Graduating college with a mountain of debt has become a social norm for our society. The common expectation is that you’ll attend college right out of high school, finance your education with public and private loans, and spend the next ten to twenty years trying to get the college debt monkey off your back. But does it have to be this way? One rule smart people choose to live by is if everybody else is doing it, it’s probably a good idea to do the opposite. Just because society expects you to graduate college with a large amount of debt, doesn’t mean it is a good idea or that it’s in your best interest to do so. So what can you do to walk off your college campus with no monkey on your back, or at least a small enough loan that the monkey will be easy to shake free? Instead of giving you some general pointers on how to save money with college, this article is going to show you exactly, step by step, how to graduate a top-tier college with no debt.
THINK PUBLIC OVER PRIVATE
If you come from a well off family who has plenty of money saved up to finance your education, or have been awarded a very large scholarship that will pay for most of your schooling, then attending a private university might be a good idea for you. Then again, if you have a wealthy family or an amazing scholarship you probably wouldn’t be reading this article. Let’s compare two colleges in the same geographic region, one private and one public, and let’s say you currently live in Texas. Rice University in Houston, TX, a private institution, will cost about 175 thousand dollars for a four year degree, including tuition, fees, room and board. Meanwhile, the state owned University of Texas in Austin, TX will cost only about 70 thousand dollars for a four year degree. And here’s the great part, the University of Texas often ranks much higher than Rice University on college ranking lists, while at the same time costing 100 thousand dollars less to attend.
Keep in mind though that the public over private mantra does not apply in every situation. A student with the opportunity to go to an Ivy League school such as Harvard should not hesitate because of debt. The median career salary for a Harvard graduate is 126,000 a year, compared to 90,000 a year for top public university graduates. This is a lifetime difference of about 1.2 million dollars, which makes the extra hundred grand or so spent on going to Harvard look meaningless.
START WITH A TWO YEAR COLLEGE
Now that you’ve decided you’re going to attend a public university in order to reduce your debt, why not take it a step further? The difference in tuition between a community college and a four year school can save you between 10-20 thousand dollars. Not only that, but if you start with a two year school near your house and choose to live at home those first two years, you can save an additional 15-20 grand. Going back to our earlier example, we see that attending the University of Texas will likely cost about 70 thousand dollars for four years of schooling. However, if you were to follow the two year school strategy and live at home those first two years, the cost is reduced to 38 thousand total for a four year degree that will enable you to earn 100 times that amount over the life of your career.
DO NOT ATTEND COLLEGE RIGHT AFTER HIGH SCHOOL
In one of my favorite SNL skits, which can be seen here, Steve Martin and Amy Poehler play a couple who are having debt problems. Chris Parnell comes in to tell them he can save all their problems with his new book titled “Don’t Buy Stuff You Can’t Afford”. The premise is simple, if you don’t have money, don’t buy something. It’s something that seems like common sense, but very few people actually follow that rule. If you are just graduating high school and your family doesn’t have a lot of money saved up, then why not consider putting off college for a few years and gaining some valuable experience and maturity, all the while saving up some money so you won’t be burdened with debt when you do graduate?
There’s another huge advantage to temporarily putting off college that nobody seems to mention. Once you turn 24 years old you are considered an independent student for federal student aid purposes no matter what your other life circumstances, meaning that the feds will only consider your income when determining aid eligibility. On the other hand if you are under 24 years old, unless you are a head of household, you will be considered a dependent student whether you live with your parents or not, meaning that you must include their income when determining aid. This can mean a difference of 5,500 dollars a year in free grant money. Keep in mind this plan will likely require you to work part-time or not at all the year before you turn 24 in order to qualify for the Pell grant unless you have children.
Now let’s assume that instead of going to college right away you work full-time for 5 years and save up 2,000 dollars a year. Once you do go to college you will be eligible for about 17,000 dollars in grant money. That cuts an additional 27,000 dollars off the 38,000 dollar price tag we came up with earlier. So we have gone from discussing 175,000 dollars for a four-year degree from Rice University to 11,000 dollars for a four-year degree from the even more regarded University of Texas, all by making some very simple and easy decisions.
WORK PART-TIME
Now it’s time to shave off that final 11,000. Working part-time while in school, whether it’s work study, internships, or a typical retail or office gig, will allow you to kill two birds with one stone. Not only will you be able to easily come up with the additional 4,000 dollars a year to be completely debt free when you graduate college, but you will have highly valuable work and life experience to put on your resume along with your degree. It should only take working part-time six months out of the year to accomplish your goal of being debt free.
Is it easy to be debt free after college? Well, the decisions you need to make to be debt free aren’t very difficult ones if you show some patience and fortitude. Will it take time? Yes, but ask yourself, would you rather be in your mid-twenties with a college degree and no debt, or in your early twenties with a degree, but anywhere between 40,000 and 175,000 dollars of debt? Graduating with that much debt pretty much locks you into a life of indentured servitude, which is precisely why the word freedom is attached to phrases such as “financial freedom” or “becoming debt free”. You will be afraid to take career risks and try different things because you have to pay that debt back, which means you have to stay at your job unless you have another opportunity lined up. Remember, don’t buy stuff you can’t afford. Being debt free, whether it’s concerning college, credit, mortgage, or any kind of debt, is only as difficult as you make it.