Thanks to the rising student debt crisis, people are unable to save for major milestones like a house, car, or retirement. On average, those with student loans spend a whopping 15% of their monthly income paying off their debt! Avoiding student loan debt isn’t easy. In fact, 60% of graduates had to take out student loans as of 2021.
America is an expensive country to study in, and the added pressure of building a life from scratch as an international student only creates more financial strain. A student loan is bound to be all the more difficult for you.
This guide is structured to guide you through each step of avoiding student loan debt, from high school to your professional life. If you heed the advice meticulously, finances won’t bar you from happiness and freedom.
Let’s learn how to go about avoiding student loan debt, step by step.
Before You Enroll
1. Earn and Save Now
Start earning while you’re in high school. That money can contribute towards a percentage of your college tuition. It might sound arduous, but when you intend on enrolling in an expensive course at an American university, you need to do everything you can to finance it.
Depending on your country of residence, qualifications and age might be a hurdle. But, there are still plenty of jobs high schoolers can do. Think along the lines of babysitting, dog walking, private teaching, and online gigs. Get creative.
Once the cash starts flowing, invest in a high-interest account, or equivalent systems that yield compound interest. If you spend all the money you earn, you won’t have any left when you actually need it.
2. Alternatives Are Your Road to Redemption
Research alternative financial options before you leap to private bank loans. For this, you need to maintain excellent grades throughout your school career. If you can manage even a portion of your college tuition through a financial funding or assistance program, your loan amount will decrease significantly.
Avoid student loan debt through these promising options for financial aid:
- Government grants such as the FAFSA (Free Application for Federal Student Aid)
- Scholarships programs for excelling students
- Student aid for families with low income (provided by most U.S. universities)
- Federal loans
- Crowdfunding (through websites like GoFundMe)
Scouting for individual and unique financial aid programs that match your needs might be grueling, but it’s better than a soul-crushing loan later on.
3. Calculated Loans Only!
When you take a loan you can’t afford, you set yourself up for financial ruin. “Afford” here doesn’t mean being able to pay everything up front, it means being able to pay off comfortably without sacrificing any necessities.
This is why a back-calculation should be the first step. Here’s how:
- First, investigate the starting and average salaries in your industry and profession. Go with the minimum amount that you are sure to earn after graduation.
- Find out the living costs (including rent, food, electricity, and other expenses) in the area you plan to live.
- Factor in the amount you’d need to save for purchasing a home and a car later on.
- If you have any other expensive purchases in mind, add that as well.
- Now, subtract all these costs from your average expected salary. You’re left with an approximate amount you’ll have in hand every month that can go towards repaying your student debt.
If the degree you want is not worth the loan in terms of how your next 10 to 20 years may look, don’t take the loan. Avoid student loan debt unless it’s the last and only option standing.
4. What Is Your Repayment Plan?
Even after taking on a sizable loan, you can gain a stable footing if you single out your ideal loan repayment plan. You’ll have much vaster options for federal loans, but private loans don’t often offer the same flexibility.
- For federal loans, consider the income-driven repayment (IDR) plans, which cap your monthly payments at 10% to 20% of your income. If you haven’t paid off your balance after 20 or 25 years, most IDF plans end in loan forgiveness.
- Although you’ll have less leeway in private loans, you can still negotiate with your lender. Try to hit the sweet spot between a reasonable payment rate and a short tenure of repayment.
If you drag your loan out too long, you’ll lose a lot of money on interest. If you try to pay it off too quickly, you might put yourself under extreme financial strain.
5. Unaffordable Universities Can Ruin You
Once you have arrived at the loan amount that you can afford, you might realize many universities you aimed for are out of your financial league. This is an eye-opener.
Even after pulling in all resources, if there is a university you can’t afford without risking it all, let it go. What you really need is an education and a degree. Jeopardizing your future for a fancy college is not worth it.
Select an affordable university. This would save you some money to chase your dreams in the real world, where degrees don’t always equate to success.
If you want to avoid student loan debt altogether, here are some radically cheaper alternatives to consider:
- State school
- Community college
- Tuition-free universities
- Online school/distance education
Your Plan for Avoiding Student Loan Debt While You’re in College
1. No Insurance, No Safety Net
Once you have enrolled, the first thing to check off your list is international student insurance. This will help secure you against further financial setbacks.
You may not be able to avoid student loan debt, but with insurance, you can evade other equally menacing financial pitfalls.
2. Don’t Sit Back And Relax. Work!
With a huge loan on your shoulders, you don’t have the luxury to devote all of your time to studies and the pleasures of college. If you start working as soon as possible, you will get a head start for your savings and loan repayment. This can take years off of your repayment tenure.
This is how international students can simultaneously build a career while studying:
- Opt for paid internships in the beginning if jobs are out of reach.
- Secure a job within your industry, so you earn credible experience along with money.
- Take full advantage of work-study programs.
- Utilize freelancing and part-time jobs as viable opportunities.
- Search for jobs that pay for college. Big businesses support employee education through tuition reimbursement plans.
3. Failure Is Guaranteed Without Financial Literacy and Budgeting
Your wealth is not the amount you earn, but the amount you have in the bank. How much do you have in your account after all the expenses? Not much?
If so, you’re in dire need of financial literacy.
Earning little and spending a lot is a sign of poor financial education and habits. Here are some life-saving tips you should heed while you’re in college:
- Stick to your monthly budget. You should not be spending more than 50% of your income on living expenses.
- Be wary of credit cards. Credit card debt can pile up fast, so don’t spend money you don’t have.
- Embrace frugality as your way of life. Spend as little as possible on impulsive desires.
- Cook at home and stay home. Ordering in, eating out, and fancy vacations can wait.
- Rent a place near your college, preferably with roommates. On-campus dormitories are more expensive.
- Be crafty about buying books and other study equipment. Try free online resources and used material.
Even if you couldn’t avoid student loan debt, with healthy financial planning, you can recover expeditiously.
Now Your Finances Are Secure
If you implement these ten steps word-for-word, there is little to worry about in the future. Once you avoid student loan debt, you unlock the key to unparalleled financial freedom at a young age.
There is power in this freedom. Once you escape the lumbering shackles of debt binding your feet, you can reach for your dreams at lightning speed.
