Surviving the Cost of College

These days it seems like you can’t read one article about higher education without the expressions “college debt bubble” or “rising tuition hikes” popping up. Whether it has to do with admissions, rankings, or campus life, the cost of college is undoubtedly on everyone’s mind. You can’t blame the discussion though, since the average under-graduate now faces approximately $23,000 of debt in student loans, and that’s not even factoring in interest costs or premiums loan providers can throw on top of it all!

So that left us asking—is there no way out of this high-stakes rat race?!

Well as things stand it’s a tough cycle to break, but there is some hope. Below are a few ways to soften the blow of tuition costs that everyone should keep in mind.

Free Application for Federal Student Aid (FAFSA): Your FAFSA should be the first line of defense towards tuition costs. As the name would imply, the FAFSA is a free service provided by the government that determines a student’s eligibility for federal financial aid; this includes everything from Pell Grants, to state scholarships, to work-study programs. The FAFSA is also worth applying to regardless of your parents’ income, since even if their earnings are too high to qualify for direct financial aid you may still be eligible for a federal loan, which can carry the kind of low-interest rates private loans can’t come close to. January 1st was the first day to apply, so the sooner you send yours in the better.

529 Savings Plan: For those of you who have yet to enroll at a university, this could be your ace in the hole. The gist of these plans is that funds put into them can later be withdrawn income-tax-free towards educational costs. Some plans allow you to buy college tuition credits at current rates for future use by a beneficiary, while others can generate tax credits for higher savings contributions. The flipside is that not all 529 Savings Plans are structured the same, and some may prove more beneficial than others for your financial situation. Your best bet is to do the research first on which plan would best suite your future academic needs.

The American Opportunity Credit: This requires some basic understandings of tax preparation, but can prove well worth it for you or your family. What it basically states is that taxpayers can receive a tax credit of up to $2,500 if that money was initially spent on tuition, fees, and course materials (the latter of which has been expanded to include books, supplies, and in some cases even computers) paid during the taxable year. While there are a few limitations—such as the time frame of these occurring expenses needing to be during 2009 or 2010, or the fact parents with a modified adjusted gross income greater than $90,000 ($180,000 for joint filers) cannot apply—it’s mostly a straightforward initiative many Americans don’t realize is available.

Public Service Loan Forgiveness Program: As mentioned earlier the average undergraduate debt out of college is around $23,000…but what if you could get out of paying that entire loan back? Well thanks to the College Cost Reduction and Access Act of 2007, such a notion has become a reality. In essence, if you’re willing to work for Uncle Sam, he’ll be willing to work for you; after 10 years of full-time employment in public service the government will clear you of the remainder of your student loan. What exactly entails “employment in public service” you ask? The options are actually quite varied, including jobs in military service, nursing, education, law enforcement, and more. There are however are a few restrictions; the offer only applies to Federal Direct Loans (sorry private loan students!), and you must be employed at one or more of these positions for the initial 120 monthly payments of the loan. For you post-grads out there this is definitely something to consider when entering the job market, and while it may seem a long ways away for you high-schoolers, with the right game plan you could come out of school with a solid career path and a chance to opt out of that staggering student debt.

What all students need to keep in mind is unless your last name is Kardashian or you’re the next Kobe Bryant, college is going to cost you some serious dough, and debt is often unavoidable. While all those zeros you see on outgoing checks and incoming invoices seem absolutely terrifying, they’re not the end of the world. If you get through school, plan your finances accordingly, and always be sure to read the fine print, you can survive the cost of college.