As a parent, you’re probably no stranger to the financial strain college can impose. With rising tuition costs, fees, textbooks, and living expenses, it’s easy to see how many families feel overwhelmed. The idea of your child taking on significant student loan debt right out of the gate is unsettling for most parents. Fortunately, there’s a way to ease the burden: outside scholarships.
Outside scholarships offer valuable financial assistance to help your child cover college expenses without accumulating debt. But how do you, as a parent, guide your high schooler in finding and applying for these scholarships? The process can feel like navigating a maze, but with the right information and approach, it’s manageable — and well worth the effort.
This guide will show you how to support your child in securing outside scholarships, from discovering where to find them to crafting a winning application. Let’s explore the steps together.
Why Outside Scholarships Matter for Your Child’s College Education
While many parents are familiar with financial aid options like the Free Application for Federal Student Aid (FAFSA) for need-based financial aid like the Parent PLUS loan or school-specific scholarships like merit aid, outside scholarships are often an untapped resource. These scholarships are offered by private organizations, businesses, foundations or individuals, and they come with a number of distinct advantages.
First, outside scholarships aren’t tied to a specific college or university, so your child can apply to a wide range of opportunities, regardless of where they plan to attend. This significantly broadens the pool of potential aid.
Moreover, outside scholarships often have unique criteria, allowing your child to stand out based on talents, interests, or other characteristics. Some awards may be merit-based, while others may focus on extracurricular involvement, leadership, or community service. And many are not tied to financial need, so even if your family doesn’t qualify for need-based aid, your child might still be eligible for outside scholarships.
Simply put, these scholarships can help reduce your child’s reliance on loans and ease the financial stress for your family. But where should you and your child begin the search?
Preparation for the Scholarship Application
When applying for a scholarship, preparation is absolutely essential. It’s not just about submitting an application; it’s about presenting a complete and compelling package that makes your child stand out among the competition. To start, ensure that all the required documents are organized and up-to-date, including transcripts, test scores, and a detailed resume that highlights their extracurricular activities, community involvement, and any leadership roles. A well-crafted essay is also crucial, often being the key component that distinguishes one applicant from another.
The essay should be personal, insightful, and tailored to the scholarship’s focus, giving the committee a sense of your child’s passions, goals, and why they’re deserving of the award. Letters of recommendation are another important part of the application process. Help your child select recommenders who know them well and can speak to their strengths in detail, whether it’s a teacher, coach, or community leader.
Once everything is in order, it’s important to review the entire application multiple times for any mistakes or missing information. In addition to preparing these materials, it can be helpful to review past successful scholarship applications to understand what committees are looking for. For this, you can explore the resource Edubirdie docs page, where you’ll find a treasure trove of student notes, essays, and other academic documents. This page is a great place to see examples of strong student work, which can provide inspiration or a benchmark as your child prepares their own application. The more prepared and thorough your child is, the better their chances of securing that much-needed scholarship!
Where to Find Outside Scholarships
The scholarship search can feel daunting, but there are plenty of accessible resources to help your child get started. Here’s a list of effective places to look for scholarships that will make a difference.
1. Online Scholarship Search Engines
One of the easiest ways to start the scholarship hunt (and skipping the student loans!) is by utilizing online search platforms designed to match students with scholarship opportunities based on their background, academic performance, and interests. Some of the best websites include:
Fastweb: One of the most comprehensive databases of scholarships, tailored to each student’s profile.
Scholarships.com: Offers an extensive list of opportunities, along with helpful advice and tips.
Chegg Scholarships: Not only for textbook rentals, Chegg has a reliable scholarship search function.
Cappex: Known for its easy-to-use search engine and personalized scholarship matches.
Encourage your child to create an account and fill out their profile thoroughly. The more detailed their profile, the better the platform can match them with scholarships that fit their qualifications.
2. Local Community Organizations and Businesses
While national scholarships get a lot of attention, don’t overlook local opportunities. Many community organizations, local businesses, and even religious institutions offer scholarships to students in their area. These awards are often smaller but come with less competition, which increases your child’s chances of winning.
Encourage your child to check with local Rotary Clubs, Lions Clubs, and chambers of commerce. Small businesses, such as local banks and credit unions, also frequently offer scholarships. Reaching out to these organizations can pay off in unexpected ways.
3. High School Counselors and Financial Aid Offices
School counselors are often a gold mine of scholarship information. Many high schools keep lists of scholarships specifically available to their students or know about opportunities that aren’t widely advertised. Encourage your child to regularly check in with their school counselor or college guidance office for updates on outside scholarships.
If your child has already selected their prospective colleges, have them reach out to the schools’ financial aid offices to see if they maintain lists of external scholarships that their students frequently apply for.
4. Professional and Industry-Specific Scholarships
If your child is passionate about a particular field of study, there may be professional organizations that offer scholarships specifically for students entering that field. For example:
The American Institute of Architects (AIA) offers scholarships to future architects.
The National Society of Black Engineers (NSBE) provides financial support to students pursuing engineering careers.
The American Medical Association (AMA) has scholarships for students aiming for a career in healthcare.
Encourage your child to explore professional organizations in their field of interest — they often have scholarships designed to support the next generation of professionals.
5. Unique or Niche Scholarships
Scholarships come in all shapes and sizes, and some of the most interesting ones focus on niche qualifications or unique talents. Some scholarships are awarded based on seemingly quirky criteria, such as being left-handed or crafting prom outfits out of duct tape.
Here are a few examples:
The Duck Brand “Stuck at Prom” Scholarship: Awards students for creating prom outfits made entirely of duct tape.
The Vegetarian Resource Group Scholarship: Offers funds to students who promote vegetarianism in their communities.
The National Make It With Wool Competition: Rewards students who demonstrate skill in sewing or knitting woolen garments.
