Debt-Free Degree: How to Go to College Without Going Into Debt

2020 was a year of breaking records and not a lot of good ones.

Student loan debt barreled over $1.5 trillion.¹ Maybe it’s a little out of control.

I’m not going to depress you by going into more statistics on student loan debt… and it is depressing.

College doesn’t have to equal debt. Not for you or your kids.

Here are some ways to get a debt-free degree.

Some are obvious, while some are not so obvious…

1. The Most Obvious: Save for College

If you want to help your kids, you have several options.

Whether you want to aggressively invest or conservatively save, the choices are many.

Here’s a quick guide to the top five:

1. 529 Plans – These plans typically cover every expense relating to education, including: tuition, fees, books, supplies, equipment, computers, and even room & board, as long as the student is enrolled at least half-time. 529 plans give you multiple options, usually involving mutual funds. Many of them have target funds where you set the expected date to start college and the investments are more aggressive while your kid is young, and they become more conservative as your child gets older and closer to using the money (similar to target retirement accounts). The contribution limits for 529 plans are high, at around $300,000/year, so many people prefer them for that alone. For more on 529 plans, here’s a complete guide.
2. ESA – A Coverdell Education Savings Account is another option, but the contribution limits are much lower, at $2,000/year. The investment options are more broad than a 529 plan. You can usually invest in individual stocks and bonds, in addition to mutual funds.
3. Roth IRA – A Roth Individual Retirement Account is typically for retirement, as the name suggests. But one of the non-traditional ways to use a Roth IRA is for your kid’s college. The most important thing here is making sure your retirement is taken care of. If you need that Roth IRA for your own retirement, it doesn’t make much sense to use it for your child’s college, but if you have another retirement options like a 401k, TSP, or 403b, then this is an option.
4. Munis – Municipal bonds are great if you earn a high income, because anyone can contribute to them and they grow tax-free. Your options are broad within munis — you can choose from a bunch of different bonds and bond funds. But they are bonds, so the expected returns are going to be lower than stocks and stock funds.
5. Custodial Accounts – The Uniform Gifts to Minors Act and Uniform Transfers to Minors Act allow you to designate your child as a trustee with custodial accounts. While this is an option to save for your child’s college, your kids will have free rein over the money once they turn 18 or 21 (depending on your state). If you want more control over how the money you’ve saved is spent, this many not be the most appealing way to go.

Those aren’t your only options; they are just the most common and most directed specifically for educational saving and investing.

2. Apply for Scholarships

Regardless of whether your child helps pay for their own college, they can at least do their part by applying for scholarships.

This can be a full-time job if they spend a lot of time applying for scholarships, writing essays, and doing interviews. They should set a goal to apply for a certain amount of scholarships every week.

The best part is, you don’t have to navigate scholarships blind. I wrote a complete guide on everything you need to know about scholarships, where to find them, and how to apply for them.

3. Choose a Reasonable College

You kids don’t have to cross state lines for school. Often, a local community college is all they need. At a minimum, once you confirm that the credits transfer to your child’s college of choice, get the core classes knocked out at a community college. Your local community college may even be enough to provide a four-year degree or higher.

While employers are caring less and less about their prospective employees having a degree at all, they really don’t care about where it comes from, at least most of the time.

There’s a certain prestige associated with expensive schools, and while it does look good to have a degree from Harvard or Yale, it doesn’t make that much of a difference. This is especially true if you’re comparing any standard state college with your local community college.

I have a friend who makes six figures working a tech job, and it did require a four-year degree for him to get the job, but they didn’t care that his degree was from an unaccredited school or that he majored in Religious Studies. I know, that’s only one example, but a quick Google search will show you many more.

4. Work Your Way Through School

“Working your way through college” has a negative connotation, but it does more for your child than simply paying the tuition cost.

The benefits to working through college is actually threefold:

1. It Keeps Them Out of Trouble – How many stories do you know about people who partied their way through college? How many can you tell personally? Working while in college tends to keep kids away from an unproductive party lifestyle. Since they’re invested in it, they won’t take it for granted.
2. It Promote Focused Studies – Students who work through school tend to put more energy into their studies.
3. It Improves Their Grades – Students who work part-time (not full-time) have better grades, according to multiple studies.² Again, it makes sense. If they are personally invested, they will take college seriously.

Working their way through college may not be a punishment. It may just be the key to instilling discipline and starting them off on the right foot.

5. Join the Military

Of course everyone isn’t cut out for the military, and a lot of kids flat out don’t want to join, but if they do show an interest, it does more than providing an opportunity to serve their country.

After I joined the military, I was surprised to learn how many people joined purely for education. I’m not saying that should be the only motivation, and if it is, the military may not go well for them, but it is a huge benefit some people overlook.

Between Military Tuition Assistance, and the GI Bill, you can have an entire degree paid for by the US military.

It’s not an option for everyone, but it is an option.

If your kid does consider the military, I suggest letting them read an open letter I wrote to anyone (more specifically directed toward Christians) considering joining.

College Doesn’t Have to Mean Debt

“Everyone has student loans” is a myth. And just because most people may have them, that doesn’t mean your child has to.

It’s actually easy to get a debt-free degree. Much easier than a lifetime of student loan payments.

Whether they go for the debt-free option that involves more work or if they go for the debt option that involves more money, both are hard.

They simply have to choose their “hard.”

Lastly, check out my guide to college prep tests and don’t forget about trade schools!

Further Book Reading

• Smart Money Smart Kids by Dave Ramsey & Rachel Cruze
• The College Tuition Riddle by C J Carlsen
• College Essay Essentials by Ethan Sawyer
• The Best 384 Colleges by Princeton Review and Robert Franek