6 Tips On Avoiding Student Loan Debt

While college is famous for being a time and place for meeting people, having fun, and enjoying new experiences, it has developed a new reputation that has everyone talking. The topic of student loan debt has blossomed into a full-on heated issue; in fact, it has even been mentioned extensively during the 2015-2016 Presidential race.

At any rate, new graduates and current college students can probably agree that sharing $1.3 trillion in debt is absolutely no fun at all. With that being said, students are not powerless against the price tag over their heads. There are multiple ways to limit the amount of debt on your shoulders during and after college.

Here are some of the more popular options that anyone with student loan debt can resort to.

Pay Interest Off During School

One of the chief culprits behind mounting student loan debt is interest. Since student loan interest capitalizes every month, these loans accumulate interest progressively throughout the year. It can be compared to a snowball growing larger while rolling down the hill. In other words, interest can break the back of anyone with student loans.

The best way to stop the rolling snowball is to make interest payments while in school or before principal payments start. By paying interest monthly, you can limit the size of the overall principal balance which eliminates the snowball effect of capitalizing interest. Many people may not want to start making payments early, but they will end up spending less on interest over the life of the loan.

Apply For Scholarships

If you are dreading student loans, then you may want to try and avoid them entirely. This can be accomplished by relying on scholarships. Otherwise known as “free money”, scholarships are one of the most underused educational financial aid resources. If played right, students can cover 100% of their tuition costs; in some cases, funding towards living expenses can be secured.

How do you find these opportunities? Check the internet. There are thousands of scholarships found online which means there are millions of dollars in free financial aid ready for the taking. If you think your chances of success are low, then think again. Scholarships are awarded for countless reasons; for instance, you can get a scholarship for simply having red hair or wearing glasses. The best idea is to look for niche scholarships (or weird scholarships) because your chances increase with smaller fields of competition. One more note, do not stop applying throughout college because anyone taking classes can qualify for some sort of scholarship.


Student loan refinancing has grown into a popular option for student loan debtors. It is offered by multiple private loan and some mortgage companies. The basics are simple. If you have multiple student loans and interest rates, then you can refinance into a lump sum with a new underwritten credit score. Over the life of a loan, this action can save up to thousands in interest payments.

A common question involves knowing whether to refinance or not. Refinancing calculators are used to quickly assess how much can be saved by refinancing student loans. An important note to cover is the underwriting process. Student loan refinancing is generally offered to those with solid credit history, so in order to get the best rate and savings, a co-signer might be necessary.

Overpay the Minimum Monthly Payment

This option bears the same rewards as making early interest payments, but there are two benefits to paying more than the minimum each month. First, you are lowering the principal balance at a faster rate which puts you on the fast track to no more student loans. Second, you are actually fighting interest capitalization by cutting away at the overall loan balance (similar to paying interest early, but this goes one step further).

This tip is a solid way to eliminate student loans for obvious reasons, but not everyone has the luxury of spending more each month. If you happen to have additional funds available, then making larger monthly payments is definitely a good way to reverse the growth of student loan debt.

Aim for Subsidized Federal Loans

Subsidized Federal student loans are probably the most desirable loan for higher education. These loans can be acquired by filling out the Free Application for Federal Student Aid (FAFSA), but they are only offered to students who fit a certain financial need threshold. This threshold makes it harder to qualify, but it doesn’t change the fact that they are better options than private student loans or unsubsidized student loans.

Students with subsidized student loans benefit because the government pays the interest during grace and deferment periods. This means you do not have to worry about the snowball effect mentioned earlier without actually having to make interest payments yourself.

Student Loan Forgiveness Programs

Just to clarify, there are multiple federal programs that offer student loan forgiveness. Some examples of these loans include teacher loan forgiveness, public servant loan forgiveness, and loan discharges due to disability/death. These programs have criteria requirements that applicants need to meet in order to enroll in a program. If you qualify for one of these programs, there are two basic scenarios to look forward to. First, your loans are forgiven outright, or second, you receive partial loan forgiveness. Here are more details.

It is clear which scenario is more desirable, but you have to remember there are criteria standards. Total student loan forgiveness is offered for cases involving bankruptcy, permanent disability, or death, but these are not conditions anyone wants to strive for. Partial loan forgiveness is a much more common option. Teachers can qualify for up to $17,500 in loan forgiveness after working in the field, and public servants can have their remaining loans forgiven after making 120 payments (or 10 years).

Final Thoughts

With the outstanding student loan debt toll breaching $1.3 trillion, it is no surprise that people are facing debt troubles. Despite the trouble you can find yourself in, you can find help, too. There are plenty of government programs that help alleviate tensions, but the best place to get help is from yourself. Many of the options on this list require the student loan debtor to put in some effort to help themselves. At the end of the day, proactivity and diligence are the best weapons you have in your arsenal for the student loan struggle!

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