Encouraging your child to think outside the box can open doors to scholarships they might not have initially considered.
How Parents Can Support the Scholarship Application Process
Now that you know where to find scholarships, it’s time to focus on the application process. While your child will be doing the heavy lifting, there are several ways you can help make the journey smoother and more successful.
Scholarship deadlines can sneak up quickly, and missing just one requirement could mean losing out on an opportunity. Help your child create a spreadsheet or calendar to track deadlines, required materials, and submission dates. Keeping everything in one place will make the process much more manageable.
Every scholarship will have its own unique set of requirements. Some may request transcripts, while others will require essays, letters of recommendation, or specific formatting. Go over the instructions with your child to ensure nothing is overlooked.
Many scholarships require an essay as part of the application process, and this is where your child can truly shine. Encourage them to write essays that are personal, engaging, and relevant to the scholarship’s focus. Avoid generic responses. Scholarship committees want to know why your child is deserving of the award—and storytelling can make a big impact.
Essays are often the deciding factor for competitive scholarships, so this is where you can provide valuable support, whether that’s brainstorming ideas or proofreading drafts.
Some scholarships require letters of recommendation from teachers, coaches, or community leaders. Encourage your child to ask for these letters early, giving their recommenders plenty of time to write a strong, thoughtful endorsement. It’s also helpful to provide the recommender with specific details about the scholarship and a list of your child’s achievements to make their job easier.
Encourage your child to submit applications early, rather than waiting until the last minute. This will help avoid any technical glitches and give your child extra time for revisions if necessary. Make sure they double-check each submission for errors—scholarship committees won’t look kindly on typos or incomplete applications.
While helping your child through the scholarship process, watch out for these common mistakes:
Neglecting small scholarships: Smaller awards can add up over time, so encourage your child to apply for them as well.
Missing deadlines: Organization is key — don’t let an application fall through the cracks because of a missed deadline.
Overlooking follow-up: If your child wins a scholarship, remind them to send a thank-you note to the organization. This simple gesture can help maintain relationships and potentially lead to more opportunities in the future.
As a parent, supporting your child’s pursuit of outside scholarships can significantly reduce the financial burden of college. With the right resources and strategies, your family can unlock valuable funding opportunities that will help your child achieve their academic dreams without excessive student loans.
The key is to start early, stay organized, and encourage your child to pursue a range of scholarships, from local opportunities to niche awards. The journey may take some effort, but the potential rewards — a debt-free college experience — are more than worth it. After all, wouldn’t it be great to see your child graduate without a mountain of debt looming overhead and find ways to pay for everything beyond tuition, including room and board?
Your Child Can Get Outside Scholarships After High School
One of the most misunderstood ideas about getting outside scholarships is that many students think they can’t get them after high school, that they’ve “missed the boat,” but they can absolutely get outside scholarships after high school. I have a list of about 20 scholarships I want my current students to apply for after they’ve gone off to college!
Don’t give up on all the options, and take advantage of them. It’s never too late to achieve a debt-free degree!
Have you ever compared the tuition cost differences between in-state and out-of-state schools?
Did you gasp out loud when you saw out-of-state costs?
Yep, yep. It’s often thousands of dollars more expensive to go to an out-of-state university compared to an in-state university, and it’s because families don’t pay for these out-of-state institutions through their taxes, so their education costs are not subsidized and they receive higher costs.
It often makes students’ decisions easy. If your child’s comfortable with the idea of going to the flagship university in your state, he might think, “It’s cheaper, it’s close to home. Sign me right up.”
Should you migrate to your in-state university? Well, that depends! Don’t discount your neighboring states — and know a few things before you jump on the local state university bandwagon. Here’s what to know and how to get in-state tuition from out of state.
What is In-State Tuition?
In-state tuition refers to the lower cost of attending a public college or university for students who are residents of the state where the institution is located. This reduced rate is offered because public institutions receive state funding to help cover the cost of educating students who are from that state. Balancing coursework with tuition research can be challenging, so some students turn to quick assignment help to stay on track academically. To qualify, students usually need to meet specific residency requirements, such as living in the state for a certain period (typically 12 months) before enrollment, or having parents who are state residents.
In-state tuition is generally much more affordable than out-of-state tuition, which is the rate charged to students from outside the state. State governments subsidize in-state tuition, making it more affordable for residents, and it takes away some of the stress of paying for college. You have enough to worry about, including getting your child through high school.
What is Out-of-State Tuition?
Out-of-state tuition refers to the higher cost that students pay to attend a public college or university in a state other than the state where they have legal residency. This fee structure applies to students who do not qualify as residents of the state where the institution is located.
Out-of-state residents are considered non-residents and do not qualify for in-state rates. Out-of-state tuition might be two to three times more than in-state rates. This is because non-resident students do not contribute to the state’s tax revenue, which helps subsidize public universities. Some states have agreements, or exchange programs, that offer reduced out-of-state tuition rates to students from neighboring states.
Many students try to qualify for in-state rates or seek financial aid and scholarships to mitigate the costs, which we’ll discuss below.
How to Get In-State Tuition if You Live Out of State
Getting in-state tuition while living out of state can significantly reduce college costs. Here are several strategies your child can consider for how to get in-state tuition out of state.
Establish Residency
Establishing residency is one of the most straightforward ways to get in-state tuition. Residency requirements vary by state and university. Living in the state for a certain amount of time is one common way to establish residency.
Move to the state early: Many states require students to live in the state for at least 12 months before establishing residency. Your child can prove residency with an apartment lease, utility bills or vehicle registration form, for example.
Prove financial independence: Your child can show financial independence to prove they don’t rely on out-of-state parents for support, which can involve having a full-time job, filing state taxes and paying rent or a mortgage in the new state. Your child may need to show employer proof as above or show proof that he pays taxes in that state.
