Student loan debt is quickly reaching critical mass.
Currently, there are around 44 million borrowers owing $1.5 trillion in student loan debt in the U.S. Of those, 65% are under the age of 39, and borrowers graduating in 2017 had an average of $28,650 in student loans.
While there are many routes one can take after high school (yes, there are college alternatives), the university route continues to be touted as the gold standard and is typically the preferred route for new high school grads.
It’s also the most expensive.
Unfortunately, students typically receive far more guidance on getting into college than paying for it.
Like any kind of debt, the best way to save on student loans is to minimize how much you take out in the first place, and to pay off those you do take out as soon as possible. It’s also important to find as many ways to save money on your college education as you can.
Here are 15 ways to save money on student loans before, during, and after college.
Ways To Save Money on Student Loans Before College
Many people don’t begin thinking about how they’ll handle student loans until they’re getting ready to attend college, but you can put quite a dent in reducing the amount of loans you’ll need if you plan well before heading off to school.
The following are tips for saving money on student loans before you even step foot on a college campus.
Related: 15 Best Online Jobs for Students
Work Part-time
Many high school students hold part-time jobs.
Most high school students also see the money they make from their part-time jobs as spending money rather than a way to save on student loans.
While it’s okay to spend a portion of your earnings on entertainment and other expenses, one way to save money on student loans before you get to college is to work part-time and save your money.
Of course, how much you’ll save on student loans will depend on how much you work, make, and how much you’re able to save.
Even a little bit saved will go a long way. While it may not seem like a lot, even $1,000 made is $1,000 less you’ll need to take out in loans.
To make even more of an impact on your savings, we recommend opening a high yield savings account to stash your money while you wait for college. These savings accounts offer much higher returns than a traditional bank or credit union, and will help you save even more on your student loans.
If you’re 18 you can typically open an account in your own name, but if you’re under 18 you’ll need your parent/guardian to jointly open it with you.
Some high yield savings accounts to check out are Ally Bank, Marcus by Goldman Sachs, and Citi Accelerated Savings, among others.
Attend Community College During the Summer
One rarely utilized way to save money on student loans before college is to attend community college during your summer breaks.
Many don’t realize it, but you can attend community college as a high school student and the classes are not as difficult as you may think.
We wouldn’t necessarily recommend doing this as a freshman, but once you’ve gotten a few years of high school under your belt you should have the foundational skills to be successful in lower level community college classes.
The advantage in doing this is twofold. One, you’ll be able to complete some core courses before heading off to college (which will mean you’ll be ahead), and two, you’ll be paying for those courses at community college rates (around $135 per credit) as opposed to university rates (between $325 and $1,039 per credit).
You’ll be saving money on the cost of some of your courses, which in turn will reduce the amount of student loans you’ll need to take out, all while getting ahead on your coursework.
We realize that some may not be able to afford to pay for community college classes out of pocket, but if you have family that is willing to contribute or savings then we’d recommend getting this head start on your coursework for a fraction of the price.
Take College Credit Courses
Similar to the point above, most high schools offer college credit classes in partnership with a local community college.
Unlike actually attending community college, these classes are given by your regular high school teachers and would cover the same subjects whether you earned college credit or not.
In most cases, you pay a small fee to the community college offering the credit in order to enroll, take the class as you normally would, and earn 3 or 4 credits in the process.
Typically, college credit courses are only offered to students in upper level classes or advanced classes, but for those looking to go onto university they offer a budget-friendly way to earn some core credits.
As mentioned above, the per credit cost of a 4-year university is between $325 and $1,039.
Compare that to the few hundred dollars in fees you’ll spend to earn credit for your college credit course and it’s easy to see why college credit courses are one way to save big money on your student loans.
Take Advanced Placement Courses
Yet another way to earn college credits in high school is to take AP courses and corresponding AP tests (although you can take the test without taking the course), which are accepted by most universities.
AP tests cost $94 each, and the 38 tests range in topic from language arts to foreign languages to history. You can also earn between 3 and 8 credits depending on the exam.
Although $94 a test may seem like a lot, even passing one exam could save you anywhere from $881 to over $3,000 in tuition based on the range of average cost per credit of a 4-year university.
Pass multiple tests and you could be saving yourself $5,000 to $10,000 in tuition costs!
Money Saved is Money Earned, and saving yourself thousands in tuition translates into thousands saved on your student loans before you ever step foot on a college campus.
Apply for Scholarships
Last but not least, another way to save money on student loans is to apply for scholarships.
A scholarship is an award in the form of financial aid, and unlike loans, you don’t have to pay them back.
There are thousands of scholarships available, and if you’re a pretty good student you have a good chance of being awarded at least a few.
Many high schools offer a set of scholarships you can apply for, as do states, organizations, and universities.
Think about your situation and the organizations you are associated with. Check out your high school, city, state, and other organizations to see what they have available and what you might qualify for. Similarly, if you have certain ancestry or your parents belong to certain groups you may qualify for scholarships for those groups.
Also, be sure to look for scholarships offered by the university you hope to attend, both before and during your college career.
