DAVE RAMSEY

If it’s right for you, no-loan college may be answer to student-debt crisis

Jun 12, 2022, 5:45 AM
(Unsplash Photo)...
(Unsplash Photo)
(Unsplash Photo)

Student loans have become quite the hot-button topic. And it’s no wonder why. According to the Federal Reserve, the United States owes over $1.6 trillion of student loan debt — yeah, that’s trillion with a T.

It seems like everyone is trying to solve this problem with some good (and some not so good) solutions. So, how can you tell the good from the bad? Let’s start by exploring one of the concepts that’s been gaining traction: no-loan college.

If you’ve never heard of no-loan college, it’s pretty much what it sounds like. Basically, students who are deemed unable to afford tuition are offered financial aid without the expectation of repayment.

Instead of taking out federal or private loans, students receive funding for tuition that comes from grants or endowments — kind of like a scholarship. In 2001, Princeton was the first university to introduce the no-loan concept, and over the last 20 or so years, about 40 other colleges nationwide have followed suit.

This is especially great for students coming from low-income backgrounds, because if they can get into the school, they’ll have a full ride. And it’s great for the college as well because, statistically, it allows them to have some of the top students.

By eliminating the financial element, all-star but lower-income students who might have been deterred by a school’s price tag are back on the table. And when a school gets these students, their rankings go up.

Now, no-loan college sounds pretty awesome, and it is. But here’s the catch: Generally, only smaller, private colleges —think Ivy League — can go no-loan because of endowments, which is just a fancy word for a fund supported by charitable contributions. And these small, private Ivy League schools have much, much lower acceptance rates.

Another catch is that what you can afford is determined for you by factors like the FAFSA or the university’s aid packaging. That means they may overestimate what you can afford.

Maybe their formulas determine you can pay $20,000 a year, and then they’ll supplement the rest. Even if that $20,000 is a financial impossibility for you, you’ll still have to make up the difference.

This funding may also not cover things like transportation costs or child care, leaving those expenses up to you as well. And if the balance of all that is still too much, the government is more than happy to offer you a loan, which is what you were trying to avoid with the whole no-loan thing in the first place.

So, should you try to get into a no-loan school? If they have what you’re looking for as a student, absolutely! While it might require a lot of hard work to get into these exclusive schools, graduating debt-free would be worth it.

But whether you get into one of those schools or not, you can (and should!) still go to school debt-free.

Take it from someone who frequently talks to people in deep student loan debt: If you think you’re worried about money now, it’s nothing compared to the stress and pain of life with student loan payments.

I mean, depending on the repayment plan and loan amount, it can take anywhere from 10 to 30 years to repay student loans. According to a Ramsey Solutions research study, 63% of student-loan borrowers worry consistently about paying back the money, and 44% of them say they can’t even buy a house because of their student-loan debt. Yikes.

The good news is, you can graduate debt-free. There are so many ways to cash flow a degree or get trained for an awesome career without borrowing. So, if you’re feeling anxious about the best ways to pay for college without student loans, let’s look at the options.

Find scholarships and grants – You can find free money by filling out the FAFSA form, researching organizations in your field of interest that offer scholarships, and using online scholarship search tools.

Choose a school you can afford – That might mean starting out at community college or going to a public, in-state school instead of a private university (there really is a huge difference in tuition costs). It might mean going to a trade school or vocational school—and that’s totally okay. If you find yourself asking if college is really worth it, remember: The only real “dream school” is the one you can afford to go to debt-free.

Work – Yep, even when you’re in high school. A part-time job or side hustle won’t hurt your grades if you keep it to 20 hours per week or less, and you’ll make bank for your college fund. Once you’re in college, look for an on-campus job or work-study program, or apply to be a teaching assistant. Also, companies like Starbucks, Amazon and Walmart have tuition assistance programs—and some of them even cover all tuition expenses while you work for them.

Be smart about your lifestyle – Going to college doesn’t mean you have to live in a fancy dorm room with a $10,000 meal plan. Live at home if you can. Stop eating out with your friends every weekend. Split groceries, rent and utilities with a roommate (or three). Get creative and find other ways to cut down on costs. And this part is crucial: Stick to a budget. That will make all the difference in helping you take control of your money.

The decisions you make today will have a lasting impact on the financial stability of your future. Regardless of whether you’re assisted by a no-loan college or not, you are the one who has to take the right steps now and set yourself up for a lifetime of success (including freedom from those monthly payments). Now, let’s make it happen!

Dave Ramsey

(Pixabay Photo)...
Dave Ramsey

Dave Ramsey says: Gambling won’t produce consistent financial success

You might see a news story once in a while about someone winning big money in a casino, but that almost never happens.
7 days ago
(Pexels Photo)...
Dave Ramsey

Dave Ramsey says: Couple with baby should marry, combine finances

It’s very difficult, legally and relationally, to play house financially when you’re not married. Marriage will combine incomes and lives, Dave Ramsey says.
14 days ago
(Pexels Photo)...
Dave Ramsey

Dave Ramsey says: Review insurance coverage once a year

You should make it a habit to review all your insurance coverage once a year. When it comes to your home especially, you need to have a policy equal to the value of the home.
21 days ago
(Pexels Photo)...
Ken Coleman

Creating your personal brand takes time, hard work

Your personal brand is how others perceive you. It’s an outside snapshot of what you value on the inside. A personal brand isn’t a mask you wear around others, and it’s not something that’s created overnight.
23 days ago
(Pixabay Photo)...
Dave Ramsey

Dave Ramsey says: Expectant parents can live off 1 income if they choose

There's no wrong answer for an expectant mom comparing the ideas of continuing to bring extra cash to the household or being at home with the baby.
28 days ago
(Pexels Photo)...
Kristina Ellis

How to save money when you’re in college and avoid debt

College can be a lot of things — fun, exciting, challenging, exhausting, rewarding, but “cheap” doesn’t usually make the list.
30 days ago

Sponsored Articles

...
Carla Berg, MHS, Deputy Director, Public Health Services, Arizona Department of Health Services

Vaccines are safe if you are pregnant or breastfeeding

Are you pregnant? Do you have a friend or loved one who’s expecting?
...
Day & Night Air

Tips to lower your energy bill in the Arizona heat

Does your summer electric bill make you groan? Are you looking for effective ways to reduce your bill?
...
Canvas Annuity

The secret to guaranteed retirement income

Annuities aren’t really a secret, but they are so misunderstood that they might as well be. Once you understand what an annuity is and how it can benefit you, you could decide this “secret” is the perfect supplement to your retirement plan.
If it’s right for you, no-loan college may be answer to student-debt crisis