Personal Finance Posts

How to Graduate from College Debt-Free

A college diploma can be a dream come true. It can mean a more secure financial life, proud friends and family, and a well-deserved sense of accomplishment. Unfortunately, it can also mean being haunted by student loans for the next twenty years. But what many graduates don’t know is that it’s possible to graduate from college debt-free.

How to Graduate Debt-Free

Generally speaking, there are two ways to grow money: either increase your cash flow from sources like profits or wages, or decrease expenses, like interest from debt.

These two ideas, increase income or decrease expenses, lay the foundation for graduating without debt, and we’ll explore them in detail below.

But first, let’s talk about the state of student loans in America.

Student loans: college baggage

The cost of higher education does pay off in the long run, but in the short-term, student loans potentially eat your profits in the years immediately following graduation.

College costs include not only tuition, but also other large expenses like books and housing.  With these ever-increasing costs, it’s clear that for most students in America, college loans are a necessity. 

The numbers don’t lie: 

  • Student loans for the 2017 graduates average $39,400, according to Student Loan Hero.
  • Around 71% of 2012 graduates from a four-year institution currently has a student loan.
  • CollegeBoard found out that tuition for college has increased by 213% from 13 years ago. To put that in perspective, inflation has only gone up about 30% in that same span of time. 
  • One of the leading College News websites, USA Today College, dug deeper and found out that from 2017 to 2018, college costs rose by as much as 4% while inflation was at 2.2%.
  • The worst news: around 11.2% of people with student loans have not paid the debt for 90 days already, according to the latest Federal Reserve report released in March of 2018.

Can you even imagine the impact of student loans? In a graduating class of 200, around 140 people would have almost $40,000 in debt that they have to pay straight out of their pockets, and more than 20 people won’t be able to the debt at all. 

Loan-free, stress-free: getting a diploma without the loans

Don’t worry, college debt is not all gloom and doom.

There are two main ways that you can get a college diploma without needing student loans. Even better, these strategies are not traditional academic or athletic scholarships. So anyone can get these virtually free college diplomas.

That said, there are no free lunches. The following have conditions that you need to meet, or restrictions for the few years following graduation. There are other considerations as well, especially regarding how you manage your time in college.

Uncle Sam cares: free college education by selected states

Due to lobbying from local and federal government bodies as well as charity and civic groups, have encouraged an environment where education is not barred due to financial reasons and to make the local workforce more competitive and educated. Here are 2 states that offer free college tuition.

  1.       New York- Excelsior Program

2-year and 4-year college education in all state and city colleges are free due to state legislation, which makes them debt-free. To qualify, the student’s family must be a resident in New York. The student must also earn 30 academic credits as the minimum each academic year. There are also no age limits so you can start early as long as the college accepts you. Family annual income has caps as well; for 2017, it was $100k and for 2018, it is $110k while for 2019 it will be $125k.

After graduation, the student is expected to stay in the state for the number of years they are studying. Also, the state will only pay for college tuition and a few miscellaneous fees; board and lodging and other expenses are carried by the student.

  1.       California – Transfer Tax to fund a college education

The City College of San Francisco is fully state-funded. In November 2016, The city has voted for a revision in the transfer tax, which will fund the state college, as per a CNBC report.

The better news? There are no income caps for people who qualify. Qualifying to get the college-free tuition is also relatively easy; you only have to be a resident for at least a year.

On the other side, the college only offers 2-year courses.

This free college education setup will benefit around 28,000 to 30,000 students since the City College would totally be tuition free.

New York and California are notable states for their determination to make college education accessible. They are not alone in this crusade for the democratization of college education though; other states are joining as well. If you reside in or are planning to stay at the following states, you may have a chance at getting a debt-free diploma.

  •         Oregon
  •         Rhode Island
  •         Tennessee
  •         Arkansas
  •         South Dakota
  •         Louisiana
  •         Minnesota

Another interesting development is the Michigan Promise, where a group of charities, schools and anonymous donors are funding the education of residents for college education in universities across Michigan.

There are also other ways to have a debt-free diploma. You can enroll in military academies or serve in the military. You can also apply for federal or state aid. Scholarships are also available for students who qualify.

An investment in knowledge pays the best interest so Benjamin Franklin would say. Do not let student loans deter you from getting a great education. Education is the best investment, even if the economy collapse, your knowledge, experience, and skills will remain with you.

Talk about how college expenses can be tax deductible.

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