Student debt

Student debt is money owed on a loan taken to pay for educational expenses. A fast and rising education costs make a student loan one of the necessary options to pay for college.

There are many ways to save money for education, despite this, there is a huge increase in student loans.

So why is a student loan growth over the years?

This happens due to a rise in the cost of higher education. The price of that education at many institutions increasingly so high, that it is impossible to cover the costs without additional financial assistance.

Today, student loan debt has become a big trouble in the U.S. economy. Statistical data show that the student debt currently gripping the nation at a hefty $1.4+ trillion. In fact, it is the second leading form of debt in the United States, right behind mortgage debt.

Yes, it is possible that students save some money for their education. But with the escalating price of education at many institutions, that savings will not be enough. In fact, all this increasingly narrows the plausibility of covering such costs without some form of financial assistance.

All of this is a concern for most people including students, graduates, parents, employers, and politicians alike.


If you have student loan debt, find out how to manage it responsibly before it becomes a hardship on your future!


How to avoid student debt???

Create a strategy for your child education savings plan

Every family is different. So, you have to plan and decide on the savings strategy that suits you best. Take special care on your cash-flow patterns and investment style.

Starting early would help you to realize your goal easily

Smart investing is important! But, the fact is that you simply can’t make up for the lost time when it comes to investing. The best time to begin your child educational savings plan is in your child’s first year. But if by then you didn’t start, do not worry, it is never too late to start.

Contribute Often

Make a plan of monthly, quarterly or annual contributions. Start as little as US$50 per month. Don’t think that this is a small amount, after 18 years of good investment, it will be enough to pay for all your educational expenses. That is the power of compounding. Make it your friend.

Also, setting up an automatic withdrawal from your bank account for transfer into your child education fund can be a very smart idea. This will ensure that you do not forget a payment.

Inform grandparents and relatives about your plan. They may decide to contribute to the fund over time instead of a birthday gift. You will agree that this is a great alternative.

TIP: If your child decides not to go to college or university, don’t worry.  At first, you may be disappointed, but look at the situation as a whole. Your child may want to be an entrepreneur. Therefore, this money can enable him to start his business.

Think of their education saving fund as an opportunity fund that can support your children’s plans for their future.

Focus On Preservation Of Capital And Steady Income

Keep in mind that this is an investment for your child, not for you. So, if you comfortable to take over the risk associated with your investment don’t do that with your child funds. That fund should not be exposed to significant risk, for example, in a volatile stock portfolio.

You should invest in stable, long-term investments that preserve the capital you put in. This will allow for steady income and modest growth over the duration of your holding. Bonds, bond funds, balanced stock-bond mutual funds, deferred annuities, endowments, and even money market instruments can be ideal for education savings.

TIP:  Get informed about tax benefits. Take advantage of any tax deduction opportunities available that reward educational savings.

What options do I have to save for my child’s education?

Roth IRAs

The Roths are one savings vehicle that is often overlooked as a way to fund a child’s college education. Most people consider that Roth IRA is a great method to save for retirement. And Roth certainly is, but also can be used as a great tool to help you cover Junior’s university tab.

Roth IRAs give you freedom and flexibility on how to invest your funds. You can generally choose to invest your money in nearly any type of investment. Also, you will have complete control over fees paid if you decide to use mutual funds or ETFs.

Keep in mind that the money isn’t tax-deductible. But all of the growth and qualified distributions are paying for school, buying the first house, and, eventually, retiring.


After five years, you can withdraw principal (but not growth). And, yes you can withdraw even if it’s not for a qualified purchase.

Coverdell ESA

Coverdell ESA is a tax-advantaged investment account designed to cover future education. The downside of an ESA is that your contributions are limited to $2,000 per beneficiary, per year. That money needs to be used for qualified education expenses, such as tuition and room and board.

529 Plan

529 Plan is a saving account, often operated by a state or by a university, offering tax benefits, while minimizing the impact on financial aid. The contribution limit depends primarily on the plan you choose but is usually considerably higher than the $2,000 yearly limit for the Coverdell ESA. The funds you contribute is intended to cover the costs associated with education and other related costs.

Standard Savings Account

 If you choose this saving way you will deposit your college savings in a standard bank savings account. You will miss out the tax advantages of a 529 plan or Coverdell ESA when you pick a basic savings account. But in this case you aren’t limited only to using your money to pay for college, you can use it for another purpose as well.

Savings accounts are also a low-risk way to save for school because there are federally insured. Usually, don’t have the best rate of return

Before You Start School – for students

It would be ideal if you began to think about how to pay your student debt, years before applying for a school.  

Definitely, it would be helpful if your parents help you and save money for your schooling when you were young. But, don’t worry even if they haven’t, there are still ways to minimize your potential student loan debt

Get a Job and Start Saving Early

Find a part-time job after school or on weekends or during your summer breaks. You will learn how business works and earn money. There are no age limits in place for jobs such as delivering newspapers, babysitting or doing chores in a private home. For official, paying job you usually need to be at least 14, according to federal law. You should check this because some states have different age requirements.

And when you find a job you must decide how much you will save for college and how much you’ll keep for your expenses and for recreation.

Think about college savings. You have several account options. Each comes with their own benefits and drawbacks:

Give High School Your All

In high school, you should prepare for the SAT or ACT so that you get the highest score possible. You can even take the tests several times to get the best score possible. This also means that you achieve the highest grades you can.

Or if you are good at sport or any other extracurricular activities you can get a scholarship.

Apply for scholarships. Each scholarship you receive will drastically reduce the cost of your education.

Fill Out Your FAFSA as Soon as Possible

It’s important to submit your FAFSA application (Free Application for Federal Student Aid) Submitting it is your key to accessing grants, scholarships, work-study programs and federal student loans, so don’t miss out on free money and low-cost loans for school. Also, submit the FAFSA each year you’re in college. Filling out the application is easier than you think. It only takes 30 minutes on average to complete when you’re prepared. And it’s free!

It doesn’t hurt to fill out the (FAFSA) application, even if you think you and your parents earn too much money to qualify for need-based financial aid. You can complete this application before you decided which school you’ll attend. This approach can even help you weigh the aid offered by one school against the aid offered by another. Also, this will decrease your future student debt.

How Student Debt is Paid Off

Definitely, one of the best strategies to pay off student loans faster is to make an extra payment. Because there are no prepayment penalties, you should use this advantage and make extra payments of any amount.

NOTICE: You must contact your lender and let him know that you will make a few extra payments during the year. You need to specify that you want to apply for any extra payment above the minimum payment to principal only (not to next month’s monthly payment). You want to limit the amount of interest that accrues.

Pay more than the minimum payment.

You can pay more than the minimum without penalty. You should definitely try this strategy because paying any amount more than the monthly minimum can reduce your student debt.

Apply for loan forgiveness

Student loan forgiveness can help a lot, and there is no matter if you are struggling with huge debt or looking for “free money” to pay off your student debt. Research various opportunities and find the right student loan forgiveness programs for you. Some states are even helping debt-saddled graduates pay off their loans.

Refinance your student loans

This is one of the most used strategies to lower your student loan rate. Refinance enables you to pay off your existing student loan and assume a new student loan with a lower interest rate (usually  2.50% – 3.00%)

Also, you can choose between fixed or variable rates and loan terms ranging from 5 to 20 years.

In order to apply for refinancing, you have to meet certain requirements and criteria which may include your credit profile, minimum income, debt-to-income and monthly free cash flow. Also, if you want to maximize your chances to be approved, you should apply to many lenders as can.