If there’s one thing we can all agree on, it’s that college tuition costs are getting out of hand. Between the years 2000 and 2012, the cost of the average four-year degree shot up by 44 percent. Budget-conscious students can no longer escape the rising cost of tuition by attending public universities — these schools have hiked their tuition rates an astounding 71 percent since the year 2000. These days, 62 percent of Americans say that even a public university is beyond their means financially.
Yet there’s no doubt that a college degree still translates to greater earning power over your lifetime. Someone with a bachelor’s degree earns an average of $17,500 more each year than that person’s peers who have only high school diplomas. That’s a lot of money — and it makes earning a college degree imperative. With college tuition on the rise, is it even possible to pay for college?
Look for Funding Everywhere
Most prospective college students will get some form of aid when they file their FAFSA, and many will also receive help from their school in the form of school-specific grants and scholarships. That’s a given. However, there are plenty of scholarships, grants and work-study opportunities out there for the enterprising student who digs deep enough.
Sites like FinAid.org exist to help students search for outside scholarships and grants, of which there are thousands. Many of these opportunities are offered specifically to minorities, women, first-generation college students, nontraditional students or others in unique situations. There may be scholarships available to people who aspire to join a particular field or to people from a certain state. Local groups and community centers also sometimes offer scholarships.
If You Must Take Loans, Take Federal Loans
Many prospective college students make the mistake of funding their educations with private bank loans instead of taking federal Stafford, grad PLUS and consolidation loans. If you must fund your education with loans, you should take federal loans if you can get them.
Federal loans offer a number of advantages over private loans. For one, the interest rates on federal student loans are much lower than those offered on private student loans, which can charge as much as 18 percent interest. The government is also much more flexible when it comes to repayment terms on student loans, which will come in handy if you struggle financially at any point between the time you graduate and the time your loan is paid off. When you take federal loans, your payments will never be more than 15 percent of your income, with allowances for the size of your family. You’ll be forgiven any remaining balance after 25 years. If you enter the civil service, your outstanding loan debt will be forgiven after 10 years. If you participate in certain community service organizations, like AmeriCorps, your loans will be forgiven altogether.
Consider an Online Program
Many schools, like American University in Washington, DC, offer online programs that are just as academically rigorous as traditional programs, but come with a lower price tag. Schools can offer the same education to online students that they offer to their traditional students for a lower cost because online students don’t need to be housed, fed and entertained. Aside from the discounted tuition, you’ll also save money on travel costs, especially if you want to attend a school far away.
Plan to Start Repayment as Soon as You Graduate
College tuition costs keep going up, but that doesn’t mean you can’t afford college. In fact, when you consider the increased earning power a college degree can give you, you can’t afford not to go to college. Just be smart about financing your education, and you’ll find that paying for college is an investment with a big return.The best way to pay back student loans is to have your repayment budget ready before you graduate. You can take any grace period you may have to work on building up an emergency fund for yourself, and you should make paying your bills and setting aside money for retirement a priority, too. After you’ve handled those things, you need to plan to set aside 12 to 20 percent of each paycheck to pay off student loan debt. If you can pay more than your minimum payment each month, that’s ideal — paying your loan off early will save you thousands in interest. For example, someone who borrows $27,400 and pays it back over 20 years at a 6.8 percent rate of interest will pay almost $23,000 in interest alone.
College tuition costs keep going up, but that doesn’t mean you can’t afford college. In fact, when you consider the increased earning power a college degree can give you, you can’t afford not to go to college. Just be smart about financing your education, and you’ll find that paying for college is an investment with a big return.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.