Your high school counselor, as well as searching online, can help you find what’s out there.
While the criteria for qualifying for scholarships will be different depending on the organization awarding it, chances are you’ll have a good shot at winning a few and reducing the amount of student loans you’ll need to take out.
Ways To Save Money on Student Loans During College
Similar to the years before heading off to college, many students don’t dedicate enough time to reducing their need for student loans while in school.
Here are some ways to save money on student loans while you’re attending college.
Attend Community College for Core Courses
Attending community college for your core courses and then transferring to a university is becoming more and more common due to the rising costs of school.
It’s also a pretty smart move.
As mentioned above, the average per credit cost of community college is $135 compared to between $325 and $1,039 per credit at a university.
This means you’ll save anywhere from $570 to $2,712 per class by attending a local community college.
Extrapolate that out over a year’s worth of classes (45 credits) and you’ll save between $8,550 and $40,680 per year!
While it may not be the college life you hoped for, holding off on university to attend community college for your core coursework will save you thousands in student loans that you won’t have to take out to get the same level of education.
Patience and smart planning will allow you to transfer to a university once your core coursework is done, allowing you to still get that college experience, a first-rate education, and save you a boatload in student loans at the same time.
Attend College in Your State
Yet another way to save money on student loans is to attend college in your state.
While many students dream of attending school in a far-off land, there are some big financial implications for doing so.
According to College Board, the average out-of-state costs for a 4-year public university was $23,890 compared to just $9,410 for an in-state 4-year public university.
That’s a difference of $14,480 per year just in tuition ($57,920 over 4 years)!
Attending school in your home state may not be the most exciting option, but unless you’re getting significant financial assistance from a university out of state it’s clearly the best financial option.
Live at Home
Along the same lines as attending college in your state, you can save even more on student loans by taking it a step further and living at home.
Again, this isn’t the most glamorous option, but living at home while attending college will not only save you in tuition, it’ll save you in housing and other living costs.
According to College Board, typical living costs for a full-time student during the 2016-2017 school year ranged from $11,810 on a low budget to $17,620 on a moderate budget. Furthermore, they found that more than 50 percent of a college student’s budget is spent on housing.
Tuition makes up just a portion of your college expenses, so finding ways to reduce your non-tuition expenses will help to reduce the amount of student loans you’ll need.
Work Part-time/During Breaks
This point was brought up as a way to save money on student loans before attending school but it’s just as applicable while attending college.
College is a busy time between classes, studying, and other activities. However, fitting a part-time job into your schedule throughout your college career will pay serious dividends by saving you money on student loans.
And working part-time doesn’t have to be inconvenient. Most students can easily find a job working on campus, and many might even be able to find work in their department of study or in an area related to their desired career.
Thus, working part-time while attending college will not only save you money on student loans, it’ll give you much needed work experience that will help you prepare for life after college.
Only Use Student Loans for Necessary College Expenses
This tip seems silly to mention, but it’s surprising how many students spend student loan money on non-educational expenses.
And unfortunately, this trend is increasing.
According to a survey done by Student Loan Hero, students jin 2017 are 2x more likely to spend their student loans on non-educational expenses as their class of 2016 counterparts.
Furthermore, the survey found that the money was being spent primarily on bills such as rent and cell phones, but also clothing, restaurants and eating out, vacations, and drugs and alcohol.
While using student loans for rent and similar expenses isn’t terrible (you need food and a place to stay after all), using your student loans to eat out, drink, go shopping, or take a trip is not only irresponsible, but will hurt you in the long run.
Student loans are loans and they must be paid back with interest. It’s important to only take out what you need and to resist the temptation to spend them on desires rather than needs.
Student loans are not free money.
Put Extra Back on the Loan
Last but not least, our final tip for saving money on student loans while in college is to put any extra money you receive back on the loan.
Believe it or not, there are times where the amount of money dispersed is more than your tuition and other college expenses for the term. Furthermore, 30% of students with loans borrow the maximum amount possible for their situation.
As a result, you may have money left over after paying for tuition, books, supplies, and perhaps even living expenses.
In these cases, the best thing to do is to either return it (if it’s within about a month of disbursement) or to put that money back on the loan early.
Putting extra money back on the loan reducing the amount of student loans you owe, saves you in interest (a smaller balance accruing interest), and ensures that you won’t be tempted to spend that extra money on non-essential things.
Ways To Save Money on Student Loans After College
Now let’s dive into the time when most students begin thinking about their student loans; after graduating from college.
Although you’ve already taken out student loans at this point, there are still ways to save money on your student loans.
Here are ways to save money on student loans after college.
Live at Home
In the wake of rising student debt and lower salaries following college, many new graduates are finding themselves moving back home after college.
While this isn’t the most desired situation for most grads, it is the most desired situation for your finances.
If you’re willing and able, living at home for a few years after college will give you a serious leg up on your student loans by allowing you to focus more of your money on your debt.
Many new grads struggle to make enough money to cover their living expenses and make any serious headway on their debt. At best, you might be able to make minimum student loan payments every month. At worst, you defer your loans and continue to accrue interest for several years.
