Students and families planning to take out federal loans to pay for college this fall will see the highest interest rates in over a decade.
The interest rate for direct federal undergraduate student loans disbursed after July 1, 2024 will be 6.53%, the Department of Education announced Tuesday.
That’s up from the current 5.5% interest rate, and the highest rates have been since 2008, according to ED data. The undergraduate rate hasn’t hit 6% since 2009, and from 2006 through June 2008 the rate was 6.8%.
New graduate student loans will have an 8.08% interest rate and parent PLUS loans will come with a 9.09% rate.
With millions of Americans taking years to pay down their student debt, it’s understandable that incoming college students may want to avoid borrowing for school. But with the cost of a college education continuing to rise, it can be difficult to get through those four years without taking on some debt.
Here are three ways to lower your overall college costs and reduce the amount you may need to borrow.
1. Apply to scholarships
There are many different kinds of scholarships available through state and local governments, as well as private and nonprofit organizations. They won’t all be full-ride packages, and you might think applying for a $500 grant may not be worth your time. But every dollar counts, and going through the process could help you in ways you may not expect in the future.
“The more scholarships I applied to, the better applications I was able to submit and ultimately have more success down the line,” Gabriella Carter, a Princeton University grad who earned $2 million in scholarships previously told CNBC Make It.
2. Try an alternative path
Many students may want the traditional four-year on-campus college experience, but that means four years of tuition, housing, food and other costs.
If your ultimate goal is to save money while still obtaining a college degree, you might have to think outside the box. Starting your college education at a community college or trade school is one way you may be able to cut down on costs while racking up course credits. You could also consider taking additional courses to expedite your education and reduce your expenses that way.
Ethan Nguonly did just that when his parents told him that they would only pay for two years of his schooling. Now 22, Nguonly hustled to get all his course credits done to earn his bachelor’s degree from the University of California — Berkeley in just two years.
He has some regrets about missing out on the traditional college experience, but he told CNBC Make It last year that the experience was worth it in the end. “I was able to put my financial goals [first] and really get started on a journey towards financial independence,” Nguonly said. “I would make that sacrifice again.”
3. Look for discounts
Along with considering a different school or timeline to save on college costs, you may be able to find discounts at your preferred institution with a little extra homework.
First, take a look at your cost of attendance breakdown, and see if there are optional costs you’re able to waive. Many schools require a student health insurance fee, for example, that you may be able to skip if you’re already covered under your parents’ plan.
Housing may be another area you’re able to save on, especially if your college is located somewhere with off-campus accommodations that are cheaper than the dorms. On the flip side, you may be able to score a discount for on-campus living by becoming a resident advisor or a similar role, depending on your school.
Don’t forget to look out for discounts while you’re in school, too. Shop around for supplies like textbooks to find the best price. Your campus community may also offer opportunities to get gently used clothes, dorm furniture and other necessities for free or cheaper than in stores.
When you are shopping in stores and online or going out to eat, also remember being a student may get you a discount at many businesses including Amazon, Apple and more.
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