Today I’ve got a guest post by Drew Cloud from The Student Loan Report. Drew Cloud is a journalist who typically writes about student loans, personal finance, and education.
If only applying to colleges was where the time and effort of getting to your dream school ended. In truth, once you’ve passed the first hurdle—college acceptance—most students have a second one waiting just after it. Finding your college is half the battle, but funding it is the rest of the fight.
Some students rely on their parents to pay for it while many rely on student loans. Of those who rely on student loans, a good portion of them still rely on their parents to cosign private loans which only leads to problems.
Fortunately, there is a better solution to student debt, and it’s centered around avoiding student loans. How to do that is simple, but seeing it through is another story. Here are a few stats to help convince you why you should avoid student debt.
Avoid Debt! Apply for Scholarships Instead
First, some scary statistics about student debt:
-U.S. borrowers have more than $1.3 trillion dollars in combined student loan debt.
-In 2014, the average graduate carried over $28,000 in student loans.
-Low-income and minority borrowers tend to have the most student debt.
-A 2015 Gallup-Purdue Index study said that more than 2 million graduates responded that their student debt prevented or delayed them from starting a business.
The implications of high student debt can haunt you for decades, which is why it is so important to borrow carefully and only when all other options have been extinguished. Why should you be careful? Because interest can accrue over the life of a loan; oftentimes, you’ll end up stuck with an enormous student debt bill of mostly interest payments. This is especially true for private student loans which are notorious for higher interest rates. On top of this, they are normally taken out after federal options have been exhausted. This also means that you’re signing yourself up for multiple loans, making things a lot more complicated.
Many schools offer financial aid in the form of discounted tuition to students they hope to attract for academic reasons or sports programs. But whether you are one of those students, or you are looking at full-price tuition to the school of your choice, it’s a smart decision to invest the time into scholarship applications before taking on significant student loan debt. Someone in high school may not understand the gravity of this financial move, but it will pay off none the less, offering a valuable lesson.
Many Types of Scholarships
Merit-based scholarships are perhaps the most common, and the type that most students think of
automatically when looking for aid. This type of scholarship is often offered directly by schools, although some people would rather call these situations “discounted tuition” than true scholarships, unless it also includes stipends for living expenses (which some do). Many schools offer merit-based scholarships for students who have a certain GPA/test score combination on their application. The higher the GPA and test scores, the better the scholarship offered to that student.
These are the easiest types of scholarship, in a way, because your college application is essentially your scholarship application as well. Colleges that frequently compete with each other for top students will often match another’s merit-based scholarship if you show them your award letters. Don’t hesitate to ask for more money, especially if a competitor has given you a better offer—in fact, many schools expect top applicants to do just that! There are many private scholarship opportunities for merit-based scholarships as well, so don’t stop with just the discounted tuition offer from your school.
Need-based scholarships are another type offered directly from schools. This type typically requires more than just your college application to get. Most schools have separate applications for need-based scholarships, which require you to submit your parents’ tax returns and a personal essay. The federal government offers some grants, similar to need-based scholarships, and there are hundreds of private foundations and non-profits that offer these scholarships as well.
Promotional scholarships are offered by private or public companies and exist as a sort of “do good” marketing opportunity. The more that the scholarship is promoted, the greater the brand awareness, and all for a good cause. Scholarships of this type are often narrowed by geographic area (typically where the company is physically located, unless it’s a national brand) or targeted to students who want to major in a field the company employs a lot of workers in.
Many other types of scholarships exist as well, narrowed by anything from race, to religion, to having military parents, or even graduating from a particular high school. It sometimes takes more time and effort to locate these types of scholarships, since they tend to have a more narrow focus, but they can make a big dent in your fight against student loan debt. The more you can find and apply for, the greater your chances of being awarded significant amounts.
Financial aid offices are a great resource for finding scholarship opportunities. Check with the financial aid department of the school(s) you want to attend and ask them to help you find the funds to attend that school. They are a fantastic free resource. Your high school guidance counselor can be an invaluable source of smaller, local grants and scholarships. Lastly, the internet is a must-use resource, with many websites entirely devoted to the scholarship search – look at FastWeb, Scholarships.com, and Unigo just for starters. The Department of Labor also has a free scholarship search tool on their website. There are many opportunities out there just waiting for applicants like you to find them.
While I do strive to only write accurate information and dispense valuable advice, I am not a licensed financial adviser. All information is based solely on my personal experience and personal research and should be treated as such. Find out more.