Best Way to Cut College Costs: Borrow Just a Little, Save a Lot

Barry Lenson

Best Way to Cut College CostsIf you want to save a bundle on your college education here’s a powerful tip for you . . .

Borrow as little as possible to pay for it, because borrowing money is incredibly expensive

For every $5,000 that you avoid borrowing at 6%, for example, you save about $100 a month to repay your loan.  But your monthly payment is only a small part of the story, as the following figures show.

The Real Cost of Borrowing $20,000 at 6% Interest

Let’s assume that you will be borrowing $20,000 to attend a public university in your state for one year. (You live in Ohio, for example, and will attend Ohio State.) If you borrow that money a 6% interest rate and take five years to pay it back, you’ll be paying back $23,199.60.  So your cost of borrowing will be $3,199.00.

The Real Cost of Borrowing $50,000 at 6% Interest

Let’s run those same numbers, but assume that you will be borrowing $50,000 to attend a private college for one year. (You’re going to Princeton, for example.)  If you borrow that money at a 6% interest rate and take five years to pay it back, you’ll be paying back $57,998.40. That means your cost of borrowing will be $7,998.40. (You’re also going to be paying back $966.64 every month, so you better hope that you have a high-paying job.)

Borrow a Little, Save a Lot

Those figures provide only a ballpark figure on how much money you can save by not taking a loan in the first place. Actually, the annual cost of attending a state school is higher than $20,000 these days, and the cost of attending an elite private institution is higher than $50,000.

But those statistics do show that borrowing is incredibly expensive. If you can avoid borrowing to pay for only one year of college, you will be paying yourself a bit financial reward.  Later on when you’re thinking about starting a family or buying a home, you’ll have a lot more money to work with, and lower debt too.

One way to do it? Enroll in StraighterLine’s Freshman Year for $1,299 program. For that fee – which is a fraction of what you would pay for a year of college anywhere else – you can take up to 10 online courses that will earn you credit at top colleges and universities.

The less you borrow, the more you save. That’s a principle that can put financial power in your pocket.

Best Way to Cut College Costs

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