Thousands of people are saddled with debt that could take them decades to pay off because they chose student loans to help them pay for college. With accruing interest rates that are often much higher than the national average for private loans, many new students are trying to steer clear of this option. If you’re wondering how to avoid student loan debt by looking for an alternative to student loans, keep reading. In today’s blog, we’re exploring all the details behind some of the most common alternatives to student loans.
What are Some Alternatives to Student Loans?
1. Private Loans
If you think a loan is your best option, consider looking into private lenders to fund your college education. There are some restrictions and requirements you need to follow for these alternatives to student loans, such as:
- These loans usually supplement federal loans, aid, and scholarships.
- You cannot borrow more than the cost of your tuition.
- Loans are only valid for a single year and cannot be certified across multiple years.
Types of Private Loans
Private lenders offer a variety of loans meant for specific purposes. The most common cover bar exam loans, medical school loans, and even loans for students with bad credit.
You can use bar exam loans to cover expenses that regular student loans don’t cover. If you need to take prep classes, pay exam application fees, or pay for living expenses as a law student, this loan can help. Bar exam loan terms can range from 1-20 years and you can expect higher interest rates than average.
Medical student loans are attractive to many students, as they often have much lower interest rates than federal loans. The only downside here is that there is no loan forgiveness potential like there is with federal loans.
If you don’t have great credit, a handful of private lenders will loan money specifically to people in your situation. They use factors other than your credit score to determine reliability, like earning potential.
There are other alternatives to traditional student loans, such as:
Work Study as an Alternative to Student Loans
Many universities offer work study programs to help cover the cost of your tuition. Some qualifying students prefer work study because it doesn’t reduce their eligibility for student loans. While income from a standard job can reduce your eligibility by $0.50 per dollar over $6,400 that you earn in a year, working at your university does not. Work study can be a viable option to supplement student loans or can pay for the entirety of your tuition, depending on the program.
As a new student, your work study options will typically include working in on-campus locations such as the dining hall, dorms, or the library. Work study loans are available to graduate students, referred to as “fellowship loans”. These loans allow students to work in something related to their field.
You must apply for work study through FAFSA first. If you qualify for this alternative to student loans, you can then discuss your options with your school.
Scholarships
If you’re wondering how to avoid student loan debt completely, you should look into scholarships. These are funds that you don’t have to pay back and can be earned based on need, academic merit, or cultural background. You can apply for scholarships that your school offers as well as external scholarships from private individuals, institutions, and charities.
There are a number of third party websites that can help you find alternatives to student loans through scholarships. After you create a profile based on your strengths and interests, these sites can match you to scholarships from over a million sources. While some scholarship applications are interested in your current grades and extracurricular activities, others are based on specific skills like creative writing, music, or your art portfolio.
Student Grants
A grant is another alternative to student loans that doesn’t need to be paid back — just like a scholarship. There are several types of grants available, such as federal, state, and college grants, that are given based on a similar basis to scholarships. You can receive a grant based on race, gender, or area of study. While many grants don’t cover the entirety of your tuition, they can go a long way to helping you pay for expenses such as books, room & board, and more.
The Federal Pell Grant is one of the most common grants available. Qualifying students receive over $5,000 per year for any school-related expenses. The government and many universities use the FAFSA application to determine which students would benefit from the grants they have to offer. So, filling out these forms is crucial to receiving more money and finding an alternative to student loans.
Tuition Payment Plans
For people who don’t qualify for loans or didn’t receive any scholarships, tuition installment plans are an option. Since many schools want to give everyone a chance to receive a comprehensive education, many will work with you to develop a payment plan that fits your needs.
Working with your school on a tuition plan is a great alternative to student loans, as most schools don’t charge interest. They do have penalties if you fall behind on payments, but your debt won’t accumulate if you stay on track.
Alternatives to Student Loans
With these tips to teach you how to avoid student loan debt, you may be able to create a healthy financial future. Do your research and don’t hesitate to meet with a financial advisor if you have questions!
High-interest loans can be expensive and should be used only for short-term financial needs, not long-term solutions. Customers with credit difficulties should seek credit counseling. The opinions expressed above are solely the author’s views and may or may not reflect the opinions and beliefs of the website or its affiliates. Cash Factory USA does not provide financial advice.
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