How to minimize student loans

Quick insights

• There are several ways to reduce student debt, such as apply for scholarships, creating a budget and cutting unnecessary costs.
• Students often attend community college or in-state schools to minimize costs and find affordable living options, potentially reducing the need for student loans.
• For some students, taking on student loan debt may be worthwhile if they can afford repayment based on the average starting salary for their anticipated career path.

College is often the first time many people start making major decisions on their own—including financial ones. Deciding how much student loan debt to take on is a financial decision with potentially long-lasting implications for your financial health. While student loans may provide access to education that could lead to a well-paying job, they could also add to your overall debts. Because of this, it may be a good idea to consider your ability to repay student loans and minimize them when possible.  

Below, we’ve gathered some tips to help avoid student loan debt and potential strategies to try if you’re currently struggling with this debt.

How to reduce student debt

The high cost of college can be overwhelming, but there are ways to help minimize or avoid expensive student loans. Here are some ways to keep college costs low and minimize your reliance on student loans.

Choose an affordable college

When choosing a college, you may want to consider the overall cost of attendance. Community colleges and state schools generally have lower tuition. Some students save money by attending a community college for their intro-level coursework and then transferring to a larger university to complete their degree.

Some colleges award scholarships that help reduce the cost of attendance. If you meet the scholarship criteria at multiple colleges, applying to many of them could potentially increase your chances of getting a scholarship offer.

Create a budget

A budget is a financial tool that helps you manage your spending. By creating a budget, you can understand your monthly income and expenses, identify areas to reduce your spending or address your unmet financial needs.  

If you have a student checking account, your bank may offer resources to help you manage your money and track your spending.

Students can use a budget to estimate their anticipated college costs against any sources of income (scholarships, part-time job, contributions from parents, etc.) they expect to have. Common college expenses include:

• Tuition
• Fees
• Housing
• Meals
• Transportation
• Books and school supplies
• Medical care
• Computer
• Dorm supplies (bedding, lamps, etc.)  
• Travel home (holidays, end of semester, etc.)
• Clothing

If you do decide to take out student loans, your budget may help you more accurately determine how much you need each semester, potentially preventing you from borrowing more than necessary.  

Budgeting may lead to other good financial habits like saving for your goals after college.  

Limit your expenses

From spring break vacation to daily dining out with friends to this semester’s textbooks, there are many expenses that can disrupt a college student’s monthly budget.

These tips may help you manage costs:   

• Do your research on room and board: Living on campus and getting a meal plan are often convenient, but they may not be the most cost-effective options. You may find it’s more affordable to cook for yourself or live off campus with roommates. If attending a nearby school, living with your parents is another way to save money.
• Minimize eating out: Developing basic cooking skills and learning tips to save on groceries may help you save money on food. Some recipe blogs and social media accounts can provide inspiration and tips for cooking affordable meals in your dorm room. Cooking is generally cheaper than the campus meal plan or dining out.
• Explore no cost and discounted activities: Look for activities on campus or in the community that have no entry fee. On some college campuses, there are events with complimentary food on many nights. Additionally, restaurants near universities may offer budget-friendly specials to draw in college students.
• Consider your grad school plans: If you plan to attend graduate school, a combined undergraduate and graduate degree program could potentially save time and money as it generally eliminates a year or more of coursework.  

If you have a student credit card, you may want to avoid making impulse purchases. Considering your credit card purchases in advance could encourage you to stay within your budget.

Explore all funding options

Understanding the different types of funding available for college can help you make more informed financial decisions. Here are some common ways students fund their education:  

• Scholarships: Financial awards that generally don’t need to be repaid, though they may have requirements to maintain eligibility.  
• Federal grants: Government funds for students with significant financial need that don’t need to be repaid.  
• Federal student loans: Government loans with lower interest rates and more flexible repayment options compared to private loans. Most don’t require a credit check.  
• Private student loans: Loans from banks, credit unions and other lenders, often with higher interest rates. They will generally require a credit check or cosigner.   

Since scholarships and grants don’t need to be repaid, it may be a good idea to exhaust these options before taking out loans. If loans are necessary, federal student loans have better interest rates than private student loans in most cases. Make sure you understand the terms of repayment, the estimated monthly payment amount and other conditions for any student loans you take out.  

When deciding whether to apply for student loans, you may want to consider the salary for your intended career. Those anticipating higher earnings may feel more at ease with student loan debt, while others pursuing careers with modest incomes might prefer to explore alternative funding options. Researching your planned career’s average starting salary, as well as the state of the job market, can help you get a general idea of what you might earn.  

You can also factor in whether the government offers any debt relief programs for people in your field. These programs generally make repaying federal student loans more affordable for certain professions (teachers, for example). Check with the Office of Federal Student Aid for current programs.

Get a part-time job

Depending on your courseload, you may want to get a part-time job. While any job may improve your financial circumstances, you could look for roles that complement your studies or career path. Here are a few options:  

• Tutoring
• Research or teaching assistant
• Paid internships
• Entry-level or administrative role in your field

In addition to the money you earn, these experiences can provide valuable insights, either affirming that you’re on a path you enjoy or helping your discover new directions you might want to explore. The work experience may also give you an edge when you graduate and start applying for full-time roles in your chosen field.  

Additionally, some schools have work-study programs that offer convenient on-campus jobs to students who qualify.

Start saving before college

Before you start college, it may be worth getting a job to build some savings. For example, it can be helpful to have a fund for emergencies. Saving as little as $500 to $1000 could help you avoid taking out additional student loans or accruing high-interest credit card debt when unexpected expenses arise. Opening a savings account may help you avoid accidentally spending your emergency fund, and it keeps your finances organized.

What to do if you already have student loan debt

Whether you’re looking to pay off your student loan debt as quickly as possible, limit interest payments or reduce your monthly payment, you have some options.

Here are some ways to manage your student loan debt:

• Work for an employer that offers student loan reimbursement: A handful of employers have interest payments or reduce your educational assistance programs that include student loan payments. These programs typically have a yearly cap on the amount they will reimburse.
• Refinance your debt: Managing multiple student loans with varying interest rates can be confusing. Refinancing potentially allows you to combine these loans for a lower interest rate. However, be cautious when refinancing federal student loans, as it may affect your eligibility for certain benefits.
• Explore your repayment options: Federal student loans generally offer flexible repayment options. You can also request a forbearance if you’re temporarily unable to pay in certain qualifying circumstances like financial hardship or medical emergencies. If you’re struggling with your current repayment plan, contact the Office of Federal Student Aid to see what options are available. They may offer online tools to help you estimate your monthly payment and see how long repayment will take under different plans.
• Pay more than the minimum: With most standard repayment plans, only making the minimum payment results in paying more in interest over the life of the loan. You can use loan repayment calculators to create a plan for paying off your debt that limits your interest payments. Please note that this general recommendation does not apply to any income-based repayment plans.

In conclusion

It’s generally recommended to avoid student loan debt whenever possible. Some potential ways to minimize student debt include:  

• Choose an affordable school, such as a community college or state university
• Create a budget and limit non-essential expenses
• Apply for scholarships to help you pay for school  
• Get a part-time job to help cover expenses
• Prioritize scholarships and grants before taking out loans   
• Understand the repayment terms for any loans you consider

If you already have student loans, you can manage your debt by working for an employer that offers student loan reimbursement, exploring different repayment plans and considering refinancing among other options.