How to Avoid Student Loans

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Student loans are a necessary evil for most college students. According to the Institution for College Access & Success, 62% of the Class of 2019 graduated with student debt, and Experian data puts the average student loan balance at $38,792 as of 2020.

But with enough planning and effort, it's possible to significantly reduce or even eliminate your need for student loans. As a future college student or a parent helping your child, here are some steps you can take.

Don't Wait for College to Start Saving

Whether you're a parent planning to help pay for your child's college education or you're a student, the best time to start saving for college is now.

While it may be easy to stash some money in a savings account or investment account, consider opening a 529 college savings plan to take advantage of special perks. For example, as long as you use 529 plan funds for qualified educational expenses, all your contributions grow tax-free and the withdrawals are also tax-free.

Additionally, your state may offer other tax breaks in the form of a deduction or credit based on how much you contribute every year.

Most 529 plans allow you to set a monthly contribution amount that will be automatically debited from your checking account to make saving easier. If you have several years before you need to pay for college, consider boosting contributions whenever your income increases or monthly expenses are reduced. Just keep in mind that if you or your child uses 529 plan money for ineligible expenses, your earnings in the account may be subject to taxes and a 10% penalty.

Formulate a Plan and Know How Much You'll Pay

As you or your child begins the process of selecting a college, look at more than just the programs and atmosphere. You'll also want to search each university's website to get information about how much you or your child can expect to pay in tuition and fees.

You'll also want to consider other major costs, including fees, books, supplies, equipment, food, rent and other living expenses.

Take some time to write down all of the expenses associated with each school. This will help you not only choose the school that provides the best value for your dollar, but also get an idea of how much you need to come up with in addition to your savings.

Seek Out Scholarships, Grants, Fellowships and Assistantships

There are many ways to find scholarships and other assistance for college. Your school may offer scholarships based on merit or financial need. Additionally, certain programs may offer additional scholarships that are only available to students in a given area of study.

Review your school's financial aid website and your program's page to get an idea of what's available to you and whether you qualify.

You can also search websites like and Fastweb. These websites host databases of millions of scholarship opportunities from private organizations. While you won't qualify for every one, you may find several for which you're an excellent fit.

Also, make sure you fill out the Free Application for Federal Student Aid (FAFSA) every year. If you qualify based on your family and financial situation, you may receive Pell Grants, which you don't have to repay.

Finally, if you're planning to attend graduate school, you may also be able to obtain a fellowship or assistantship.

A fellowship functions similarly to a scholarship and may be available for a few months up to several years based on merit. The program also typically provides the student with unique opportunities in their field of study, which could help their careers after graduation.

In contrast, an assistantship provides funds in exchange for part-time work in a student's field of study, typically on campus.

Look Into Work-Study Programs and Part-Time Work

Work-study programs work similarly to apprenticeships in that you exchange part-time work for pay. However, work-study programs are typically provided through the federal financial aid program, and they're available to both graduate and undergraduate students. The job you do in a work-study program may or may not be related to your degree program.

Additionally, you may look for part-time work in other places. For example, there may be several on-campus jobs that aren't included in the work-study program that you can apply for. You may even look off-campus for job opportunities in your area. That could include a job at a local restaurant or bar, a customer service position, a gig in retail or something else.

As you consider working during school, make sure you can get a job with hours that align with your school schedule. Also, try to find a good balance between work and school, so you don't sacrifice your grades for an income.

Regardless of your approach, the money you make as a college student directly impacts your need to borrow through student loans.

Consider Federal Loans if You Still Need Money

Whether or not you expect to apply for student loans, it's a good idea to fill out the FAFSA every year. In addition to providing opportunities via grants and work-study programs, it also makes you eligible for federal student loans if you need them.

Unlike private student loans, federal student loans don't require a credit check in most cases. They also provide access to loan forgiveness programs and income-driven repayment plans, neither of which is accessible to private student loan borrowers.

And if you exhibit financial need, you may qualify for subsidized loans, where the federal government pays interest on your student loans while you're in school or deferment later on.

While it's not ideal to borrow money to get through school, it may be necessary if you've exhausted all of your other options. On the plus side, federal student loans offer low interest rates and important perks—and can help you afford a college education by filling the funding gap.

Use Other Ways to Build Credit During College

College is an excellent time to start building your credit history because once you graduate, you may want to borrow money to buy a car or a home. If you have a thin or nonexistent credit file, though, you'll have a difficult time getting approved on your own.

Student loans don't typically report to the credit bureaus while you're in school because you're not making payments. So consider using a student credit card or a credit-builder loan as a way to establish your credit history. With both options, make your payments on time and in full to avoid late fees—and, in the case of the credit card, interest charges. It's also important with a credit card to keep your balance low relative to its credit limit.

You can also sign up for a credit monitoring service, so you can keep track of your progress once you've developed a credit score. The process of building credit can take time, but the sooner you start, the better off you'll be in the long run.