How to Avoid a House-Worth of Student Loan Debt

By Shannon Doyle
Certified Credit Counselor at LSS Financial Counseling.

Several times a week I get calls from college students (and their parents), asking how they can avoid taking on too much student loan debt. They’re concerned, and no doubt they should be. With student loan debt levels surpassing credit cards for the first time in history this is a concern for anyone taking on student loans, be they young or old, student or parent.

Set a limit for how you much you are willing or able to afford

We all know that the cost of college is sky-rocketing, even at public institutions. There has been much discussion lately as to whether the value of a college education is worth the cost in debt.  An important thing to remember is that in the past two decades almost 100% of all job growth has occurred in fields that require at least some post-secondary education. That makes it fairly safe to say that some college will be necessary to achieve a middle-class lifestyle. But, how to keep an education affordable?

One of the biggest pieces of advice I give to my clients who are students (and their parents) is to set a limit on how much debt they are willing to take on for college. Remember that you will not really know the out-of-pocket cost for tuition until you have received your award letter from the college. Go ahead, apply for your dream school AND one or two other less expensive schools as well. This way you can compare and contrast award letters and determine which is the most affordable for your family budget.

Other tips to consider:

  • Complete your general requirements at a Community College or State University/College then transfer to your dream school to receive your degree.
  • Live at home to reduce costs – this can save you tens of thousands of dollars in room and board, and help you avoid the dreaded “Freshman 15” (pounds, that is).
  • Determine the minimum amount of education required for an entry-level position in your career, complete that then be on the look-out for employers who offer tuition reimbursement to complete your education
  • Don’t go to school until you know what your career path is. The biggest waste of money (and time) is to go to college because you don’t know what else to do. Take some time off, work, figure out your path, then go to school.

Explore reciprocity agreements

Many states have agreements with surrounding states to charge students attending out-of-state schools “in-state” tuition. Minnesota even has a reciprocity agreement with the Canadian Province of Manitoba! (Which is a steal at about $9000 per year, depending on your program). This can be a fantastic way to attend college in a different state and keep it as affordable as if you were attending college in your state. You can find out more about these agreements by visiting your state’s Higher Education Board’s website. In Minnesota this site is

Know who you owe: Stick to Federal Loans

It’s pretty tricky to get through school without borrowing some money, but believe it or not about 43% of all undergraduates only borrow $10,000 or less (according to this report put out by the Federal Reserve Bank of New York). Student loans can be confusing because there are so many different types of loans. Below is a primer on student loans.

Federal Student Loans

Private Student Loans

SELF Loans

William D. Ford Direct Loans

  • Direct Loans to the student
  • Subsidized – Interest paid while in school
  • Unsubsidized – Interest accrues while in school
  • Fixed rate interest set by congress
  • Grace Period: 6 months from date of graduation or drop below ½ time

Apply with private banks

  • Usually require a co-signer
  • Variable interest rates
  • Pay attention to fees
  • Payments may be deferred while in school


Apply at State Higher Education Boards

  • Requires a co-signer
  • Must be repaid in 15 years
  • Interest accrues right away: can be fixed or variable
  • No grace periods or deferments


Parent PLUS Loans

  • Direct Loans that parents take out
  • Payment starts right away
  • Interest starts right away
  • Fixed rate interest set by congress



Perkins Loan

  • For undergraduate and graduate students
  • Funds depend on student’s financial need and availability of funds at the college
  • Interest is 5%
  • College is the lender; payment is owed to the college that made the loan



It’s important to remember that while private student loans may start out with lower interest rates, they are typically variable and can adjust upwards making the loan very expensive and the payment unaffordable. You can learn more about the different types of loans here:

A special note to parents: it is wise to borrow as little as possible to fund your child’s education. You are most likely at a time in life when you need to be focusing on building your retirement savings instead of taking on debt for your kids’ education. If your son/daughter has maxed out their federal student loans, scholarships, grants, and savings and there is still a balance due it may be a good sign that the school they are looking at is just not affordable for you or them. You are not depriving your child of anything by not taking on that debt and you are teaching them a valuable lesson about making financial decisions based on reason as opposed to emotion.

Make use of available resources

There are many resources available to help you figure out how to keep student loan debts low. Some of the best sites I’ve found include and

About LSS Financial Counseling

At LSS Financial Counseling, we empower people to take control of their debt with tangible steps and personal guidance that are the key to confidence and success. We’re here to help you with your finances, not take over and ultimately show you that you’ve got what it takes to Conquer Your Debt.

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