Are Student Loans the Only Option? Here Are All the Other Ways You Can Pay for College

Whether or not to take out student loans is one of the most important financial decisions you’ll make as a young adult. Without them, most people would be unable to afford a higher education, and the benefits of a degree can outweigh the cost of taking on debt. However, they also come with long-term consequences, so they may be a poor option if your career path is uncertain, your expected future income is modest, or you’re already on shaky financial ground.

Understanding Student Loans

There are two types of student loans: federal and private. The former are issued by the U.S. Department of Education. They generally offer lower, fixed interest rates, and most students can borrow without a credit check. Federal student loans also have subsidized and unsubsidized options. With the former, the government covers the interest while you’re in school.

Alternatively, banks, credit unions, and online lenders offer private student loans. They often require a credit check or co-signer and may have variable interest rates, which can make your payments less predictable. Private loans also have fewer benefits and protections than their federal counterparts.

When Not to Use Student Loans

While student loans can be a useful tool, there are a few situations when taking on debt may do more harm than good.

Scholarships and/or Grants Are Available

If you qualify for scholarships and/or grants, lean on them first. These funds don’t need to be repaid and are among the best options for reducing your college costs. Student loans can then be considered if there are still funding gaps after scholarships and grants have been applied.

You’re Unsure About Your Career Path

With the high cost of tuition and other education-related expenses, the long-term effects of student loan debt can easily outweigh a degree’s value. If you’re still figuring out what you want to do with your life, racking up debt without a clear idea of how you’ll pay it can put you in a tough spot, especially if you have to delay graduating, change majors, or drop out.

Your Career Has a Low Starting Salary

Some degrees don’t pay off immediately, so you might find yourself struggling to make loan payments on an entry-level salary, especially in a low-paying field. That doesn’t mean you shouldn’t pursue your passion, but if your expected future income won’t be high enough to afford your debt payments, temporarily pursuing a more profitable career path might be a necessity if you can’t get alternative sources of education funding.

You’re Experiencing Financial Instability

If your personal or family finances are struggling, taking on more debt puts you at a greater monetary risk. Capitalizing interest, missed payments, and default will only make an already difficult financial situation worse.

Alternatives to Student Loans

• Scholarships and grants: Apply early and often, even if you don’t think you’ll qualify. In addition to those you might be awarded after submitting the Free Application for Federal Student Aid (FAFSA), you may be able to find additional scholarship and grant opportunities via local organizations and online.
• Work-study programs: Submitting a FAFSA application also can qualify you for work-study opportunities, which allow you to earn money to cover school-related expenses while also acquiring job experience.
• Family contributions: While not every family can afford to do so, it’s not uncommon for parents to set aside funds to at least partially cover the cost of their child’s education. Even if this isn’t an option for you, your family may be willing to help in other ways, such as by letting you live at home if your campus is nearby.
• Lower-cost school: In-state public universities, community colleges, or starting at a two-year institution before transferring to a four-year one can significantly reduce your total tuition bill.
• Part-time education: Taking fewer classes per semester while working can reduce the need to take on substantial amounts of student debt, though this likely will mean you’ll be in school for a longer period of time.
• Job benefits: Some employers offer tuition reimbursement as a benefit of part- or full-time employment.
• Trade school: Certain high-demand careers don’t require a four-year degree. Vocational programs may offer faster, more affordable paths to employment.

The Bottom Line

Student loans can open the door to a higher education, but uninformed borrowing can set you back before you even enter the workforce. Before taking out student loans, consider all your options, including scholarships, grants, and more affordable schools. Think about your career, your expected future income, and how comfortably you’ll be able to manage debt. A little planning now can go a long way toward a stronger financial future.