How to minimize student debt

One college student's winning strategy

Published: June 27, 2014 04:15 PM

With each passing year, college costs are increasing. By one estimate, they will continue to rise at a rate of 5 percent annually for at least the next 15 years. Debt may be unavoidable, but there are several steps you can take to minimize the amount of money you will owe when you graduate.
As a rising junior at a state university, here's what I've learned.
• Take advantage of scholarships. Scholarships and grants are forms of financial aid that you do not have to pay back. Scholarships may be offered through your high school, college, and any extracurricular organization. Researching online for scholarships is also a good way to find financial opportunities. There are people and organizations out there that want to help you; you just need to help yourself first. It's not impossible. In fact, I am living proof.
During my last year of high school, the senior class was provided with a booklet listing scholarships. I applied to as many as I could, checking the requirements and criteria. I was worried that I would not get any. But as I spoke to classmates and students I realized there was not a lot of competition for scholarships. Many students were unaware of the opportunities, despite being given the booklet. Those who were aware did not bother to apply, mostly because of time constraints or lack of effort; many of the applications required an essay or personal statement. Only a handful applied, giving me a greater chance of receiving financial help.
I found more scholarships by asking around and by looking online. I ended up applying for my father's union's scholarship and also entered a competition to win $1,000. I conducted an online search and found, a website dedicated to financial aid and scholarships, and another website,, with more information. Both can help narrow your search for scholarships.

Want to know more about paying for college? Consumer Reports has the answers.

• File the FAFSA early. The Free Application for Federal Student Aid is the form you have to fill out before your college will tell you how much financial aid you're entitled to. You'll need some information from your parents about their income and savings. The form also asks for your savings. Fill it out as soon as possible after Jan. 1 for the coming school year. This is to ensure you get a portion of the available money before it runs out.  

• Opt first for subsidized loans. As much as scholarships help, sometimes they may not be enough to cover the bills. Rising college costs make it difficult for students to get through college without taking a loan. If given the option between unsubsidized and subsidized loans, get as much as you can first from subsidized loans. Unsubsidized loans charge you interest while you are in college. Subsidized loans, on the other hand, give you a grace period, most not charging interest until after you graduate. These types of loans are usually offered through your college based on financial need.

• Make a calculated decision about which unsubsidized loan to take. Once you've maxed out your subsidized loans, you may have to get an unsubsidized loan. Consumer Reports recommends you choose unsubsidized federal loans first because, unlike private loans, they offer options such as flexible repayment plans. These plans are based on income. Forgiveness is offered only in certain instances, depending on your job, if you have a disability, or other circumstances.

Based on the criteria, I knew forgiveness would not apply to me. I also knew my family income was too high to meet the required income for a good financial aid option. I made a calculated decision to turn to a private loan, only because it had a lower interest rate than the other options and I knew I could repay the loan without falling behind.   

• Read the fine print. Sometimes a loan provider may increase the interest rate after a period of time. Do not get caught in this trap. You do not want to be part of the 71 percent of recent college graduates that owe an average of $29,000 in student loans. Student debt is estimated to be $1.2 trillion, according to Consumers Union, the policy and advocacy arm of Consumer Reports. 

• Begin paying back loans while still in school. My secret: I save all of my money. I opened up a certificate of deposit, or CD, a few years back when I was 16. A CD accumulates interest over time. All of my money that I received from holidays and other occasions went straight to the CD. When college came around, I used the money I saved toward paying back my unsubsidized loan.

• Work while in college. Most colleges offer work-study, or other employment opportunities within the school. I say, take advantage of that offer! This is especially true when that offer includes free room and board. I ended up applying for a resident assistant position, which is a huge financial help because it equals one less loan. If you think you can handle a job while in college, then do it. It will definitely pay off in the long run.

—Marcy Robles

Source: Federal Reserve Bank of New York

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