How to Survive the High Cost of Higher Education

Few years back I remember a financial guru on a PBS pledge special advising a member of her audience not to worry so much about her education loan since it has an interest rate of only 2%. She told the women to avoid making minimum payment on consumer debt and pay it off as soon as possible. Those were the good old days. That advice would not be valid today. Students and new graduates must worry about the ever increasing cost of education and its interest rate.
The interest rate on education loan had almost doubled since 2003 from 3.4 to 6.8 in 2006. Pell grant has been dwindling for the last decade failing to keep up with the cost of higher education. What's more, the cost of tuition is spiraling up wards. The average undergraduate student carries $19,000 though many exceed $40,000. What is a student to do? Well, though students can do very little about the cost of higher education, there are some things they could be doing to decrease the load of loan they take up.
The first thing students must do is get involved in politics. Start paying attention to what is being done by the law makers. Write letters to your representatives. Most importantly, VOTE!!! Generation X and Y have been apathetic when it comes to what's going on around them and it will cost us dearly. Higher monthly payment means having less room in the budget for saving. With no security with Social Security, this generation can't afford not to save. Currently, there are 2 bills in congress that propose to cut the interest rate on student loan and increase Pell grant. Learn about them and sign a petition or write/call your representative. It doesn't take that long.
http://projectonstudentdebt.org/index.php

Secondly, borrow smart. Students must learn what all the education loans mean. Of course, students should also seek scholarship as much as possible. They must invest some time in applying for whatever scholarship they can get. Though the following step may not work for all students, it may help some.
- Apply for scholarship well ahead of time. Ask your school to provide you for list of scholarships. Don't be afraid to ask questions at the financial aid department, but don't make them your only source. Scholarship information is also available at the school website. It is a good idea to read the information and compare and contrast with the things the financial aid advisor is providing for you and ask about things you have seen online (I have seen many advisor who were clueless).
- Apply for financial aid well ahead of time. In most cases, depending on your income or your family's income, you'll be granted Pell grant, subsidized loan and unsubsidized loan.
Pell grant: it is free money. You don't have to pay it back. It is not much, but it's better than nothing. Always accept Pell grant first.
Subsidized loan: is awarded based on financial need. The federal government subsidizes the interest for you while you are in school. Therefore, you don't accrue interest on this loan before repayment begins. If you must take a loan, accept this loan first.
Unsubsidized loan: students should take this loan if the above 2 are falling short and they have no option but to accept additional loan. However, you should be aware of how much of these loans you are taking during your school years. With this loan, interest is charged from the time of disbursement. Furthermore, the interest is capitalized, which means you pay interest on the interest you accumulate. (Btw, you can pay the interest accrued so it doesn't accumulate more interest rate while in school).
Private loan: This is a recent phenomenon. My advice is to read the fine print and only take this loan as a last resort. Don't take out a loan to buy computers and other non essential products. Most Universities have computer lab. Use that till you have enough money saved up to purchase computer in cash.
- Lastly, students should try to pick up a part time job. Live within your means.
It is evident that the pay as you go system students employed in the past is not an option for today's students. The cost of education has risen at a much faster rate than the pay of minimum wage type of jobs students take. The jobs that happen to have the most flexible hours for those attending school, are mostly service jobs that pay barely enough to get by. Other jobs with slightly better pay overlap with class schedules and have no flexibility. That having been said, students should still take up some sort of part time and summer jobs.
Another issue is the lack of financial literacy among most students. This is vitally important. Students should learn how to manage money and learn the difference between need and want.
Above all get involved in politics. Demand education!