On the other hand, staying at home significantly reduces your living expenses and that money can then be reallocated toward paying off your student loans. You’ll not only save yourself in interest, but you’ll be able to pay off your student loans quicker.
Begin Paying Immediately
Whether you live at home or not following college, you should try to set yourself up in a situation where you can begin paying your student loans immediately.
Many students struggle to cover their expenses immediately following graduation and thus place their loans in deferment. The problem with deferment is that in most cases the loan will still be accruing interest, which means that the amount you owe will continue to grow.
In fact, many student loans begin accruing interest as soon as they’re dispersed, meaning they’ve been accruing interest WHILE you were in school.
Long story short, you should begin paying your student loans as soon as possible to avoid accruing as much interest as you can.
Pay More Than the Minimum Payment
While beginning to pay your student loans immediately upon graduating will save you some interest and time, you’ll get the biggest savings if you’re able to pay more than the minimum payment.
Take a look at these example student loan payoff schedules from Navient.
| 4.45% | 6.00% | 7.00% | |||||||
| Balance at Repayment | Direct Subsidized Loans and Direct Unsubsidized Loans for Undergraduate Students | Direct Unsubsidized Loans for Graduate and Professional Students | Direct PLUS Loans for Parents of Undergraduate Students and Direct PLUS Loans for Graduate/Professional Students | ||||||
| Payment | Months | Interest | Payment | Months | Interest | Payment | Months | Interest | |
| $1,000 | $50 | 21 | $41 | $50 | 21 | $56 | $50 | 21 | $66 |
| $10,000 | $100 | 120 | $2,408 | $108 | 120 | $3,322 | $113 | 120 | $3,933 |
| $20,000 | $200 | 120 | $4,815 | $215 | 120 | $6,645 | $225 | 120 | $7,866 |
| $26,830 | $269 | 120 | $6,460 | $289 | 120 | $8,914 | $302 | 120 | $10,552 |
| $30,000 | $300 | 120 | $7,223 | $323 | 120 | $9,967 | $338 | 120 | $11,799 |
| $40,000 | $400 | 120 | $9,631 | $430 | 120 | $13,290 | $450 | 120 | $15,732 |
| $50,000 | $501 | 120 | $12,039 | $538 | 120 | $16,612 | $563 | 120 | $19,665 |
As you can see, the higher the loan balance the higher the minimum payments for a 10-year payoff schedule. You’ll also notice that the higher the balance the higher the interest paid (also higher or lower depending on the interest rate).
This is for a 10-year payoff schedule, just think of the interest you’d pay if you’re payoff schedule was for a longer timeline and your minimum payment was less.
Now imagine if you paid an extra $100 a month toward a Direct Subsidized Loan at 4.45% interest. In this scenario you’d save around $3,000 in interest over the life of the loan and pay it off almost 2 years earlier.
Up the extra monthly payment to $200 and you’ll save around $4,500 in interest and take around 3.3 years off the life of the loan.
Of course it may be difficult to consistently tack on an extra couple hundred dollars to your loan payment each month, but any extra you can dedicate toward your student loans, even if it’s an extra chunk here and there, will save you in interest over the life of the loan.
Get a Job That Offers Help With Loans/Continuing Education
Last but certainly not least, another way to save money on student loans is to get a job that offers student loan or continuing education assistance.
If you work in certain career fields or organizations for a certain amount of time you may be eligible for student loan forgiveness.
Fields that may be eligible include teachers, nurses, and public servants (check out this article by Student Loan Hero for a list of careers that may be eligible for loan forgiveness).
Make sure you fully understand the criteria required to be eligible for student loan forgiveness before embarking on your career so you don’t delay your eligibility.
Aside from jobs that may make you eligible for student loan forgiveness, many jobs offer to help you pay your student loans as part of the benefits package.
Although this perk isn’t commonplace yet, there is a growing list of companies willing to offer student loan assistance.
Finally, many jobs offer continuing education assistance as part of their benefits package. While continuing education assistance won’t help you pay off your current loans, it can make going back to school more affordable or help you gain the credits needed to move up the pay scale.
Whether you received forgiveness, loan payoffs, or continuing education assistance, landing a job that offers student loan assistance is a great way to save money on your student loans.
Related: The Best Online Jobs for Teens in 2023
Moral of the Story
Student loans are fast becoming an epidemic and one that is setting young people far behind previous generations.
However, with a little planning and effort, it’s pretty easy to significantly reduce the number of student loans you’ll need to get the education you want.
Starting in high school, you can work part-time, attend community college in the summer, take college credit and AP courses in high school, and apply for scholarships.
Once in college, you can attend community college for core courses, attend a college in your state, live at home, work part-time, and put any extra money back on loan rather than spending it. You would also be wise to ensure you only use student loans for college expenses.
Finally, once you graduate, you can live at home, begin paying your loans immediately, make more than the minimum payment on loans, and get a job that offers student loan assistance.
Taken together, these 15 ways to save money on student loans can save you thousands of dollars on your college education.
