free or reduced cost (see “5 Ways to Jumpstart Your College Career and Save Money!” 16 February, 2012).
• Prepare yourself academically so you can avoid remedial classes. Most of us had high school teachers repeatedly warn us: “You’ll need to know this for college.” Guess what? You do. According to ACT, 75% of students enter college unprepared in math, reading, writing, and science; therefore, they must take at least one remedial class that prepares them for academic work at the postsecondary level (17 August, 2011). This does increase college costs, however.
• Save. This applies not only to parents, but also to future college students. By working part-time as a high school student, I managed to save enough to pay for my first two years at a local community college.
• Assess what you can realistically afford rather than blindly pursuing what you would like to have. Postsecondary institutions do not typically perform credit checks, but you certainly can do this for yourself (see “An Obvious, Easy Way to Reduce Student Debt,” 23 February, 2012).
• Bargain shop for special deals like reduced summer and early enrollment savings (see “Attention Tuition Bargain Shoppers!” 8 November, 2011).
• Consider working full-time and going to school part-time. Traditionally, students do this the other way around, but an increasing number of working adults are finding benefits to focusing on a job first. Then they add to their credentials by taking classes part-time. By utilizing summer terms, this doesn’t extend the time to complete a degree too much, and you may receive job benefits like tuition reimbursement and/or raises as you improve your credentials.
• Discipline yourself by reducing wants to focus on needs. You do need food, clothing, shelter, and education. Most, if not all, other items fall into the “want” category. I wanted a car, for example, but I never owned one as an undergraduate. I lived near enough to campus to walk or take the bus. I never went to Cancun or Panama over spring break.
• Avoid changing majors and/or colleges by exploring options before making a commitment to a program. If you do need to make a change, carefully consider the possible financial effects.
• Improve your financial literacy because a a lack of understanding is a cause of student debt.
Although some of these tips take time and effort, in the long run they will save both time and expense.
Reduction
Hindsight is 20/20, and for some of us, options like dual enrollment weren’t available when we were in high school. Also, life happens: There may be a myriad of other reasons that a large amount of college debt accumulated. What do you do if you currently have a lot of student debt?
There is hope. Recently, Josh Mitchell of the Wall Street Journal shared the story of Harvard Business School graduate Joe Mihalic who paid off $90,000 worth of student loan debt in seven months (17 May, 2012). How did he do it?
• Get a second job devoted to paying off your debt even if you are lucky enough to land a six-figure position right after graduation.
• Do not dine out, even at fast food places.
• Sell all of your unnecessary possessions.
• Choose free and active dates (e.g., hiking over a movie).
• Walk or use public transportation whenever possible.
• Rent out your living space if you go away for business or add roommates if possible.
• Consider using and replacing retirement assets like your 401K. [Note: this is very controversial, so I would suggest proceeding carefully to make sure interest saved on prepayment of student loan(s) is at least equal to any penalties or missed matching funds from an employer that may be missed.] (Mitchell, J., 17 May, 2012).
Mihalic estimates that by paying off his debt in seven months instead of 15 years based on the installment plan, he saved about $40,000 (qtd. in Mitchell, J., 17 May, 2012). He also wants to share more ideas with others via his website No More Harvard Debt .
Keep in mind that there is a lot of general advice about reducing debt that can apply to student loan debt. For example, in spite of the name, the Motley Fool staff have some helpful resources for those interested in debt reduction.
Notice that some of the techniques for reducing existing student loan debt are the same as the ones for avoiding it in the first place.
Satisfaction
The bottom line with student debt isn’t as much about large political issues like gainful employment as it is about taking control of your life, future, and finances. Improve your own financial literacy as a (future) student with resources like Doug Shantz’s “Top Ten Student Financial Literacy Resources on the Web” (28 April, 2012).
Feel free to share any additional tips, tricks, or resources in the “Comments” area below. Let’s wipe out student debt!
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