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How to Reduce Student Loan Debt & Graduate in Four Years

Personal Finance
group of students who know how to reduce student loan debt by graduating on time and within budget

Going to college is an investment that can pay off over your entire life. According to the Bureau of Labor Statistics, the average college graduate earns $1,189 per week, compared to just $718 per week for the average high school graduate. This earning gap adds up year after year.

But college degrees aren't usually cheap, and figuring out how to reduce student loan debt can be as important to your financial future as deciding on a school and major. Whether you're applying for colleges, already a student or helping a family member arrange their expenses, these strategies can help reduce student loan debt.

Graduation Times & Student Finances

Traditionally, it has taken students four years to complete an undergraduate degree, but that's no longer the typical timeline. The Wall Street Journal (WSJ) reports that only about 40 percent of full-time students graduate within four years. The majority of students take longer than that, and that extra time in college can be quite costly.

Another year of school means another year of tuition and living expenses, and it's more time for interest to add up on existing student debt. It may also delay when you're able to work full-time and earn a higher salary as a college graduate. Altogether, the WSJ estimates that each extra year of college costs an average of $68,153.

There are still situations when staying in school longer can make sense financially, such as attending a graduate program to potentially earn an even higher salary afterward. But for many students, extra years of study are likely the result of undergrad delays, not further education.

Strategies to Graduate on Time

Graduating on time can be one of the best ways to help control your costs. But that can seem more easily said than done.

To help you graduate within four years, first aim for a full course load that will earn enough credits — 15 credits per semester at the average school. This might seem obvious, but many schools let you enroll for a lighter course load, and you might not realize you're behind until it's too late. Before committing to a major, think carefully about whether it's the right one for you. Changing degrees later could delay your graduation time, because the new major may have different course requirements.

If you work part-time during the year, you'll want to be careful about balancing work with your course load or studies. An extra year of school may be an additional cost to you, and you should consider weighing that against whatever you're earning part-time.

Finally, try to treat your studies as seriously as a full-time job. College is a fun environment, and there's always something exciting to do, but prioritizing your schoolwork will help you graduate on time.

How to Reduce Student Loan Debt

Besides concentrating on graduating on time, there are other strategies to help avoid or help limit debt while in college. If you're still in high school, see if you can take any Advanced Placement (AP) classes, which can be used for college credit. You'll just have to pay for the end-of-the-year exam and get a passing grade. Every extra credit means less college class time that you'll need to pay for.

As you compare different schools, think carefully about whether the most expensive college is truly the best option. Tuition at an in-state public university is often quite a bit lower than at a private university or college. That can make a difference for your debt. You could also start at a local community college, and perhaps live at home to help save on even more expenses, and then transfer to your dream school partway through.

Finally, make sure to take advantage of all forms of financial aid, including grants, federal loans and work-study programs. You should fill out the Free Application for Financial Student Aid (FAFSA) form to see if you're eligible for government aid. You can also visit your school's student aid office to see what kind of scholarships, grants and other programs it offers.

Setting a Student Loan Budget

To help keep things from getting out of control, try to set a limit to how much you'll spend as you figure out your college planning. A common benchmark is to borrow no more than you expect to make in your first year out of school. This way, you'll have a budget for how much you can spend on tuition, housing, study-abroad programs and so on. With the numbers in front of you, you can make any necessary trade-offs, like going to a less expensive college so you can afford a year abroad. Don't just borrow for everything and wait to figure it out later.

Graduating on time and within a reasonable budget can take some serious planning, but it's possible. Some people even manage to get through college without taking on student debt at all, or to pay their debt off early through careful budgeting and saving. Following their examples can help you find the financial path that's right for your needs and goals.

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