If you know you need a college education but are reluctant to go into debt for your degree, you’re in luck. Read on to learn about the 15 alternatives to student loans that could help you afford an education.
- Federal Grants and State Grants
If you’re like many students, you might associate federal and state “financial aid” with student loans. However, there are other forms of financial aid funded by federal and state governments. Federal and state grants, for example, are types of need-based funding that you never have to pay back. You might hear grants called “gift aid” because they typically don’t need to be repaid.
The most well-known grant is the Federal Pell Grant, which can provide up to $5,920 for a year of undergraduate study, according to Federal Student Aid. There are also Federal Supplemental Educational Opportunity Grants (FSEOG) for undergraduate students, Teacher Education Assistance for College and Higher Education (TEACH) Grants for aspiring educators and grants available through state government entities. To be eligible for federal grants, you need to fill out the Free Application for Federal Student Aid (FAFSA).
- Institutional Grants
Some grants aren’t funded by governments, but are instead awarded by colleges themselves. Institutional grants are often need-based as are federal grants, but they may require you to meet additional qualifications, including full-time student status, minimum GPA and even continued participation in certain sports or extracurricular activities. Some schools award separate grants for expenses such as housing. Because institutional grants are under the control of the individual college rather than a federal or state government, the award amounts can vary based on institutional policies.
- Institutional Scholarships
Unlike need-based grants, scholarships are typically merit-based – and that means you may have more control over the funding you receive. Students may receive institutional scholarships on the basis of grades, athletic performance or other factors. The amount of institutional scholarship funding awarded can vary from a few hundred dollars to several thousand dollars per year. It is rare to receive an institutional scholarship that fully covers the cost of your college education. Only about 0.3 percent of full-time students at four-year colleges receive one of these full-ride scholarships, according to CBS News. However, many students do receive some scholarship funding – and every little bit helps.
- Private Scholarships
Many organizations outside of colleges also award scholarships. Sources of private scholarship funding can range from nonprofit community organizations and charities to commercial companies looking for a way to give back. While grades may be a factor in eligibility, most private scholarships may ask students to prove their merit in other ways, like writing an essay on why they are pursuing a specific course of study or completing some form of project to be judged like a contest. The good news is that you can apply for as many private scholarships as you want. If you’re willing to put in the time and effort, you could qualify for a number of different scholarships and drastically cut the cost of your education.
- Federal Work-Study Programs
Work-study is a form of financial aid that you don’t have to pay back, but you do have to work for it now. The federal work-study program pays students to work part-time during their education, often but not always on campus, according to Federal Student Aid. The amount you are eligible to earn is limited. Federal work-study programs are based on financial need, so not every student qualifies.
- Fellowship or Assistantship Programs
For graduate students, a fellowship or assistantship program may offer you the opportunity to earn money while working in your field. While a fellowship is typically more along the lines of scholarship funding, awarded based on merit, an assistantship is closer to a work-study opportunity. Graduate assistantship programs may include opportunities for research assistants, teaching assistants, or higher-level work in an administrative department of the college, such as media and public relations. Since you are working for this money, you don’t have to pay it back – but you may need to meet strict requirements to maintain eligibility.
- Working Off-Campus
If you fill out the FAFSA and the federal government determines that you don’t have enough financial need to qualify for work-study, you can still get a part-time job to make some money. In fact, working off-campus while in school can have other benefits, as well. Some studies report correlations between working a moderate number of hours during college and getting better grades. Employment helps students to develop skills like time management, that are useful not just in a work setting but in a college setting and in your personal life. Working college students even report feeling more engaged in their education, according to Inside Higher Ed.
However, you need to be realistic about how many hours you can handle and about your earning potential. Generally, tuition rates have risen much faster over the last few decades than wages have. While previous generations could have hoped to work their way through college without relying on other sources of funding, that’s nearly impossible for today’s college students. Still, even a little bit of income can help you fund your education with minimal or no student loans.
- Payment Plans
A student loan essentially offers you the money you need for college now in exchange for a commitment to repay that money later. There’s another type of arrangement that allows you that opportunity: a payment plan or tuition installment plan offered by your school.
There are two key differences that distinguish a payment plan from a loan. First, payment plans typically don’t charge students interest. That means you won’t wind up having to pay twice – or even several times – the amount you initially borrowed. Of course, there still are requirements you must meet to remain in good standing and consequences if you don’t make the payments you have promised.
A second distinction between payment plans and student loans is the amount of time you have to make payments. Student loans can be paid back slowly, often over the course of several years. However, installment plans typically just spread your payments out over the duration of several months to a year. A payment plan can help if you need a few months to get together the money for tuition, but it can’t replace a loan if you’re planning to repay the cost of your education with the earnings you make once you have your degree. Additionally, not all schools offer installment options, so you need to check with a school to find out if this alternative is available to you.
