By: Mark McLaughlin,
Special to CNBC.com
College acceptance letters should be hitting the mailboxes of anxious high school seniors any time now. Once students choose their institution of higher learning comes the hard part: paying for it.
Financial aid, ranging from need-based federal Pell grants and student loans to privately-funded merit scholarships, can cover a big chunk of tuition bills. But filling in the gaps not covered by aid is equally crucial.
To keep a lid on expenses, Dan Landau decided to only apply to colleges close to his Bridgewater, N.J. home. By commuting to Fairleigh Dickinson University, holding down a part-time job, and graduating in three years, he saved over $20,000 on his bachelor’s degree while accruing no student debt.
“The path I took to save money on college is not for everyone, but there are ways to get a quality college education on the cheap,’’ says Landau.
In that spirit of frugality, here are five strategies for cutting your college bills.
1. Graduate ahead of schedule
With tuition alone averaging $7,020 at in-state public colleges and $26,273 at private schools, knocking a year or more off the traditional four-year degree is a sure way to shave costs. Here are a few ways.
Advanced Placement credits. High school students can get a head start by taking advanced courses or college-level curricula. At the University of Virginia, two-thirds of the 2010-2011 freshman class earned Advanced Placement credits, with recipients qualifying for an average of 19 credit hours. Existing undergrads, meanwhile, can cut short their time on campus by studying over summer school or adding online courses.
Advanced Placement exams. AP credits earned in high school often reduce the number of credits needed to graduate. Qualification standards vary by university, but students must typically score a 4 or 5 on each AP exam. To ensure college credit, students should list their desired colleges as test-result recipients when they register for exams. Courses offered by the International Baccalaureate program, a college prep curriculum offered in over 700 U.S. high schools, may also qualify for college credit.
CLEP tests. Students of any age can earn college credit in 33 subjects by taking College Level Examination Program, CLEP, tests given by the College Board. College senior Luke Macias of San Antonio said he credits CLEP tests for enabling him to stay debt free and on track for a degree in economics this spring from Thomas Edison State College.
Dual Enrollment: Students can enroll in college-level courses at community or four-year colleges through dual enrollment/credit programs that fulfill both high school and college requirements. Seventy-one percent of high schools offered these programs in 2002-2003, according to the most recent data from the National Center for Education Statistics. Dual enrollment courses are typically offered at reduced rates or at no cost.
Online Courses: The number of for-profit colleges offering online courses and degree programs has boomed over the last several years, making it vital for students to verify that supplementary courses will qualify for credit. College admissions officers recommend students vet online courses with their general or departmental adviser.
Summer School: Attending summer school can also boost credit hours. At schools like UCLA and the University of Virginia, out-of-state students save on summer classes by paying in-state tuition rates.
2. Earn income in college
Many students take on jobs in college to bridge expense gaps. Divya Bahl lived rent-free her last two years at Boston University by serving as a resident adviser in a student dorm. Manuel Fabriquer, a college counselor in San Jose, Calif., says RA positions save students at Santa Clara University $15,000 a year.
Professional schools and academic departments can provide leads on education and research-related jobs. Carnegie Mellon University’s Academic Development Office, for example, employs 140 students in tutoring programs. Career services and alumni associations, meanwhile, are a good resource for off-campus employment.
Brooke Kamenoff, a freshman at Northeastern University, plans to utilize her school’s co-op program to take time off to work and earn income for her five-year degree program.
3. Lean on Uncle Sam
The American Opportunity Credit, a tax credit for college tuition and fees, has been extended through 2012. Formerly known as the Hope Credit, it can reduce your tax bill by up to $2,500 per undergraduate.
Alternately, you can deduct up to $4,000 in education expenses per student from your taxable income. You must choose the credit or the deduction—tax credits are always more valuable than deductions.
To maximize tax credits, financial planners recommend paying for tuition and fees out of pocket and using 529 college savings accounts to cover other expenses ineligible for tax savings. Five twenty-nine distributions are tax-free when used for college expenses such as room and board.
Having a child in college can also extend the years he or she qualifies for a dependent exemption on your tax return. Exemptions normally phase out at age 19 but extend up to 24 for full-time students.
4. Stay close to home
Tuition rates for in-state residents at state universities are often higher than the cost of room and board. For students matriculating close to home, commuting to school can generate significant savings. If commuting is not an option, consider off-campus housing.
“We have found that the best way for us to cut costs was to have the kids move off campus,’’ says Corinne Connor of Montclair, N.J., who has one child in law school and another in college. “The combined rent and food costs are considerable lower than dorm and cafeteria costs.”
Community colleges have also become a popular destination for cash-strapped students. Annual tuition at a two-year community college averages $2,544, nearly two-thirds less than tuition at a residential four-year state school.
5. Borrow responsibly
After all other forms of financial aid are exhausted, students must turn to loans.
Today’s low initial interest rates for private student loans may look attractive, but you can avoid extra costs later by thoroughly researching your loan options.
