Student loans are a backbreaking burden on many people in this country both young and old. Collectively, our borrowing for education is nearing $1 trillion. I believe it's the next debt bubble to burst.
Thankfully, there are some ways you can decrease the amount of loans you have to take out and speed up the payoff of existing loans.
BEFORE AND DURING COLLEGE
1) Learn the golden rules for student loan borrowing
I've long talked about some basic rules for student loan borrowing designed to keep you out of harm's way. You can boil my advice down to the following.
Borrow only what's available to you under the federal student loan program. Avoid private loans at all costs. Never take out more in loans for a four-year degree than you are likely to earn during the first year on the job that degree will get you. And start your degree out at a community college for two years before transferring to the four-year school where you ultimately plan to graduate.
2) Look for $10,000 four-year degrees
A number of states are coming up with ways to keep the cost of a college education down.
The university system in Texas has been deputized to deliver select standard four-year degrees for a total cost of $10,000. Degree offerings will include information technology, business administration, organizational leadership, and more. Among the 10 participating Texas colleges are Angelo State University, University of Texas at Arlington, and Texas A&M University-Commerce.
Florida has its own way to reduce the cost of a degree. They've converted many of their two-year community colleges to offer four-year bachelor degree programs at community college prices. Meanwhile, Georgia is now allowing a small handful of its two-year community colleges to offer four-year degrees.
Massachusetts has yet another idea. If a resident student goes to a Massachusetts community college for two years and maintains a 3.0 GPA or better, that qualifies them for free tuition during junior and senior year at the UMass Lowell or Amherst campuses.
3) On-campus work can lower the cost of an education
Some years ago, one of my friends saved money on her education by serving as a resident assistant (RA) during her junior and senior years at Boston College.
As an RA, she was in the charge of the safety and wellbeing of students, making sure they were doing well socially, and ultimately ensuring that campus rules weren't being broken.
"It gave me a sense of responsibility and I made a lot of great friends doing it," my friend says. "I enjoyed it more than I imagined I would and showing that level of responsibility was useful in obtaining my first job out of school."
Perks of the job included free room and board in an on-campus dormitory and a free meal card. As my friend recalls, there was a pretty competitive application process that included an interview and a week of training simulations to see if candidates would make good RAs. She estimates she saved at least $12,000 per year serving from 1992-1994.
If this sounds like something you'd consider, go to the residence life office at your school and ask about opportunities. You can't beat living for free on campus and a free meal card!
4) Seek out unusual scholarships
Scholarships can be as individual as people themselves. There are a number of unique scholarships available, including ones for being either extremely short or extremely tall, being left-handed, and even drinking milk. (No, I am not making this stuff up!)
Visit CollegeGold.com and search keyword "unusual scholarships" to see what I'm talking about. The really obscure ones are usually funded by someone who had to overcome some kind of disability in life.
AFTER YOU'RE OUT OF SCHOOL
5) See if you qualify for student loan forgiveness
If you have built up student loan debt, there are certain ways to get it forgiven based on your occupation. Federal Stafford, Grad PLUS, and consolidation loans in the Direct Loan program are eligible for forgiveness after 10 years of on-time payments. Private loans are not eligible.
Qualifying careers for what is called the Public Service Loan Forgiveness (PSLF) program include any job in government, military service, emergency management, public safety, law enforcement, public health, and public education, to name just a few. After 120 nonconsecutive months of on-time payment, the remainder of your student loan balance is forgiven when you're in this program. IBRInfo.org does a great job of explaining all the details of the PSLF in plain English.
6) Cap what you pay on federal student loans
Even if you don't qualify for the PSLF program, there is still help for you.
For federal student loans taken out before October 1, 2007, you may qualify to have your payments capped at 15 percent of your income. In addition, you can have outstanding student loan debt forgiven after 25 years of on-time payments. It's all part of what's called the income-based repayment (IBR) program. Visit IBRInfo.org for further details.
Meanwhile, if you borrowed after October 1, 2007, there's a new way to cap your monthly payments on federal loans at 10 percent of your income--regardless of income. It's called the Pay As You Earn repayment program. Under this plan, any remaining student loan debt is forgiven after 20 years of on-time payments. See if you're eligible by visiting the Department of Education's website at StudentLoans.gov.
Unfortunately, neither program applies to private student loans.
7) Get student loan forgiveness for homesteading
Americans have historically moved from where they were raised for opportunity. It's just something in our DNA. Today it's possible to do that and get your student loan debt forgiven if you know where to look.
At least 50 counties in Kansas qualify as what are called "rural opportunity zones." In return for living in these communities, they'll absorb up to $15,000 of your student loan debt and exempt you from state income tax for five years. You don't have to be an existing resident of the state to qualify for this program.
A similar program recently launched in Niagara Falls, New York. Niagara Falls is offering up to $3,500 a year in loan forgiveness if you rent and live there full-time or buy and occupy a home in the community as a full-time resident.
Why are these places and others offering such sweet deals? They're looking to reverse "brain drain" where talented young people leave smaller communities such as theirs for the lure of bigger cities.
Just know that you've got to consider the pluses and minuses of the communities carefully before jumping at these opportunities. Contact the local governments of these places for more program details.
Clark Howard's new book, "Living Large for the Long Haul," came out on August 6.
For more money-saving tips, visit ClarkHoward.com. Money in Your Pocket. Advice You Can Trust.