4 strategies for avoiding taking on too much student debt in college

May 1 is College Decision Day, the deadline many schools set for students to decide which college they will attend. One key consideration should be picking a school that doesn’t require taking on too much student debt, experts say.

“Families are increasingly getting price-sensitive when choosing a college,” said higher education expert Mark Kantrowitz. “This includes students.”

Kantrowitz has found in his research that less than a third of student loan borrowers who took out less than $20,000 were stressed by their debt, compared with more than 60% of those who’d taken out $100,000 or more.

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The general rule of thumb is not to borrow more than you expect to earn as a starting annual salary, said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.

That figure will vary based on what you plan to study. You can look up annual average incomes for different occupations at the U.S. Department of Labor’s website.

Kantrowitz also stands by that metric. “If your total student loan debt at graduation is less than your annual starting salary, you should be able to repay your loans in 10 years or less,” he said.

Here are four strategies high school seniors, and their families, can consider to avoid ending up deep in debt.

In the 2022-23 academic year, the average estimated annual costs for full-time undergraduate college students, including tuition, room and board, was $27,940 at an in-state public school and $57,570 at a private nonprofit, according to the College Board.

That difference between the two is notable.

“To reduce student loan debt, enroll at a less expensive college,” Kantrowitz said, adding that public colleges often “provide just as good a quality of education.”

Financial aid matters, too. The so-called sticker price may be more than what families end up paying. Dig into your award letters for information.

When trying to get a sense of what a school will cost over the course of a degree, “families need to look at the big picture,” said Elaine Rubin, director of corporate communications at Edvisors.

“If the first year of tuition is a struggle and requires the family to borrow debt, there is a high chance that pattern will continue for future years,” Rubin said.

A college’s cost typically only increases between years, she added.

You can find information about a school’s tuition increases on the U.S. Department of Education’s College Affordability and Transparency List, “which identifies not only which colleges have the highest and lowest net prices,” Rubin said, “but also shows increases from year-to-year.”

The “net price” is the amount you’ll have to pay with savings, income and loans to cover the bill, after aid that doesn’t need to be repaid, including grants and scholarships, is accounted for.

If one college is offering more generous grants than another school, that should also be taken into consideration, experts say.

Some families have salted away money for their children’s college costs.

At the end of 2022, the average 529 plan account balance was $25,630, according to Kantrowitz. Those state-sponsored investment plans allow families to contribute money and then withdraw it tax-free, so long as the money is used for qualifying education expenses.

Those funds can go a long way at reducing how much a student will need to borrow. Kantrowitz has said that 529 savings don’t make a significant impact on aid, either.

Families can continue saving in a 529 plan while their child is enrolled in college, Kantrowitz said.

“This is particularly useful if your state offers a state income tax break on contributions to the state’s 529 plan,” he said. “That’s like earning a discount on tuition.”

Many students who are eligible for the federal Pell Grant program miss out on the aid because they don’t apply for it, Mayotte said in a previous interview with CNBC.

In the 2022-2023 academic year, Pell Grants range from a minimum of $692 to a maximum of $6,895, depending on how much it is calculated that a student’s family will be able to contribute to their college costs, Kantrowitz said.

To qualify for a Pell Grant, you have to submit the Free Application for Federal Student Aid, or FAFSA, form.

Meanwhile, more than $6 billion in scholarships are awarded to college students each year, according to Kantrowitz. It’s not too late to seek out such awards.

Scholarships are gifts that don’t need to be repaid, and there are thousands of them offered. Some of the awards are based on merit while others are granted because of financial need.

Students can use free scholarship matching services to search for the awards, Kantrowitz said. Some of the services he recommends include Fastweb and the College Board’s Big Future. According to the Education Department, students also should ask both their high school counselor and the college’s financial aid office about scholarship opportunities.

The Labor Department also has a scholarship search database. 

According to calculations by Kantrowitz, around 1 in 8 college students has won a scholarship. The average award is around $4,200. Around 0.1% of undergraduate students received $25,000 or more in scholarships.

Working a part-time job while in college can help students manage costs, experts say. But they need to make sure they don’t overdo it.

Putting in 12 hours or less per week has positive impacts, but “every additional hour cuts academic performance,” Kantrowitz said. Meanwhile, students who try to work full time while in college are half as likely to graduate on time or even within six years.

“Working on-campus or near-campus, students may find employers with flexible scheduling to accommodate a college student’s schedule,” Rubin added.