Buy Like Buffett: Three Ways to Avoid Student Loan Debt

Going back to college is always a smart move but paying for it can be a major headache. Student loans are a big problem in the lives of most Americans. College loans are large debts that can rob borrowers of their money every two weeks for a long period of time. It can take twenty years or more to pay off four years of college. That's if you can make the payments. Many college graduates find that they do not have enough income to pay off their student loan debts.

So, how can you avoid the student loan trap?

A while ago Diane wrote about maximizing your education budget. Here are three more ways to help you and your kids leave college without a huge debt burden.

1. Go to school online.
   
   Online education is becoming more and more popular. Schools like the University of Phoenix and Strayer have seen a surge in enrollment during the recession. So, why should you go to school online? One of the biggest advantages of online schools is that the tuition at online schools is much lower than that of traditional universities. Another advantage is that online schools often offer extra help to students looking to go back to school. This assistance can come in the form of helping students obtain scholarships or grants.


2. Stay away from private lenders.
   
   Banks and commercial finance companies would be more than happy to lend you money to return back to school. That is because they can virtually guarantee repayment and at double digit interest rates. Private lenders charge nearly twice the interest rate of federal loans from Sallie Mae. Private loans have strict repayment schedules that are almost impossible to get out of. Would you like to refinance these rates? Since the payments can be obtained via wage garnishments and tax refunds seizures, lenders do not offer refinancing options. Your best bet is to avoid private loans at all costs.


3. Enroll in a state sponsored 529 plan.
   
   You can always learn from your past experiences. Just because you may have used student loans to get through college doesn't mean that your kids have to. It's never too early or too late to save for your kid's college tuition and housing. A 529 college savings plan will cover all of the fees for your child's tuition at any local state institution. Imagine the smile or your kid's face when they graduate from college without the albatross of student loan debt following them around.

What strategies have you employed to avoid incurring student loan debt? Share your experience with us in the comments.

Mark Riddix is the founder and president of New Horizons Financial Management, an independent investment advisory firm that provides personalized investing and asset management consulting. Mark is a regular contributor to Seeking Alpha and has written financial columns for Baltimore and Washington, D.C. area newspapers. Mark publishes his own financial blog, BuylikeBuffett.com and has written the book Your Financial Playbook.