How to Borrow Less to Pay for College

When the cost of attending college — tuition, fees, room and board, transportation, books and personal expenses — outweighs the available funds from savings, earnings, scholarships and other sources, many families begin to consider student loans. Before you and your student decide to take on debt, first consider ways to reduce the amount you feel must be borrowed.

Why It Matters

Loans need to be repaid, with interest.
You’ve likely heard stories from personal acquaintances or news outlets about how student loan debt can take over the lives of young adults. As interest builds on student loans, they are harder to repay, especially on a young professional’s starting salary.
Loans don’t go away if college graduation or the ideal job don’t materialize.
After student loans are paid to a college on a student’s behalf, the borrower becomes responsible for repaying the debt, even if the student doesn’t graduate, changes career goals or isn’t able to find a job after college.

What Your Student Can Do Now

Earn and save money.
Your student may be able to find a first job or pick up additional hours to save for college expenses. This is a delicate balancing act between committing time to academics and involvement that can also affect college acceptances and scholarship awards. However, even small earnings can offset later expenses, reducing the need to borrow for those.
Apply college credits wisely.
Your student may have earned college credit for free or at a greatly reduced cost before graduating high school. Some credits may still be earned before graduation in a few months. Your student should understand how these credits will be treated by the colleges under consideration. Will some or all of them be counted toward a specific major or required general education classes? If so, your student may be able to obtain a degree in less time, reducing the overall cost and need to borrow.
Consider costs when deciding on a path.
One of the most effective ways to reduce the need to borrow is to choose an educational or training path that is less expensive. If a four-year degree isn’t needed for your student’s career goal, it may not make sense to borrow money to obtain one. Many students save money by attending a community college, possibly commuting from home, for one or more academic terms. Finally, many careers do not require a degree from specific colleges; is a less-expensive option an equally advantageous path?
Apply for scholarships.
As highlighted in the previous article this month, scholarships are free money that can be used for education and training expenses. Each scholarship dollar earned is one less dollar that has to be paid back with interest later.

What Your Student Can Do Later

Maximize enrollment.
The institution your student eventually enrolls in may charge a set rate of tuition for all full-time students. If this is the case, your student should be prepared to understand how many credit hours can be managed effectively to take as many as possible without extra costs. In addition, your student should work closely with an academic adviser to stay on track to graduate in as little time as possible to reduce the total cost of obtaining a degree.
Live like a college student.
College students can often spend less by avoiding impulse buys, expensive hobbies and exotic trips. By choosing to make coffee instead of buying a gourmet to-go beverage every day, for example, students can save hundreds of dollars a year. The same goes for eating out instead of using an already-purchased meal plan, choosing living options with more — but not really necessary — amenities, and buying brand-new books for every class.
Continue to earn money.
Working full-time or more over breaks and part-time during academic terms can have multiple benefits. The income can be used for future expenses, reducing the need to borrow later. In addition, it’s harder to spend money while working, allowing your student to avoid unnecessary spending. Finally, research indicates that working a few hours a week during school helps students perform better academically.

What You Can Do

Create budgeting exercises.
Does your student buy groceries for the family or get involved in discussions about large purchases? If not, now is a good time to share how you make decisions about spending every day. Even posing a question about whether to spend more for a brand-name clothing item can start a discussion about the trade-offs of common financial decisions. This type of critical thinking can help your student when making daily purchases and considering the large expense of education after high school.
Provide rational guidance.
Remove emotion from discussions of college decisions. While a certain institution might be the most appealing for a lot of reasons, the cost needs to be sustainable for the entire time it takes to earn a degree.
Explore loan options with your student.
Spend some time researching loan options, especially if you know some borrowing will be necessary. Many families think students will be able to get student loans for the full cost of an education. Federal student loans are available, but there are annual limits on the amount a student can take out. Private student loans may require you or another credit-worthy adult to cosign, assuming equal responsibility for the debt. Parent loans are in your name and are your responsibility. Investigate interest rates, origination fees and repayment terms and help your student put these in perspective based on a realistic starting salary after earning a degree. Watch for more information on this topic next month.

Registration is still open through March 29 for a scholarship for Iowa high school students, not just seniors. The scholarship awards $1,000 College Savings Iowa deposits, which can be used when your student is ready to pay educational expenses. Register at www.IowaStudentLoan.org/ScholarshipSignUp.

Next Steps

Be sure to complete the survey questions at the end of this article to be entered into the 529 deposit giveaway!

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