College Accounting 101: How To Be Debt-Free In College and After You Graduate

September 18, 2012  |  

When most Americans leave college, they not only leave with a degree but debt. And, according to a new analysis by US News & World Report, if you are a student at HBCU Clark Atlanta University, you will leave with more debt than the average American college student.

The study found that the average debt of a 2011 Clark Atlanta graduate is $47,066, and 94 percent of students borrow money to attend the school. The magazine ranked a total of 270 colleges. On the flip side, another HBCU,  Howard University, came in sixth on the list of colleges where students had the least debt. Howard students graduate with an average debt of $15,080.

There are ways  to avoid debt while in college. As we reported before, Pell grants offer up to $5,550 to the neediest students. There are also work-study programs, which are need-based.

Income-based repayment, a program started under Obama in 2009, allows borrowers to adjust monthly payments to 15 percent of their income, which will erase the debt in 15 years. According to Bloomberg Businessweek, however, the program hasn’t worked as well as hoped — at least not yet. One reason is many students don’t know about the program or if they qualify. “To get into the program, you have to apply through the bank that services your loan, but many banks don’t tell borrowers about the program. They aren’t required to do so, and… they make more money if monthly payments are higher,” the magazine says. To encourage more participation, the Obama administration will drop the threshold from 15 percent to 10 percent for some borrowers.

Michael Szarek, the founder and president of College Counseling for the Rest of Us, emailed us nine suggestions for reducing your college debt.

1)    Actually, don’t stay out of debt completely. In other words, DO borrow. Some. But only  borrow from the Federal Direct Loan Program. (This will cap your lending at $31,000 for your undergraduate career).

2)    If possible, only borrow a portion of your loan eligibility. You are under no obligation to borrow all of it, and too many families look at the decision to borrow as “all or nothing.”

3)    Determine what you can pay out of pocket via a monthly payment plan. Every dollar paid directly is money not borrowed.

4)    Know your college’s costs before enrolling. Many students start a college program without knowing or understanding the actual cost. Like all major purchases, know the actual price before buying.

5)    If you can’t afford that particular school, don’t go. That can be a hard decision to make, but you can use community college credits to save money, work to earn money, or both.

6)    Finish in four years. If you thought college was expensive, try adding an extra year or two.

7)    Earn community college credit in the summer and winter. But make sure – beforehand – that the credits will transfer back to your baccalaureate institution.

8)    Avoid credit cards. There is a reason why so many campuses ban credit card sales representatives.

9)     If you have to borrow, do borrow for an education, not for a iPod or gaming device.

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