What are the Alternatives to Student Loans? Everything You Need to Know!

student carrying books

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, explore the most common solutions and everything you need to know about them here.

1. Private Loans

If you still think a loan is your best option, you can look into private lenders to fund your college education. There are some restrictions and requirements you need to follow for these alternatives to student loans, including:

  • 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 Loans

There are a number of loans from private lenders that are meant for specific purposes. The most common cover bar exam loans, medical school loans, and even loans for students with bad credit.

Bar exam loans can be used 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.

Other alternatives to traditional student loans include:

  • International Student Loan
  • Student Loans w/o Cosigner
  • State Loans
  • Credit Union Loans

Work Study

tip jar for work study cafeteria employees

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 for every 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 the dining hall, dorms, or the library. For graduate students, work study loans are called fellowship loans and 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.


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

two people applying for grants

A grant is another alternative to student loans that doesn’t need to be paid back — just like a scholarship. There are 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 books, living expenses, and more.

One of the most common federal grants is called the Federal Pell Grant, and 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 are 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 to pay for your degree. Since most schools want to give everyone a chance to receive a comprehensive education, they will work with you to develop a payment plan that works for your financial goals.

Working with your school on a tuition plan is a great alternative to student loans, as most schools don’t charge you interest. They do have penalties if you fall behind on payments, but your debt won’t accumulate if you stay on track.

graduating students tossing their graduation caps

With these tips to teach you how to avoid student loan debt, you may be able to create a healthy financial future with help from Cash Factory USA. Get more financial advice when you read our blog.

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