Alternatives to Student Loans: Compare Low-Debt Options

When scholarships and grants for college don’t work out, student loans are not your only option. There are many loan alternatives that can help fund your college education, or help cut the costs of college.

Student Loan Alternatives Compared

Early Planning: Your Best Financial Aid Strategy

One of the most powerful ways to avoid excessive student debt is to start planning early. By researching scholarships, grants, and low-debt programs in your junior or senior year of high school, you give yourself more time to uncover opportunities that don’t require repayment. Many scholarships have early deadlines — sometimes a year before college starts — and funds are limited. Create a calendar or checklist to track deadlines, required materials, and follow-up actions. Early planning also gives you time to improve your eligibility by boosting your GPA, test scores, or community service hours.

Tuition Payment Plans: Spread Out the Cost Without Loans

Many colleges and universities offer tuition installment plans that allow students and families to break up the cost of tuition into monthly payments instead of paying one lump sum each semester. These plans are typically interest-free but may include small setup or administrative fees. They can be a great option for families with steady income who want to avoid taking out loans. Be sure to ask your school’s financial aid office if they offer a payment plan, and what the terms are.

Employer Tuition Assistance: Earn While You Learn

Some employers offer tuition reimbursement or education assistance programs as part of their benefits package. These programs may cover a portion (or all) of your tuition costs if you agree to work for the company during or after your studies. Large employers like Amazon, Target, and Starbucks have launched well-known tuition assistance programs, but many smaller employers offer them too. If you’re currently working — even part-time — ask your HR department about available options. Keep in mind: some programs require you to study in a field related to your job, and many have GPA or grade requirements.

Save Big by Starting at a Community College

Most community colleges are about a third of the cost compared to a four year college or university. If you check with your local community college most have college transfer programs set up with a number of surrounding area 4-year college and universities. These college transfer programs often allow the college student to complete the first two years at the community college, with guaranteed admission the third year to a 4-year college or university.

Many community colleges offer transfer agreements with nearby four-year colleges and universities. These agreements, often called “articulation agreements” or “2+2 programs,” allow you to complete your general education requirements at a community college, then transfer to a four-year institution as a junior to finish your bachelor’s degree.

Bonus: Some programs even offer guaranteed admission to partnering universities — meaning you can plan your full college path from day one, with huge cost savings along the way.

Before enrolling, talk to an academic advisor at your local community college to confirm which credits will transfer and which four-year schools participate in their transfer programs.

Earn College Credit Through CLEP Exams (And Save Hundreds)

College Level Examination Program (CLEP) gives college students the opportunity to earn college credit, by passing CLEP examinations. For example, if you are required to take a 3 credit American Literature course for your college degree major, you could instead take the CLEP American Literature examination, and if you pass you would receive those 3 course credits and not be required to take the American Literature course at your college or university.

Why is this a smart alternative to student loans? Because CLEP exams cost just $80 (plus a small test center fee in some cases). Compare that to the cost of a traditional 3-credit college course, and you could save hundreds — or even thousands — of dollars.

Each CLEP exam can earn you 3 to 12 college credits, depending on your school’s transfer policy and the subject. There are more than 30 CLEP subjects available, including science, math, literature, business, history, and foreign languages.

Before registering, always check with your college or university to confirm their CLEP credit policy. Some schools have specific rules about which exams they accept and how the credits apply to your degree.

Bonus: CLEP exams are free for active-duty military service members, thanks to funding through DANTES.

You can find and register for a CLEP exam through an approved CLEP testing center near you.

Federal Work-Study: Earn Money While You’re in School

The FWS Program provides funds that are earned through part-time employment to assist students in financing the costs of post secondary education. Students can receive FWS funds at approximately 3,400 participating post secondary institutions. Institutional financial aid administrators at participating institutions have substantial flexibility in determining the amount of FWS awards to provide to students who are enrolled or accepted for enrollment. Hourly wages must not be less than the federal minimum wage. Financial need is determined by the Department of Education using a standard formula, established by Congress, to evaluate the financial information reported on the FAFSA and to determine the expected family contribution (EFC).

More than 3,400 colleges and universities participate in the program. If your school offers FWS, you can apply for a variety of jobs — from working in the library to assisting in a campus office or even tutoring other students. Some off-campus positions are available through community service partnerships as well. Your eligibility and award amount are determined by the information you submit on the FAFSA. Financial aid administrators at each school have flexibility in deciding how much you can earn, based on your financial need and the school’s available funding.
Work-study jobs must pay at least the federal minimum wage, though many pay more depending on the type of work and your experience level. Unlike regular part-time jobs, work-study earnings typically don’t count against your financial aid eligibility in future FAFSA calculations.
Tip: Check the box for “interested in work-study” when filling out the FAFSA to be considered for this program. Then follow up with your school’s financial aid office to ask about available positions.

Federal Work-Study vs. Regular Part-Time Jobs

Join AmeriCorps

AmeriCorps is a network of local, state, and national service programs that connects more than 70,000 Americans each year in intensive service to meet our country’s critical needs in education, public safety, health, and the environment. AmeriCorps members serve with more than 2,000 nonprofit’s, public agencies, and faith-based and community organizations. Since 1994, more than 400,000 men and women have provided needed assistance to millions of Americans across the nation through their AmeriCorps service. AmeriCorps rewards both part and full time service members with money towards their college educations.

Save on College Costs with Education Tax Credits

Tax incentives can be one way to help reduce the costs of your college education. There are different tax credits and deductions that specifically correlate with college education expenses.

Tax incentives can significantly reduce the out-of-pocket cost of college — but many students and families overlook them. The U.S. government offers several tax credits and deductions specifically for higher education expenses, including tuition, fees, books, and more.

The two most common options are:

• American Opportunity Tax Credit (AOTC): Up to $2,500 per eligible student for the first four years of college.
• Lifetime Learning Credit (LLC): Up to $2,000 per tax return for undergraduate, graduate, and professional education.

You may also be able to deduct student loan interest and qualified education expenses depending on your income and filing status. These tax benefits can help reduce the amount of taxes you owe — or increase your refund.

To learn more about how education-related tax credits and deductions work, visit:
College Tax Questions: Deductions and Credits.

Military Service

Military service is not for everyone, but those who are interested in serving their country can find many financial benefits for gaining their college education. For example, the U.S. Armed Forces provide service members with multiple programs which provide money for a college education. These programs are often flexible, allowing students to serve either before or after receiving their college education, and depending on the students time commitment to service can receive between $25,000 – $50,000 towards college. Students from countries other than the United States, are encouraged to check out if their military service offers similar college programs.