2 answers

What do I need to do to lower by student debts?

Asked Chicago, Illinois

I want to come out of college as close to debt free. I am going to an out of state university. #financial-aid #finance #student-loans #money

2 answers

Adam’s Answer


First off, your attitude is awesome! Second, since the first poster listed some ways to save money to pay down debt, I'll touch on some of the most important things about paying back your loans.

It's important to know what kinds of loans that you have. Certain loans (namely, direct subsidized loans) have the interest charges paid by the government while you're in school (and for a little bit afterwards). Therefore, there's less of a benefit in paying down those loans. Most other loans don't require payments while you are in school; however, the interest is "capitalized" or applied for the entire time you were in college. Also, you may have multiple loans that carry different rates. Generally, paying down loans with higher interest rates will reduce your total payment. The takeaway is that it's important to decide which loans are most important to pay down, and in what order.

When you graduate, you may still have loans. There are multiple different options to repay them, including a variety of income-driven repayment plans. All of these are different and your circumstances when you graduate (income, marital status, etc.) will greatly affect whether or not these plans make sense for you.

If you decide to work for the government or a non-profit, you can also apply for Public Service Loan Forgiveness (PSLF) which is another income-driven plan with significant benefits.

Adam recommends the following next steps:

  • Create a list of your loans and create a priority list for paying them off.
  • Research income-driven repayment plans.

Kim’s Answer

Updated San Antonio, Texas

Wow. It sounds like you have your mind made up to go to the out of state school. Hope it is Texas A&M?

Assuming this other state will be charging you out-of-state tuition rates, some people take off a year (or more) and actually move to and become a resident of that other state, thereby lowering the tuition. This would mean finding a place to live and getting a job. Any job that pays the bills - you just want to lower your tuition. It would be nice if it was someplace that actually offered tuition assistance. Again, the objective is to "use" them for their tuition assistance, it does not have to be your dream job. Another idea, rarely mentioned, is to join the military.

Beyond lowering the cost of school, you also want to look at the cost of books, as well as living expenses. There are a lot of options for books - rent, buy, new, used, etc. Become familiar with them and shop around. I buy my books, because I mark them up a lot. I find the best deals on-line. used.

Living expenses? The extreme: there was a guy who lived in his car while going to school. Got a gym membership, which covered the showering concerns. Stayed on campus most of the time, taking advantage of extended hours, etc. Found decent priced meals. Don't recall the school.

Take a hard look at transportation. Do you really really have to have a car to get around? Can a bicycle plus Uber during bad weather do the trick? Watch your meals. Find good second hand stores for clothes and dorm furnishings. And most importantly, learn to distinguish between wants and needs. Be super-frugal!

Utilize whatever you can get for "free" at school - believe me, you are paying for it! Entertainment, healthcare, photocopying/printing in the computer lab, etc.

When commuting back home, take the bus/train rather than fly.

I do believe that about covers it! Best of luck!

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