Experts agree that families should max out federal Stafford and Perkins student loans, which feature low, fixed rates and flexible repayment features, before tapping private loans that tend to carry variable rates.
If you must take out a private student loan, shop around, as interest rates vary widely across providers. Based on recently quoted rates, Student Lending Analytics, a Palo Alto, Calif., lending consultant, calculates that students choosing the low rate over the high rate for a $10,000 student loan could save nearly $6,000 over 15 years. Paying loans off faster can also significantly reduce total cost.
Getting creative with your savings strategies can make paying for college less intimidating and allow your kids to attend their No. 1 choice, regardless of cost.
If unemployment rates and budget cuts have you down, there are still options for students who need someone else to foot their college bills.
Students can work their way through college, obtain a waiver or choose an in-demand field. Find out more about these and other ways to attend college without paying.
The perennial way of eliminating college costs is still available. To up your odds, Doug Hewitt, co-author of “Free College Resource Book,” advises students to fill out the Free Application for Federal Student Aid, or FAFSA, and then focus on local prizes.
“There are more scholarships you’ll qualify for in your home state than nationally,” says Hewitt. “Look at local organizations and talk to your high school (guidance) counselor.” Start early, too. While students usually don’t start scholarship hunting until senior year, awards are available for all high school grade levels
Give Service to Your Country
The U.S. Coast Guard, Air Force, Military, Merchant Marine and Naval Academies offer free rides to students who serve after college, but cash is also available through ROTC programs at their home institutions.
Service requirements vary but all require students to complete military training on campus and commit to up to 10 years of service. Students leave with training, a guaranteed job and opportunities for more free education.
AmeriCorps, a national service organization that offers education awards in exchange for community work, provides a $5,550 education award for each full year of service. Members also receive a living stipend while serving in the program.
Work for the School
Schools charge students tuition, but they usually don’t for employees. “This is a great option, especially for older students with job experience,” says Reyna Gobel, author of “Graduation Debt.” “If you’re 18, you might not qualify for a job that provides (tuition) benefits.”
Schools typically provide benefits for full-time workers and sometimes require a certain level of experience, Gobel says. Future students can find out about their school’s policy by calling the admissions office.
Waive Your Costs
“Tuition waivers may be available for (current or former) military and talented students,” says Manuel Fabriquer, founder of College Planning ABC, a financial aid and admissions counseling firm in San Jose, Calif. “Even families that have substantial income can get tuition waivers if (the student) has the right test scores.”
The North American Council on Adoptable Children in St. Paul, Minn., reports that Kentucky, Virginia, Maine, Massachusetts, Texas, Florida and Maryland offer waivers at certain public schools for adopted and foster care children. Other schools offer waivers for Native American students, senior citizens and dislocated workers. To find out what your school offers, call the financial aid office.
Become an Apprentice
Apprenticeships can pay for school, provide a post-college job and offer a salary, too. Apprenticeship programs take one to six years, are available in more than 1,000 occupations and require participants to complete at least 2,000 hours of field work annually, according to the Department of Labor.
In exchange, the sponsoring employer pays for college or technical training and provides a salary. A list of available programs is available at the Workforce One website.
Have Your Employer Foot the Bill
A survey of benefit plans for 4,500 companies by pension fund administrator Benefits USA found 76% of firms offer tuition reimbursement to some employees. Approximately one in three companies offer reimbursement to workers at any level.
“With employee reimbursement, you have to study in your field,” says Carol Stewart, author of “Looking for Scholarships.” “If you’re thinking about being a film producer, I would be surprised if an engineering firm paid for that.” To find out if your company offers reimbursement, talk to your human resources
Be in Demand
Students can also skip taking on debt by working in high-needs fields. Individual schools offer incentives to students in math, science, nursing, teaching and social work, but additional opportunities are also available through national organizations such as Teach for America, the Nursing Education Loan Repayment Program and the National Institutes of Health.
“The University of Portland has a nursing program where if you work in certain areas (after graduation), they’ll pay for two years of tuition,” Fabriquer says. “There are similar programs in (high-needs) fields across the country.”
Attend a Work College
Students can bypass scholarship applications by enrolling in a work college. Designed to lower college costs and to provide work experience, the nation’s seven four-year and one two-year work colleges require all students to work, usually 15 to 20 hours per week and sometimes while school isn’t in session. In exchange, they receive free or substantially reduced tuition.
According to the Work College Consortium in Berea, Ky., students work in fields ranging from landscaping to hospitality, can change jobs once per year (sometimes more), and leave campus with their degree and four years of experience.
Choose a School That Pays for You
Focus on a single subject and you could attend school free. Schools such as The Cooper Union, the Webb Institute and the Curtis Institute of Music offer a select range of academic programs but also foot the tuition bill for every student.
“That’s fine if you have no doubts about what you want to do,” Gobel, author of “Graduation Debt,” says. “The worst scenario is graduating, realizing you don’t want to do that and having to go back.