Is loan-free college the answer to the student loan crisis?

Kristina Ellis

By Kristina Ellis

Student loans have become a hot topic. And it’s no wonder why. According to the Federal Reserve, the United States owes more than $1.6 trillion in student loan debt. trillion with a J.1 It seems everyone is trying to solve this problem with good (and not so good) solutions. So how do you tell the good from the bad? Let’s start by exploring one of the concepts that is gaining traction: college without a loan.

If you’ve never heard of college without loan, that’s pretty much what it looks like. Basically, students found unable to afford tuition are offered financial aid without waiting for reimbursement. Instead of taking out federal or private loans, students receive tuition funding that comes from grants or endowments, much like a scholarship. In 2001, Princeton was the first university to introduce the loan-free concept, and over the past 20 years or so, about 40 other colleges nationwide have followed suit.

It’s especially great for students from low-income backgrounds because if they can get into the school, they’ll have a full ride. And it’s also great for the college because, statistically, it allows them to have some of the best students. By eliminating the financial element, star but low-income students who might have been deterred by the price of a school are back on the table. And when a school receives these students, their ranking increases.

Now, college without a loan sounds pretty awesome, and it is. But here’s the catch: Typically, only small private colleges — think the Ivy League — can’t borrow because of endowments, which is just a fancy word for a fund backed by charitable contributions. And these smaller private Ivy League schools have much, much lower acceptance rates.

Another problem is that what you can afford is determined for you by factors like the FAFSA or the college’s aid package. This means they may overestimate what you can afford. Maybe their formulas determine that you can pay $20,000 a year, and then they’ll top up the rest. Even if this $20,000 represents a financial impossibility for you, you will still have to make up the difference.

This funding may also not cover things like transportation or childcare costs, leaving you to bear those expenses as well. And if the balance of all this is still too much, the government is More than happy to offer you a loan, which is what you were trying to avoid with this whole no-loan thing in the first place.

So should you try to get into a school without a loan? If they have what you are looking for as a student, absolutely! While it might take a lot of hard work to get into these exclusive schools, earning a debt-free degree would be worth it.

But whether you get into one of these schools or not, you can (and should!) still go to school debt-free.

Believe it from someone who frequently talks to people in deep debt: if you think you’re worried about money right now, that’s nothing compared to the stress and pain of living with student loan repayments. . I mean, depending on the repayment plan and the loan amount, it can take 10 to 30 years to pay off student loans.2 According to a research study by Ramsey Solutions, 63% of student borrowers constantly worry about paying the money back, and 44% of them say they can’t even buy a house because of their student loan debt. . Yeah.

The good news is that you box graduate debt free. There are so many ways to cash in on a degree or train for a great career without borrowing. So if you’re worried about the best ways to pay for your education without a student loan, let’s take a look at the options.

  1. Find scholarships and grants – You can find free money by filling out the FAFSA form, researching organizations in your area of ​​interest that offer scholarships, and using online scholarship search tools.
  2. Choose a school you can afford – This can mean starting at a community college or going to a state public school instead of a private university (there really is a huge difference in tuition). This may mean going to a trade school or a vocational school, and that is completely acceptable. If you’re wondering if college is really worth it, remember: the only real “dream school” is the one you can afford to be debt free.
  3. Work – Yes, even when you’re in high school. A part-time job or side hustle won’t hurt your grades if you stick to 20 hours a week or less, and you’ll bank for your college fund. Once in college, look for a job on campus or a work-study program, or apply to be a teaching assistant. Plus, companies like Starbucks, Amazon, and Walmart have tuition assistance programs — and some of them even cover everything tuition while you work for them.
  4. Be smart about your lifestyle – Going to college doesn’t mean you have to live in a fancy dorm room with a $10,000 meal plan. Live at home if you can. Stop eating with your friends every weekend. Share groceries, rent, and utilities with a roommate (or three). Get creative and find other ways to cut costs. And this part is crucial: stick to a budget. It will make all the difference in helping you take control of your money.

The decisions you make today will have a lasting impact on the financial stability of your future. Whether or not you are helped by a loan-free college, you you’re the one who needs to take the right steps now and set yourself up for a lifetime of success (including freedom from those monthly payments). Now let’s make it happen!

After winning $500,000 in scholarships and earning bachelor’s and master’s degrees from her dream school, Kristina Ellis aims to help students create their own plan for a debt-free education. She is the bestselling author of Confessions of a Scholar and How to Get a Degree Without Debt. She is a featured expert on the 2021 documentary Borrowed Future: How Student Loans Are Killing the American Dream. Her work has been featured in numerous media, such as Fox & Friends, The Katie Couric Show, CBN, USA Today, Reuters, Seventeen, and Money. As a Ramsey personality, Kristina helps thousands of families across the country navigate the complex waters of college finance and graduate debt-free.

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