Driver’s license and voter registration: Encourage your child to obtain a state driver’s license, register their vehicle in the state and register to vote. They may also want to consider having other evidence to prove residency, such as utility bills in their name, employment records or state income tax returns.
Be aware of rules: Residency requirements vary by state, so you’ll need to review specific policies at your child’s college. Also ensure your child will meet the residency requirements well before any deadlines, typically at least a year before they intend to start classes.
Tuition Reciprocity Programs
Some states have agreements that allow students from neighboring states to attend school at reduced tuition rates (not always full in-state tuition, but lower than out-of-state rates). Many universities offer regional markets and reciprocity agreements, meaning colleges or universities offer students in different states in-state or reduced tuition for students who live in the same region.
Here are a few tuition reciprocity programs that might be open to your child, depending on where you live:
Western Undergraduate Exchange (WUE): WUE enables students from one of 16 Western Interstate Commission for Higher Education (WICHE) states and territories in the Western U.S. to enroll as nonresidents in 160+ participating public colleges and universities.
Midwest Student Exchange Program (MSEP): Applies to several Midwest states, including Indiana, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Ohio, and Wisconsin.
New England Board of Higher Education (NEHBE) Tuition Break: Tuition Break covers New England states, providing savings for residents of the following six states: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont, and for colleges that participate.
Academic Common Market (ACM): For students in southern states pursuing programs not available in their home state, the ACM allows students in southern states to enroll in out-of-state public universities at in-state tuition rates if the program they are interested in is not offered by their home state. States include Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Tennessee, Texas, Virginia, and others. Students must meet residency requirements in their home state and gain acceptance into the qualifying program at the partner institution.
Generally, the process involves checking your eligibility (such as state residency requirements and participating universities), majors eligible, GPA, application and other school requirements. Finally, you’ll apply directly to the school to let them know you’re applying using the tuition reciprocity program.
University-Specific Programs
Some universities offer their own discounted tuition or in-state tuition rates for out-of-state students with certain qualifications, such as meeting merit-based scholarship requirements, athletic scholarships or legacy programs (where alumni children qualify for in-state tuition).
Check into the options available to your child based on your own alumni status! It could be a huge relief to your family, though I will recognize that many students don’t prefer to attend where “mom and dad” went to school! (That’s another topic for a different day.)
Military Service
Many states offer in-state tuition rates to active-duty military members, veterans or their dependents, regardless of where they live. If you’re a military member, check into this.
Attend a Border State School
Some states offer what’s called border-state tuition for residents of neighboring states. For example, Minnesota and Wisconsin have a tuition reciprocity agreement, allowing residents to qualify for in-state rates at public universities across state lines.
Special Circumstances or Exceptions
Some states allow students to take advantage of waivers in certain situations or exceptions. For example, those who have immigrant or refugee status may take advantage of these options, and so might dependent children of state employees or those enrolled in specific majors that benefit your state. The best way to find out about these involves asking the schools your child may be interested in attending. Ask many questions!
Online Programs
Many schools offer online degree programs at in-state rates for all students, regardless of where they live. However, each school and state has specific residency requirements for tuition, so review them carefully. Also, ensure that this is the right option for your child — it’s not the right fit for everyone, particularly if you think your child would thrive at an in-person institution.
Institution-Specific Waivers
Certain colleges and universities might also provide tuition waivers or reduced rates based on specific requirements, such as academic merit. Schools might also have special agreements for students from particular counties or areas of your state.
Our college used to offer an out-of-state scholarship for students who attended an out-of-state college in an effort to boost our out-of-state numbers. Offers like that may be achievement-based or merit-based, depending on differing schools’ requirements. Your best bet is to ask questions if your student’s looking into an out-of-state institution. Email or call an admission counselor at that school for more information.
Undocumented Students
Some colleges and universities may offer in-state tuition to undocumented students. Check into institutions your child is considering if they accept DACA recipients or those in similar situations.
26% of states offer in-state tuition to undocumented students
24% offer in-state tuition if the student meets statutory requirements
22% require undocumented students to pay out-of-state tuition
4% require undocumented students to pay international student rates
In 11% of states, policies differ by institution, and another 11% of states have no statewide policy on tuition rates for undocumented students. Alabama does not allow undocumented student enrollment by state law.
Of public four-year institutions:
25% of states offer in-state tuition to undocumented students
27% offer in- state tuition if the student meets statutory requirements
25% require undocumented students to pay out-of-state tuition
In 10% of states, policies differ by institution, and 6% of states have no statewide policy on tuition rates. Arizona offers undocumented students regional tuition rates, Missouri requires undocumented students to pay international student rates. Alabama, again, does not allow students to enroll by state law.
Some states extend in-state tuition to dependents of state employees or public service workers, such as police officers or teachers, even if they don’t meet other residency criteria.
Native American and Tribal Agreements
Some states have agreements to offer in-state tuition to members of federally recognized Native American tribes, regardless of residency.
Are You Eligible for Reduced Rates?
There are several exceptions to standard in-state tuition rates that may allow students to qualify for reduced rates, even if they don’t meet the usual residency requirements.
Financial Benefits of Securing In-State Tuition
One of the best ways to look at an example of an apples-to-apples comparison. Let’s look at out-of-state tuition vs. in-state tuition rates for an education major at Texas A&M University.
First, the out-of-state costs for an education major at Texas A&M University for one semester:
Total estimated cost of attendance with tuition and fees
$30,429
Now, compare that cost with in-state tuition for one semester:
Category
Cost estimate
Room and board
$6,504
Books and supplies
$552
Travel
$1,066
Loan fees
$30
Personal expenses
$1,657
Total estimated cost of attendance with tuition and fees
$15,584.35
You can save a lot of money by attending college in state, so consider all your options. Your child should have excellent reasons for attending an out-of-state institution, particularly if they won’t get great scholarships to attend.
