Four Alternatives to Student Loans

Americans owe the federal government specifically Sallie Mae more than $1.6 trillion in student loan debt. This astronomical number is spread out over 43 million borrowers, ranging from fresh graduates looking for a job to seniors nearing retirement.

The average repayment plan is 10 years, but many borrowers take years longer to clear the balance.

Student loans are one reason that graduates entering the work force aren't able to buy homes like their parents did, and 40% report that they don't have savings over $500.

Alternatives to Student Loans

The good news for students who want to attend college is that there are better ways to finance an education besides those crushing loans.

Scholarships

Many students believe that scholarships are reserved for high academic achievers or star athletes. The truth is that there are lots of different types of scholarships out there, based on factors like diversity, community service, performing arts, and writing skills. Websites Fastweb.com or Scholarship.com are two source that match students to scholarships.

There's no limit to the number of scholarships a student can apply for, and a few hundred dollars from several adds up pretty quickly. Consider this a student who spends 20 hours applying for scholarships and wins $1500 in awards is effectively making $75 per hour for that time great return on their investment.

Grants

Grants, like scholarships, are considered "free money" because unlike loans, the money doesn't have to be repaid. Grants are often based on financial need, and are given through federal and state governments, non-profit organizations, and even the schools themselves.

Students who want to be considered for grants must complete the Free Application for Federal Student Aid (FAFSA). Any grants you are eligible for are included in your student aid package. There are additional grants available for people who meet certain requirements, for instance if you want to be a teacher or a parent was killed in military action.

Federal and State Aid

The FAFSA program also oversees Pell Grants. These are government grants that cover some college expenses, and the amount is based on the student or their family's expected financial contribution (EFC) towards their education. The minimum Pell Grant for 2022 is $650, and the maximum is a healthy $6,495. This amount is for the entire academic year. If the student's financial situation worsens during the academic year, they can apply for additional Pell Grant aid.

States also offer aid to eligible residents. Each state has its own requirements for grants and the aid distribution process, so check with your state to find out about available grants. Two examples are the Cal Grant in California, and HOPE grants in Georgia.

Work Study

If you have taken out student loans, you may have the option of a campus job to help pay the loans off faster. The Federal Work Study (FWS) program guarantees eligible students the chance to work at certain jobs to offset the costs of college. Students who are interested should check the box on the FAFSA form that indicates they're interested in the program, and the institution takes it from there.

Some schools also have their own work-study programs that aren't associated with the federal one, and the benefits may be different. For example, if you choose to work for the school while you're a student, you may get reduced tuition or fees. The money you make is paid to you via paycheck, and you can use it for living or school expenses.

One thing to consider before you sign up for work-study is that your income is taxable, and you need to report that income on your FAFSA form the next academic year. But, income from a campus job does not have any impact on your financial aid for the following year.