- Income-Share Agreements
Income-share agreements (ISAs) are fairly new alternatives to student loans, so it’s not surprising if you haven’t heard of them before. Purdue University’s Back a Boiler fund is an example of institution-run income-share agreement. The Purdue Research Foundation launched the program for the Fall 2016 semester.
Basically, instead of taking out loans that charge interest, students commit to paying a percentage of their after college income for an agreed-upon length of time in exchange for funding their college education. Often, what students agree to equates to between five and 10 percent of their income for 10 to 15 years or 10 to 15 percent of their income for five to seven years, Kiplinger reported. While few schools are currently offering ISAs, that number is growing. Some private companies are also offering this model of college funding, according to Kiplinger.
- Employer Tuition Assistance
If you’ve already got a job, there may be some benefits you’re not yet tapping into that could help with the cost of college. Around 54 percent of today’s employers offer some form of tuition benefits for workers, according to U.S. News & World Report, so it’s worth checking to see if your employer is one of them. The Internal Revenue Service (IRS) permits employers to contribute up to $5,250 in tuition assistance benefits per employee per year tax-free.
There’s a lot of variation from one employer tuition assistance program to another. Some employers want a say in what school you go to and what subject you study. Often, workers must have been with the company for a certain length of time prior to using tuition benefits, and they must attain a minimum GPA for the employer to pay for their education.
There is one problem with relying on employer tuition benefits as an alternative to student loans. You often have to pay for your education yourself first and then get reimbursed after you successfully complete the course.
- City or State Programs
If you’re lucky enough to live in a place that values education – and stands behind that principle financially – then you might be eligible for college funding through city or state programs. Though these cities that offer free college are few and far between, there are dozens of communities experimenting with “Promise programs” designed to make college affordable, according to MarketWatch. These cities include Kalamazoo, Michigan; El Dorado, Arkansas; Pittsburgh, Pennsylvania; and Denver, Colorado.
Some states, also, have special tuition assistance funds available to students in the community. For example, if you live in New Jersey, you can receive free tuition at any community college in the state. All you have to do is rank among the top 15 percent your class during your junior or senior year of high school to qualify for the NJ Stars program.
- Military Aid
If a family member has served in the United States military, or if you intend to serve in the armed forces yourself, then you may be eligible for military aid to pay for your education. Military aid takes different forms, so what type of aid you qualify for depends on your specific situation.
Students who feel a calling to serve their country can enroll in a Reserve Officers’ Training Corps (ROTC) program. These programs train future officers for a successful military career as well as providing college funding, according to U.S. News & World Report. Students who are dependents of veterans can also qualify for Department of Veterans Affairs (VA) education benefits under the GI Bill, according to FederalStudentAid. There are also federal grants available to veterans and their dependents.
- Tuition-Free Schools
A free education might sound too good to be true, but there actually are legitimate – and well-respected – tuition-free colleges out there. It isn’t always to find or get accepted into a college that offers free tuition and there are some additional requirements you have to meet. You still have to pay for room, board and other living expenses, as well. For the right student, though, a tuition-free school could be the perfect solution.
To go to a tuition-free school, students often must commit to working on campus during their education. Some tuition-free colleges are military academies, and students who attend for free agree to serve in the United States military after they graduate. If you think a tuition-free school is the right choice for you, check out this list from U.S. News & World Report.
- Institutional Financial Aid Policies
There are dozens of schools across the United States that will meet 100 percent of demonstrated student financial need, according to U.S. News & World Report. While many of these schools do include loans that must be repaid in their financial aid packages, a number of colleges are now adopting a “no loan” policy for their financial aid packages. Some of these schools have a high tuition rate, but this policy of fully meeting student financial need without loans makes the schools affordable all the same.
Most schools that meet all student financial need are private universities. However, public institutions University of North Carolina—Chapel Hill and University of Virginia also offer generous aid packages that meet student need.
- College Savings Accounts
While starting a college savings account may not be much help if you’re already preparing to apply for school, it can be a great alternative to student loans if you start saving early enough. The 529 college savings plan offers tax benefits – like keeping contributions exempt from federal taxation – for individuals who are saving for college for themselves or a younger relative. There’s no age limit, so even adults can use 529 plans to save for their own education. Some plans even include a prepaid tuition option that insulates savers from future tuition hikes, according to U.S. News & World Report.
Before you saddle your future self with tens of thousands of dollars in student loans, find out which of these alternatives could help you cut the cost of a college education.