Consider All Your Options
Note: Out-of-state and in-state designations generally do not apply to private colleges, as their tuition rates are typically uniform for all students regardless of residency.
In fact, I always smiled when someone asked, “What’s the out-of-state cost at your school?”
Why? Because I had great news for families. The cost wasn’t any different for out-of-state students because I worked at a liberal arts college.
Liberal arts colleges and private universities charge the same price no matter where you’re from, and here’s why: Unlike public colleges and universities, private institutions don’t get funding from state governments. Therefore, private colleges and universities charge one tuition rate for all students, whether your child resides in the same state as the institution is located or not.
For example, if a liberal arts college is in Florida but your child lives in Minnesota, you’ll pay the same price whether you live in Florida or Minnesota.
Email or call an admission counselor at each college your student’s considering. it’ll make you feel more prepared to make some decisions about the college search, or it’ll at least give you a start in the right direction!
FAQs
Check out a few frequently asked questions that might still be on your mind.
Will FAFSA cover out of state tuition?
Out-of-state students pay higher tuition and fees than in-state students. It’s difficult to predict whether you’ll ultimately pay more. Note that most out-of-state students will have a gap between the cost of tuition and fees and the amount of aid they’ll receive, so ensure you make the right decisions for your family so you’re not swamped by federal student loans or private student loans.
How do people afford to go to college out of state?
If your child really wants to attend a particular college out of state, reach out to the financial aid office to learn more about the full costs. Merit or need-based aid may cover some of the costs.
What are the cons of going to college out of state?
The largest disadvantage of attending an out-of-state college is that the costs are higher than in-state fees. However, some states offer discounts to students in several different ways, which we discuss in the article above.
Here’s how to get rid of student loans: Repay them yourself. No “magic plan” will make them go away faster than you can actively repay them on your own — not even government plans.
Naturally, you might be in a hurry to get rid of this debt as soon as possible. But what’s the best way to get the job done? Let’s discuss.
Why Income-Driven Repayment or Federal Programs Aren’t the Answer
Many people assume they can take on loans as part of financial aid and wait to enter into a repayment plan after graduation. They assume they’ll sit happy until everything gets forgiven at the end, as in the example of income-driven payment plans. (Your payment is based on your income, and you’ll continue to pay on them for 20 or 25 years until forgiveness swoops in to save the day.)
But ultimately, you may pay more over time if you rely on federal forgiveness programs, so those programs aren’t the answer, because the standard repayment plan is just 10 years. Why wait for 20 to 25 years? (Note that it’s completely understandable that many people have situations that cause them to need to have one job only — circumstances might prevent them from hustling or handling a second job.)
However, we need to keep the end goal in mind: getting rid of student loan debt. And note that learning how to get rid of student loan debt without paying doesn’t work. You can’t shake off student loans, and you might find yourself in a position of having your wages garnished to pay for student loans. You don’t want to be in that position, do you?
No! So pay attention to what’s going on with your loans and make a plan to pay them off. No more regrets about how you spent way too much money on room and board, how you spent so much on pizza when you lived in off-campus housing, or that you should have gotten in-state tuition. No more regrets. Now it’s time to focus on paying it off.
Here are the real ways to learn how to get rid of student debt. If you’re at the beginning of your journey, look into how student loans work.
Pay Extra Toward the Principal
There are a few parts that make up your student loans: the principal balance, or the amount you borrowed. It also includes interest, or what you’ll pay for borrowing the loan, and the fees the lender charges as well. You must make at least the minimum amount payment on your student loans.
Paying extra toward the principal will help you pay off your loans faster. The more you pay, the less interest you’ll owe. A student loan payoff calculator can tell you how quickly you’ll pay off your student loans and how much overall interest you’ll save over the life of your loan.
Here’s an example of how paying off student loans early can save you money with a $30,000 student loan and a fictitious interest rate of 5% per year:
Loan Amount: $30,000
Interest Rate: 5% per year
Loan Term: 10 years (120 months)
Monthly Payment: $318.20
Regular Repayment (10 Years):
Total Interest Paid: $8,184.24
Total Amount Paid: $38,184.24
Early Repayment (5 Years):
Monthly Payment: $566.14
Total Interest Paid: $3,968.08
Total Amount Paid: $33,968.08
Savings by Paying Off Early:
Interest Savings: $4,216.16
Time Saved: 5 years
By increasing your monthly payment and paying off the loan in five years instead of 10, you could save over $4,000 in interest. This example shows how even small extra payments can lead to significant savings and financial freedom sooner.
Make More than the Minimum Payment
One of the best ways to pay off your student loans is to make more than the minimum payment. Once you determine your budget (how much money you have coming in and going out) you’ll know exactly how much extra money you have in cash at the end of the month. If you can kick in just $50 extra at the end of the month, that’s okay — it’s better than nothing! If you can double your student loan payment, that’s amazing.
Don’t worry about how little you’ve increased it as long as you do something to increase your payment each month. As you receive raises and bonuses, you can consider upping your minimum payment. Some people also elect to get a side hustle to raise your minimum payment.
Here are some ideas:
Round up payments to the nearest $10 or $50
Make bi-weekly payments instead of monthly
Use windfalls like tax refunds or bonuses for extra payments
Allocate a portion of any pay raise towards extra payments
Apply extra income from side gigs or overtime
Cut discretionary spending and redirect savings to payments
Pay extra towards the highest-interest debt first
Use cashback rewards or rebates to make additional payments
Avoid adding new debt to maximize repayment efforts
Make additional payments directly after receiving your paycheck
Get on a Budget
Get on a budget. If there isn’t another phrase greeted by a louder round of groans, I don’t know what it is. Budgeting might seem like a huge bummer to a lot of people, but it doesn’t have to be, especially if you’re meeting your goals at the end of the month.
