5 Ways To Help Your Kids Avoid Student Loan Debt

Despite the headlines surrounding the Department of Education, upwards of $90 billion in new student loans will be issued this fall to families attending college.

At the same time, there’s a lot of uncertainty around what repayment plans and loan forgiveness options will be around when these kids graduate.

The SAVE income-driven repayment plan that gave so many borrowers so much hope is essentially dead as well, after the 8th Circuit Court of Appeals upheld an injunction blocking its implementation. All the while, costs for higher education and our collective national student loan debt (currently somewhere between $1.6 and $1.7 trillion or more) continue to spiral out of control.

These are just some of the reasons to wonder if there’s any way you can help your dependents avoid student loans altogether, but there’s plenty more. This includes the fact that a decent percentage of college degrees have essentially no return on investment (ROI), or even a negative ROI.

How can you help your kids avoid student loans, soul-crushing debt, and the decades of turmoil that are bound to come with it at this point? These tips from experts can help.

Start Saving For College Early (Now)

Claudia Wenzel, who serves as Assistant Vice President of Enrollment & Financial Services at John Carroll University, says the best way to prepare for a child’s college education is to start planning and saving early.

“Consider creating a 529 savings plan, which allows you to invest tax-free for education expenses,” she says. “Even a small amount each month will add up and help you feel prepared for when your child’s college search process begins.”

That said, you’ll want to make sure the money you move to a 529 savings plan is actually invested for long-term growth. Also check whether any tax advantages apply in your state since they might give you even more reason to put some money away.

In the state of Indiana, for example, taxpayers get a 20% state tax credit on up to $7,500 contributed to a 529 plan (or plans) each year. That’s an instant 20% return on your money, and $1,500 back from the state when you file taxes annually if you max it out.

Choose Schools Carefully

While students should consider a range of college majors that suit their personality and future career goals, finding the right school is just as important. And since cost is a consideration, the right school doesn’t have to be (and shouldn’t be) the most expensive one. This is especially true if a student wants to pursue a non-specialized degree that’s offered at a range of high-quality, affordable schools.

Wealth advisor Jack Wang of Innovative Wealth Management says that, first and foremost, parents should help students do a deep dive into investigating colleges instead of just focusing on the “name” or ranking.

“There are great colleges that are not brand names but cost a ton less,” he says.

College consultant Danilo Umali of Game Theory College Planners also says families should do their best to map out the child’s potential career path before picking a school, even though this may not make sense until late in their sophomore year of high school or their junior year.

“Part of minimizing your cost and need for loans is making sure your student doesn’t jump from college to college chasing their major every time they change their mind,” says Umali. “Find schools with a wide array of majors that match your student’s interests.”

Teach Your Kids About Money (Or Learn With Them)

Dr. Peter C. Earle of the American Institute for Economic Research says that “fostering financial literacy from a young age” can be immensely helpful when it comes to avoiding crushing student debt. This is because finance is generally not taught in schools and can help kids make informed decisions about college costs, budgets, and tradeoffs they may need to make.

Helping kids understand the financial impacts of their decisions can also help them choose wisely when it comes to money-saving measures they can participate in, such as pursuing advanced placement (AP) courses, dual enrollment, or community college credits. Earle says all of these can decrease the total cost of credits one may have to take at their university of choice.

How can you teach your kids about money? Start with financial literacy books that can help you learn with your kids, talking about how debt works, and staying on top of the news regarding average student loan debt.

You can even just explain to your kids that the average student loan debt is currently around $28,950 per borrower, and that a large percentage owe even more than that. From there, you can talk about how that leads to monthly payments that can last for years or even decades, and how those payments might prevent them from achieving other financial goals.

Factor Work Into The Plan

William Gogolak, Assistant Teaching Professor at Carnegie Mellon University’s Heinz College, says that students who work during school can graduate with better financial outcomes over all. As a result, parents should encourage their students to look for internships or take on jobs around the university.

“Universities often need students to fill roles in various campus buildings, and these jobs can help cover basic expenses while in school,” he says. “Plus, they offer a great opportunity to meet new people and build a network.”

If not on-campus, finding a job off-campus can also help cover regular living expenses, books, and supplies for school. Basically any money the student can earn can help reduce the amount of money they borrow, so nothing should be off the table when it comes to working at least part-time during college.

Look For Scholarships, Grants, And Other Types Of Aid

James Lewis of the National Society of High School Scholars (NSHSS) says that something non-negotiable is completing the Free Application for Federal Student Aid (FAFSA) for each year of college. While filling out the FAFSA is the only way to qualify for federal student loans, it can also unlock various types of financial aid that doesn’t need to be paid back.

In addition to financial aid that can be accessed through the FAFSA, Lewis says there are 1.7 million private scholarships and fellowships available to students nationally with a total value of more than $7.4 billion.

“Don’t assume you are not eligible,” he says. “Countless awards are available for athletics, STEM & STEAM, community service, music, and those from government and large corporations.”

Lewis also points to some off-the-beaten track scholarships that can help with college and may be easier to qualify for. For example, Tall Clubs International offers scholarships to male and female students who are considerably taller than their peers.

Lewis says to research all the available scholarships you can, and to apply early and often since doing so increases your chances of bridging the gap between what you owe and what you can afford.