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Alternatives to Student Loans

As college expenses continue to rise, student loans are seen as the only financial option for many college-bound students. The problem is, the higher the tuition cost, the more students have to borrow. While student loans are a temporary solution to immediate financial assistance, borrowers are reminded they must be paid back, with interest.

It’s common for many students not to qualify for enough money to fully cover their tuition, where they’re forced to find another source of aid to cover it. While fear of debt can discourage students from pursuing college, a lack of money can keep them from finishing college.

Fortunately, there are financial alternatives outside of student loans to help pay for college tuition. The best part? The money awarded does not have to be returned.  

SCHOLARSHIPS

Scholarships are financial aid awarded to students that are specifically designed to cover college tuition and, at times, associated living expenses and study abroad programs. There are millions of scholarships available through thousands of various programs, such as academics and sports, as well as those catered to minorities and tailored to assist individuals of socioeconomic circumstances. You can search for scholarship programs through your high school counselor, the financial aid office of your college, or research online through the federal aid program and other scholarship-based websites.

GRANTS

Similar to scholarships, grants are also awarded to students that don’t have to be repaid. The difference is, scholarships are generally merit-based; grants are typically need-based and may have additional requirements to qualify. Federal Pell grants, or “pell grants,” are offered through the federal government and awarded to undergraduate students who exhibit financial need. Students can apply for pell grants online through the Free Application for Federal Student Aid (FAFSA). There are also several other types of grants for students offered through colleges and universities, state programs, and more. 

COLLEGE SAVINGS PLAN

For parents who’d like to save in advance for their child’s future, there are college savings accounts offered through different banks and financial institutions in nearly every state. The 529 Plan, for example, is a tax-advantaged college savings plan that operates similar to that of a 401K or Roth IRA. It has multiple investment options that one can choose from and tax-free withdrawals when used to pay for college-related expenses. 

In addition to a savings plan, students can also save money on future college costs by attending a community college first and later transferring to a university. The average tuition cost of a four-year college program is about $9,000 per year. Community college, on the other hand, is only about $3,000 per year. Also, in support of President Obama’s 2015 State of the Union address, dozens of states are offering up to two years of community college tuition-free. This way, students can save on costs and still have access to secondary education.

These alternatives may not cover all of your tuition costs, but they can significantly minimize a portion of it, decreasing the amount needed in student loans. And, if you decide to take out a student loan to cover additional costs, ConsumersAdvocate.org has a helpful and informative review on the Best Student Loans. College is a big step and a major financial decision that you don’t have to do alone. SimpliCollege is here to help with tips, answers, and guidance to your college planning process.

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