One of the best ways to get on a budget is to consider using a budgeting app. However, you don’t have to do that — if you’re disciplined, you can create a budget all on your own and stick to it, even if it’s in a simple spreadsheet.
There are five main steps to getting on a budget:
List your income. Tally up everything you make, including any side hustle money that you earn.
List your expenses. How much are you spending per month relative to the amount you earn? If you’re spending more than you earn, that’s a quick sign that you need to start watching your money.
Subtract your expenses from your income. What’s left over? How much money do you have left? Are you spending more than you earn?
Track everything coming and going. Keep track of your transactions so you know exactly how much you can budget per month. You may even have different budget categories, like groceries, clothing, etc. Keep in mind the important things on your list, like setting aside money for retirement and an emergency fund.
Make a new budget each month. Budgets can be fluid, which is a beautiful thing. You may want to challenge yourself to save more than you had last month, or put more toward your student loans than you did the month before.
Cut Spending
Can you cut your spending? Chances are, there’s something that you don’t need. Here are some ideas you can cut out:
Extended warranties
Gym memberships
Premium cable packages
Bottled water
Designer clothing
Name-brand medications
Banking fees
Luxury car features
Subscription boxes
Fancy coffee
After you get on a budget, you might consider searching for these items that you regularly spend money on. Who needs ’em? You don’t, especially when you’re trying to get rid of student loans.
Pay While in College
Paying on your loans while in college: Is it possible? Yes, and you may want to consider that approach if you have an unsubsidized federal loan. Unsubsidized loans means the government doesn’t pay for your loan while you’re in school, unlike subsidized loans. If you can tackle some of your costs while you’re a student, you can consider this possibility. Doing so may help you reduce your overall debt, reduce stress after graduation and give you a head start on paying for college.
If you’re still in school, look into a tuition payment plan to help you — it can break up the costs.
Increase Income
How might you increase your income? Can you get a side gig in the very popular gig economy? You might consider:
Freelance writing
Rideshare driving
Pet sitting/dog walking
Virtual assistant
Graphic design
Tutoring
Photography
Delivery driving
Social media management
Handyman services
House cleaning
Online surveys
Event planning
Blogging
Babysitting
Transcription services
Dropshipping
Personal fitness training
Freelance web development
Selling handmade crafts
Or what about a second job? If you have the energy to work two (or even three) jobs, it would be well worth it to pay off your student loans faster. Consider the following:
Retail associate
Bartender
Restaurant server
Call center representative
Delivery driver
Warehouse worker
Customer service representative
Administrative assistant
Security guard
Hotel receptionist
Uber/Lyft driver
Bank teller
Personal care aide
Janitor
Cashier
Night auditor
Fitness instructor
Receptionist
Freelance designer
Landscaping assistant
Or you can ask for a raise at your existing job, of course. Once you make a decision about how you’ll increase your income, you can put any extra hard-earned money toward your debt. It’s a fantastic way to get out of debt much more quickly than you might have been able to do previously.
Refinance Only if it Makes Sense
Refinancing means replacing your existing loans (federal, private or both) with a private loan. Refinancing doesn’t reduce the amount you owe — it changes your loan in some way so you owe less over your loan term. These are the ways it can change your loan positively:
Give you a shorter repayment period: Refinancing a loan can result in a shorter repayment period, which allows you to pay less interest over time. However, it’s important to note that with a shorter repayment period, it’s likely that you’ll have to make higher monthly payments on your student loan debt.
Lower your interest rate: Getting a lower interest rate is one of the biggest benefits of refinancing, because you can save money over your loan term if you have a lower interest rate. For example, if you owe $30,000 on your student loans at 7% and a term length of 20 years, you’ll pay more than $26,000 in total interest over the course of the loan. If you refinance to a 5% interest rate and keep the same 20-year term, you’ll save around $8,000 in interest.
Reduce your monthly payments: You can also lower your monthly payment through a refinance. However, it also increases your loan term, and a longer loan term means you’ll end up paying more in interest over time.
The borrower requirements generally vary by lender, but you generally must have good credit with an established credit history, stable income, a degree from an accredited college or university, and a certain amount in student loans.
Shop around with a few different private loan lenders to see if a refinance makes sense for you.
Don’t Bank on Government Plans
So much has been said about the benefits of sticking to government plans, like loan forgiveness programs or deferment or forbearance options. However, it’s a much better option to simply pay off your student loans yourself, as we’ve discussed. But why, exactly?
Here’s exactly why: Let’s take Public Service Loan Forgiveness (PSLF) as an example. You must make 120 qualifying monthly payments on your student loans and work for a qualifying employer (such as a government or nonprofit organization) to qualify for PSLF.
In other words, you must continue making payments for 10 years, plus you might give up on more beneficial routes of employment, including more lucrative job opportunities. (However, it is important to note that you can get certain forgiveness benefits if you work as a teacher, for the military or as a health care worker.)
Why drag out your student loans longer if you could finish paying them off in five years instead of 10? You’ll save money by not dragging them out. Income-driven repayment plans can also affect you in the long run as well because you pay based on your earnings and family size.
Federal loans also allow you to temporarily pause your payments through deferment or forbearance if you face financial hardship, unemployment, or if you’re returning to school. You will still accrue interest while your loans are in forbearance, so you’ll owe even more money over your loan term while they’re in forbearance.
Need an example? Let’s break down an example of how an income-driven repayment plan can end up costing a student more money over time with actual numbers:
Loan amount: $50,000
Interest rate: 5%
Annual income: $40,000 to start, increasing by 5% per year
Family size: 1
With the Standard Repayment Plan:
Repayment term: 10 years
Monthly payment: $530 (fixed)
Total payments over 10 years: $530 x 120 months = $63,600
Amount added to original loan amount: $13,600
With PAYE Repayment Plan:
Years one through three: Monthly payments are income-driven. Let’s say the payments start at $200 per month.
