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Avoid College Debt by Taking Advantage of these 6 Expert Tips

College costs make even the savviest planner quake. You can (and should) get estimates on what a specific college will cost by using the net price calculator on their website. The problem is, you don’t always know the whole story until you get the financial aid offer, long after your student has applied. We checked in with Melissa Bassett, vice president of InSchool Lending at SoFi, a personal finance company, for her top tips on managing student debt while paying for college.

How to Manage Student Debt

1. Exhaust free money before borrowing.

Ensure your student applies to colleges that offer the possibility of merit scholarships or need-based aid. The most generous aid often comes from the college itself, so it pays to do your homework by checking the college’s website to find out what they can offer. Many selective colleges do not offer merit aid, but do provide generous need-based aid based on family income.

Sources of aid and scholarships include:

  • Federal Pell grant
  • State need grant or scholarship for in-state students (check what your state offers)
  • Institutional need grant or scholarship (run schools’ net price calculators for previews of likely aid)
  • Outside scholarships (best to search locally and regionally)
  • Work-study (campus job)

2. Always have your teen borrow first.

Students are entitled to low-interest federal student loans, the Direct Subsidized and/or Direct Unsubsidized (also known as Stafford loans), and they should borrow before parents do, especially if they qualify for a portion to be subsidized. Subsidized means the federal government pays the loan interest while students are in college. Unsubsidized loans accrue interest starting with the first payment. Federal student loans come with limits to keep students out of trouble: up to $5,500 for the first year, $6,500 for the second, and $7,500 for junior and senior year. Colleges determine the loan amount based on other financial aid offered. Students don’t have to borrow the whole amount, and if you’re opposed to your student acquiring debt, you can always pay it down for them if you have the ability to do so.

3. Be strategic about parent borrowing.

Parents can borrow a federal Parent PLUS loan, a private parent loan, or co-sign a private student loan if federal student loans don’t cover enough. Tread carefully. Look at all four years’ borrowing to ensure you or your student can handle the loan amount and associated monthly payment, Bassett advises. In the private loan market, parents sometimes borrow too much in the first two years and then aren’t allowed (by the bank) to borrow more because they’re too leveraged, Bassett says. That leaves their college junior high and dry. They can get into a different kind of trouble with the federal Parent PLUS loan. This parent loan doesn’t require a debt-to-income analysis, and families might borrow beyond their ability to comfortably handle the loan payment.

4. Shop around.

If you do borrow, compare interest rates, fees, and repayment options. Federal Parent PLUS loans offer protections but also come with an origination fee (a fee for establishing the loan) and a fixed interest rate. Private loans may provide a lower interest rate for a good credit score, but they don’t come with the same protections. “Parents should seek out the loan calculators on SoFi.com or studentaid.ed.gov for good information on repayment types. And run that payment amount. It’s really about how much you can comfortably afford,” Bassett advises.

5. Ask for a reconsideration of your financial award.

If you are disappointed with your student’s financial aid package, you can go back to the financial aid office to request a review. You’ll have a better chance if you can document a change in circumstance, like a job loss, but even if you can’t, filing an appeal is useful. Some schools will match competing offers from other colleges at the same level. “Ensure you’re comparing the same direct costs of each school—tuition, mandatory fees, room, board,” Bassett says. The college might say no, but you’ll never know if you don’t ask.

6. Use the college payment plan.

Bassett believes the least understood tool available is the interest-free college payment plan that most schools provide. It helps families spread costs out over 8-12 months. “The deferred payment gives you more time to plan throughout the year and can reduce what you need to borrow,” she says.

Paying for college isn’t easy. It takes planning, researching college resources, and conversations with your teen. The key is to avoid getting on a financial roller coaster that could tip you into unmanageable debt.

Joanna Nesbit

Joanna Nesbit is a freelance writer based in the Pacific Northwest. She writes frequently about parenting and her work has appeared in The Washington Post, Family Fun, Parenting, and elsewhere.