Total for first 3 years: $200 x 12 months x 3 years = $7,200
Years four through six: As income increases, the payments rise to $350 per month.
Total for next 3 years: $350 x 12 months x 3 years = $12,600
Years seven through 10: Payments continue to rise as income increases further, say to $450 per month.
Total for final 4 years: $450 x 12 months x 4 years = $21,600
Total payments over 10 years (before forgiveness at 20 years) = $7,200 + $12,600 + $21,600 = $41,400
But here are the hidden costs. During the 10 years, interest accrues on the loan balance. In this example, the borrower’s monthly payments early on ($200, $350) may not cover the full interest on the loan, leading to the loan balance increasing over time (negative amortization).
Even though the borrower only paid $41,400 over 10 years, which seems like a savings compared to the standard repayment plan, here’s where the cost comes in: They could have paid off the loan faster under a standard repayment plan and avoided the extra accrued interest. By the time year 20 rolls around, how much would you have paid under the income-driven plan versus the standard repayment plan, or better yet, paying your loans off early?
It’s quite possible that you feel like you don’t make enough to pay off your loans, but consider getting a second job or side hustle instead of believing you have to get on one of the income-based plans.
Watch Out for Consolidation
Consolidation means taking all of your federal student loans and turning them into one loan with one interest rate. It may not be a good idea to consolidate your federal student loans because what happens if some of your federal loans have a lower interest rate?
Consolidation can also lengthen your repayment period, so you’ll likely pay more in interest over the years. In addition to that, outstanding interest on your consolidated loans becomes part of the original principal balance on your new consolidation loan, meaning interest might accrue on a higher principal balance than if you’d kept your loans divided.
Consolidation might also mean lower interest loans might become higher when you put them all together. Ask questions about what it’ll mean for your loans before you opt to consolidate.
Consider All Angles When Getting Rid of Student Loans
The message: You and only you have the power to learn how to get rid of student loan debt. Student loans won’t magically disappear, unfortunately!
Wondering how to get rid of private student loans, including how to get rid of Navient private student loans or private loans from another provider? The same principles above can apply to private student loans as well.
The biggest thing is to plug away at them, and even if you have a low interest rate, consider what having student loans hanging over your head will do for you. If you owe money, that entity will control your life until you pay it back.
We’ll take a look at a few frequently asked questions about getting rid of student loans below.
Can you get student loans wiped out?
Yes, in very rare situations, you can have your student loans discharged, but that doesn’t happen very often. But what does that mean, exactly? When your student loans are discharged, you won’t have to pay back some or all of your loans. You may also qualify for forgiveness after successfully participating in a government plan, such as PSLF.
However, in many situations, these programs prolong your student loan debt and cause you to pay more over time. And if you’re waiting for a fairy godmother to come and wipe out your student loans, dream on!
What happens if I don’t pay my student loans?
After a 30-day-late payment, your loan servicer will charge you a late fee up to 6% of the amount due. After 90 days of no payments, your servicer will report your loan as delinquent to the credit bureaus. You don’t want that, because it can affect your credit score, potentially preventing you from buying a house or even affecting your ability to get a job (some employers check your credit!).
How do you pay off student loans when you’re broke?
I get it — it’s so difficult to understand how you’ll even put food on the table sometimes. However, consider getting a side hustle or part-time job to set aside money for paying off loans. Ask your buddy if he needs extra help in his junk hauling business, or use your skills you learned in college to create a side hustle that you and only you can do. The sky’s the limit, so use your imagination.
Most of us have been there: transitioning from high school to college puts us in the grownup league. This is the point where many things change, and we begin to think more maturely. One of the many things we begin to consider is a roof over our heads.
Things aren’t as simple as that; you shouldn’t dismiss the idea instantly. This guide will outline the options for students who want to buy a home while enrolled in college or university.
Should You Buy a Home as a Student?
Buying a house or an apartment is a big commitment, so the first question you should ask yourself is whether you should consider buying a property.
Even though this step has some pros and cons, the advantages outweigh the negative sides, so most people will say to go for it. Living under your roof means you won’t pay for a dorm room or rent, which can get costly, depending on the location.
This means you’ll need to account for mortgage payments, utility bills, and any other recurring costs. Additionally, using a moving cost calculator can help you estimate the expenses associated with relocating to your new home, so you can budget effectively.
The monthly payments will be higher, so a roommate can be a good idea. Having one means you can partially cover the payment and be more comfortable with your finances. Once you finish college, you can continue renting it and have an additional monthly income.
Committing to a home mortgage is recommended if you stay in the area. While that is true, moving to another state or country doesn’t mean you cannot keep the property. You can always sign a contract with an agency and let it deal with rent and maintenance. The best part is that you’ll continue getting monthly income.
How to Buy a Home as a Student
One of the main reasons students are hesitant about buying homes is generally instability. They work part-time or underpaid jobs, which often discourages them from considering a permanent roof over their heads. Even though this may make things difficult, it’s not entirely impossible.
Mortgage Loan
Most properties are purchased by taking out a mortgage, and it won’t be too different if you’re a student. Getting a loan and paying for it for several decades with interest is a good way to get your home now without thinking too much about saving enough to pay it at once.
Many mortgage companies are offering different kinds of loan programs each with various conditions. The result is some flexibility in choosing based on the interest rate or the down payment percentage.
Speaking of down payments, saving enough money can be a bit of a struggle as a student. Careful budgeting may help, but in a worst-case scenario, you can always check some of the assistance programs or go for a loan with no down payment. It’s important to understand that a mortgage is a secured loan, meaning your lender uses your home as collateral. This means if you quit making your mortgage payments, your lender could take your home away from you. In comparison, a personal loan does not use your home as collateral — they are unsecured loans. Learn more about how to get a personal loan.
Get a Co-signer
As a student, your credit score may not be ideal for getting a loan, but that doesn’t mean you won’t be able to get your new home. If you feel like you can afford the monthly payment but were denied the mortgage, your other option is a co-signer.
The idea behind this is simple: the person in question would be one with a better credit score than yours who can vouch for you. It’s a way of telling the lender you can make full payments on time. A co-signer is often someone very close to you, like a parent, sibling, or partner. The main reason is that they’ll take on the payment responsibility if you fail to do so.
Since the co-signer vouches for you, lenders will approve your mortgage, and you’ll be ready to purchase your new home. As long as you pay on time, everything will be fine. If you fail to do so, that responsibility falls on the so-signer, and they’ll need to continue making the payments instead of you. Keep in mind that this can hurt their credit score as well.
Consider All the Angles Before You Buy
Many students dismiss the idea of a home mortgage due to existing student loans. While having an existing loan may complicate things a bit, it won’t make it impossible to buy a home.
When applying for a mortgage, the first thing that lenders evaluate is your debt-to-income ratio or DTI. This gives them an idea of how much you make and the debt you’re currently in. Some have a fixed number and don’t approve applications below that, while others are more flexible. If your DTI isn’t as ideal as you want it to be, you can try to aim for flexible lenders.
On the other hand, if you’re not in a rush, you can start working on improving your score and apply for the loan again once the numbers are up.
Gaining experience in the stock market can be a transformative part of a teen’s financial education. Beyond the potential for financial gain, investing teaches valuable life skills, such as patience, critical thinking, and decision-making.
These are qualities that extend well beyond finance, preparing teens for the responsibilities and challenges of adulthood.
By learning to evaluate risks, track investments, and adjust strategies based on market conditions, teens develop a mindset that encourages long-term planning and disciplined financial behavior—qualities that will benefit them in many aspects of life. Keep reading for everything you need to know about stock market investing for teens.
Understanding the Stock Market
Before diving into the world of investments, it’s important for teens—and their parents—to grasp the fundamentals of the stock market.
The stock market can seem complex, but breaking it down into simple terms helps demystify the process and makes investing more approachable.
What Are Stocks and How Do They Work?
At its core, a stock represents a share in the ownership of a company. When someone buys a stock, they’re essentially buying a small piece of that company. If the company performs well, the value of the stock can increase, leading to potential profits when sold.
However, if the company underperforms, the stock’s value might decrease, which introduces risk. Teaching teens about how stocks reflect the performance and health of a company helps them understand why stock prices fluctuate and how this impacts their investments.
The Difference Between Stocks, Bonds and Mutual Funds
Understanding the different types of investments is crucial for a well-rounded financial education. Stocks, as discussed, are shares of ownership in a company.
Bonds, on the other hand, are a type of loan made to a company or government, where the investor earns interest over time and is paid back the principal at maturity.
Mutual funds are a collection of stocks, bonds, or other securities, managed by professionals, that allows investors to pool their money together. These funds can be less risky than individual stocks because they diversify investments across multiple assets.
Explaining these differences to your teen helps them make informed choices based on their risk tolerance and investment goals.
Online Tools and Resources for Young Investors
Equipping teens with the right tools can make their journey into investing smoother and more educational. Several online platforms and resources are designed to help young investors learn, track, and manage their investments effectively.
Apps and Websites for Tracking Investments
A great starting point for teens is MarketData.app, a platform that provides real-time and historical market data, allowing users to track stocks, options, and indices. The platform integrates seamlessly with Google Sheets, making it easier to analyze data and build custom reports. It’s particularly useful for those who want to dive deeper into the data behind their investments.
Other valuable tools include Robinhood, which is user-friendly and popular among beginners, E*TRADE, which offers educational resources alongside trading capabilities, and Yahoo Finance, known for its comprehensive stock tracking and market news.
These platforms not only help teens monitor their portfolios but also provide educational content that can enhance their understanding of the stock market.
Educational Platforms for Learning More About the Market
Learning about the stock market doesn’t have to be daunting, thanks to various educational platforms. Websites like Investopedia and The Motley Fool offer a wealth of articles, tutorials, and videos that cover everything from basic concepts to advanced strategies.
These platforms allow teens to learn at their own pace and explore topics that interest them.
Khan Academy also offers free courses on economics and investing, providing a solid foundation for understanding how the market operates.
The Benefits of Virtual Stock Market Games
Before putting real money at risk, teens can benefit from virtual stock market games. These simulators allow them to trade stocks with virtual currency, providing a risk-free environment to learn and experiment.
These tools are not only educational but also engaging, making the learning process enjoyable.
Common Investment Terms Every Parent Should Explain
Understanding key investment terms is essential for navigating the stock market. Explaining these concepts to your teen will help them make informed decisions and avoid common pitfalls.
Explaining Dividends, Shares, and Portfolios
Dividends are payments made by a company to its shareholders, usually derived from profits. These payments can be a source of income for investors and a sign of a company’s financial health.
Shares, as mentioned earlier, represent ownership in a company. The collection of all the different investments a person owns is called their portfolio.
Diversifying this portfolio—holding different types of investments—can help manage risk. Helping your teen understand these terms lays the groundwork for making smart investment choices.
Understanding Market Volatility and Its Impacts
Market volatility refers to the rapid and significant price movements of stocks or other securities. While volatility can present opportunities for profit, it also comes with risks, as prices can swing both ways.
Explaining how external factors like economic news, political events, and market sentiment can cause volatility will help your teen grasp why prices fluctuate and why it’s important to be patient during these times.
Breaking Down Stock Market Indices
Stock market indices, such as the S&P 500 or the Dow Jones Industrial Average, track the performance of a group of stocks, providing a snapshot of the market’s overall health.
These indices are often used as benchmarks to compare the performance of individual stocks or portfolios. Understanding indices helps teens see the bigger picture of how markets perform over time and the importance of diversification in managing risk.
About Risk and Reward
Investing always involves a degree of risk, but understanding how to balance that risk with potential gains is key to successful investing. Teaching your teen about risk and reward helps them approach investments with a realistic mindset, rather than expecting quick wins or guaranteed returns.
Balancing Risk with Potential Gains
Every investment carries some level of risk, but the potential for reward is what makes investing attractive. For example, following the wbc latest trading price on HALO Technologies allows investors to evaluate market performance and make informed decisions. Higher-risk investments, like individual stocks or cryptocurrencies, often offer the possibility of higher returns.
However, they also come with the chance of significant losses.
Lower-risk investments, such as bonds or index funds, may provide more modest returns but are generally more stable. Teaching your teen to assess their comfort with risk and align it with their financial goals is an important part of their investing journey.
Assess the Risk Level of an Investment
Evaluating the risk level of an investment involves looking at several factors, including the company’s financial health, market conditions, and economic trends.
Encourage your teen to research the companies they’re interested in, looking at earnings reports, market forecasts, and historical performance.
Understanding these elements helps them gauge how much risk they’re taking on and whether it aligns with their goals. It’s also important to diversify investments to spread risk across different assets, reducing the impact of any single investment underperforming.
How to Start Investing
Starting to invest can be an exciting step for teens, but it’s important to begin with a solid foundation. This involves setting up the right accounts and choosing investments that match their goals and risk tolerance.
Opening a Custodial Account for Your Teen
A custodial account is a great way to introduce your teen to investing. As a parent, you manage the account until your teen reaches the age of majority, but they can participate in investment decisions. This setup allows teens to learn about investing hands-on, with your guidance.
You can help them choose investments, track their performance, and understand the tax implications of their decisions.
Selecting Your First Stocks Together
Choosing the first stocks to invest in is a significant step. Start with companies your teen is familiar with, such as brands they use or admire. This approach makes the stock market more relatable and helps them stay engaged. Parents who follow specific investment principles, such as focusing on halal stocks, can use this opportunity to explain how personal values can shape financial choices.
Discuss why you’re choosing certain stocks, considering factors like the company’s performance, industry trends, and overall market conditions. This collaborative process not only builds their investment knowledge but also strengthens their decision-making skills.
Starting Small and Building Confidence
It’s wise to start with small investments to build confidence. This way, your teen can experience the ups and downs of the market without risking significant amounts of money.
As they become more comfortable and informed, they can gradually increase their investments. Starting small also reduces the pressure to succeed immediately, allowing them to learn from any mistakes without major consequences.
The Role of Diversification in a Balanced Portfolio
Diversification is a cornerstone of smart investing. It involves spreading investments across different asset types to reduce risk and increase the chances of steady returns.
What Does Diversification Mean?
Diversification means not putting all your eggs in one basket. In investing, this means spreading your investments across various sectors, industries, and asset types—such as stocks, bonds, and real estate—to mitigate risk.
If one investment underperforms, others in different sectors might perform well, balancing the overall portfolio.
How Diversifying Reduces Risk
Diversifying reduces the impact of market volatility on your portfolio. For example, if you invest only in tech stocks and the tech sector faces a downturn, your entire portfolio suffers. However, if you also invest in health care, energy or bonds, those sectors might perform better during that same period, offsetting losses. This is where options like direct indexing companies come into play, offering a tailored way to diversify by investing in individual stocks that mirror an index.
This approach smooths out the highs and lows of the market, leading to more consistent returns over time.
Encouraging Long-Term Thinking in Stock Market Investments
Investing should be seen as a long-term strategy rather than a quick way to make money. Teaching teens to think long-term helps them understand the benefits of patience and consistency.
The Power of Compound Interest Over Time
Compound interest is one of the most powerful concepts in investing. It refers to the process where the earnings on your investments generate additional earnings over time. Even small investments can grow significantly if left to compound over many years.
For example, investing a modest amount early in life and allowing it to grow can result in substantial returns by the time they reach retirement age. This illustrates the importance of starting early and staying invested.
Why Patience Is Key in Investing
Markets can be volatile, with prices rising and falling unpredictably. However, history shows that the stock market tends to increase in value over the long term. Patience allows investors to ride out short-term fluctuations and benefit from the overall growth of the market. Teaching your teen to stay calm during market downturns and avoid impulsive decisions helps them develop a disciplined approach to investing.
Teaching Teens the Value of Holding Investments
One of the most valuable lessons in investing is the importance of holding onto investments for the long term. Selling investments in response to short-term market changes can result in missed opportunities for growth.
Encourage your teen to focus on the bigger picture and the potential for long-term gains rather than reacting to daily market movements. This approach can lead to better financial outcomes and a more stable investment experience.
Lessons from Warren Buffett and Other Major Investors
Warren Buffett, one of the most successful investors in history, is known for his long-term investment strategy and his belief in the power of compounding. He famously said, “The stock market is designed to transfer money from the Active to the Patient.” Buffett’s approach—buying quality companies and holding them for decades—has proven to be highly effective.
Other major investors, like Peter Lynch and John Bogle, also advocate for long-term thinking and diversification.
Lynch emphasizes investing in what you know, while Bogle, the founder of Vanguard, pioneered index fund investing as a way to achieve diversified, low-cost exposure to the market.
Teaching your teen about these investors’ strategies provides them with valuable insights and timeless principles that can guide their own investing journey. The lessons learned from these investing legends can help your teen develop a sound approach to building wealth over time.
Preparation for the Scholarship Application
