How to Avoid Student Debt: A Strategic Guide for Families
Student debt is not inevitable, but avoiding it requires planning that starts long before your student submits a single college application. The families who graduate with the least debt are those who build a strategic college list, understand every line of their financial aid packages, and know how to negotiate. For a comprehensive overview of scholarships and financial aid options available in the U.S., visit our complete guide to U.S. Scholarships & Financial Aid.
Below, veteran college admissions expert Jamie Berger and the team at Great College Advice share the specific strategies that make the biggest difference.
What Are the Statistics?
A recent article by Kevin Carey published in the New York Times (“What About Tackling the Causes of Student Debt?”) digs into the data to demonstrate just how bad it really is.
Mr. Carey, who directs the education policy program at New America, excavates the statistics to demonstrate these main points.
- Students—without assets or income—are limited in how much they can borrow for college. This limit is currently $31,000.
- Statistics obscure the fact that families may borrow much more than this limit. Because parents can take out both federally backed and private loans to pay for college.
- Federally-backed Parent PLUS loans have grown considerably: in 2013. They accounted for only 14% of student loans, but in 2020 made up 25% of student loan volume.
- There is no cap on the amount of Parent PLUS loans a family can borrow, and these loans are relatively easy for parents to get, even if they have no credit history at all.
- Parents can also borrow private money from banks to pay for college. However, these amounts do not show up in national student loan statistics.
The result is that American families are deeply in debt to pay for college in ways that government statistics fail to capture. And as the price of higher education continues to increase—with no end in sight. We can anticipate that the national student loan burden will continue to grow for the foreseeable future.
What Is the Single Most Effective Strategy to Avoid Student Debt?
If there is one move that does more to prevent student debt than anything else, it is building the right college list. Not the most prestigious list, not the longest list—the right list. The right list includes schools where your student is competitive for meaningful merit-based financial aid.
Sarah Farbman, senior admissions consultant at Great College Advice, puts it plainly: “The number one best thing that you can do is to write the correct college list. If you are able to put those generous institutions on your list, you are going to give yourself the biggest possible leg up when it comes to collecting merit-based aid.”
Here is what many families miss: merit-based aid is essentially a tuition discount. Colleges use it as a recruitment tool to attract strong students. A school with a $60,000 sticker price may routinely offer admitted students $20,000 to $35,000 per year in merit awards. Meaning most students at that institution actually pay closer to $25,000 to $40,000. But not every school does this. Elite institutions like Yale, Stanford, and Princeton do not offer merit-based scholarships because they do not need to use discounting as a recruitment strategy.
However, hundreds of high-quality public and private universities do offer substantial merit awards. The challenge is knowing which ones—and that is where experienced guidance makes a measurable difference. At Great College Advice, the team draws on extensive data and years of experience to identify which institutions are most generous with merit aid for a student’s specific profile. The return on investment can be significant: even if a family spends $10,000 on admissions consulting, saving $20,000 to $30,000 per year over four years of college represents a net savings of $70,000 to $110,000.
As one parent in the Great College Advice community observed: “The greatest gift any kid can get is to graduate with little to no student debt from a very good university.” That goal is absolutely achievable—but it demands a different kind of preparation than most families expect.
Key insight: The best grades and test scores your student can achieve remain the strongest lever for merit aid. A few additional points on the SAT or ACT can translate directly into thousands of dollars in scholarship awards.
How Should Families Use the FAFSA and CSS Profile to Reduce College Costs—Even If They Think They Won’t Qualify for Aid?
One of the most common mistakes families make is skipping the FAFSA because they assume they will not qualify for financial aid. This is almost always the wrong decision, for several important reasons.
Federal loans require it
If your student will take out any federal student loans (including subsidized loans where interest does not accrue until after graduation) filing the FAFSA is a must. Many families choose to have their student take on a manageable federal loan to give them, as the Great College Advice team puts it, “skin in the game.” The maximum federal student loan for a first-year student is currently $5,500, and this amount does not require a credit check or income qualification. But you must file the FAFSA to access it.
It establishes a financial baseline
If your family’s financial circumstances change (a job loss, illness, or other unexpected setback) having a FAFSA already on file creates a baseline that allows you to go back to the school and request repackaging of your aid. No one knows what happens in the future. Filing early can serve as a baseline so that the family can communicate a change and be repackaged.
It can actually help admissions
This surprises many families, but the FAFSA can demonstrate financial means as well as financial need. “For some schools, if they are looking for full-pay students to round out their budget and you have filled out the FAFSA and can demonstrate financial means, that could be helpful if your student is on the margin,” Farbman explains. You can file the FAFSA and still indicate to individual schools that you are not applying for need-based aid—giving you the benefits without the risks.
The FAFSA opens October 1 each year, and filing early matters. Schools have limited financial aid budgets, and they can run out. Getting in line early gives your student access to the maximum available funds. The CSS Profile, administered by the College Board, is used by a select group of private colleges and collects more detailed financial information, including home equity. Check whether your student’s target schools require it and plan accordingly.
Practical tip: If you file but do not want a school to consider you for need-based aid, you can check “no” when asked about need-based aid, file the FAFSA after the school’s deadline but before the June 30 federal deadline, and then contact the school to clarify that the filing was for loan purposes only.
What Is the Difference Between Merit-Based and Need-Based Financial Aid, and Which Should Families Prioritize to Avoid Debt?
Understanding this distinction is fundamental to any debt-avoidance strategy.
Need-based aid
The aid is determined by an algorithm. You fill out a form—the FAFSA (federal) or the CSS Profile (private)—and the government or institution generates a number called the Student Aid Index (SAI), which represents what your family can theoretically afford. However, colleges are under no obligation to treat that number as definitive. One school might determine you can pay $40,000; another might calculate $60,000 based on its own institutional methodology. Families have limited control over need-based aid beyond completing the forms accurately and on time.
Merit-based aid
It functions differently. As Farbman explains: “Merit-based aid is what we like to think of as a discount. People call it a scholarship, and it is, but from the college’s perspective, it is a recruitment tool to attract strong students. It is not related to the FAFSA. What you get on the FAFSA is irrelevant to merit-based aid.”
For families focused on minimizing debt, the strategic implications are significant. You can actively influence your merit-based aid outcomes in two ways: by helping your student achieve the strongest possible academic profile (GPA, test scores, extracurriculars), and by selecting schools that are known to offer generous merit discounts. Some colleges routinely discount tuition by 30% to 50% for students whose profiles exceed their admitted student averages.
If your student is already in senior year and grades are set, the lever you still control is which schools go on the list.
How Can Families Compare Financial Aid Award Letters to Find the Best Deal and Avoid Hidden Debt?
Financial aid award letters are one of the most confusing documents families encounter and the lack of standardization is by design. Schools package their offers to look as generous as possible, which means families need to do careful detective work.
Sarah Farbman outlines the critical distinctions: “There are different types of aid in the package. You really have to do some digging. One category I like to identify is what is actually your money—it’s just your money later. This includes loans. Colleges will offer you federal loans, subsidized or unsubsidized. That’s still your money because you have to pay it back.”
Sometimes people see an award that turns out not to be yearly. It’s not an annual award from the college—it may just be something for that first year. You need to do some math: did you get a $10,000 scholarship or a $40,000 scholarship?
Here is a framework for reading any award letter:
Start with the full Cost of Attendance (COA)—not just tuition and fees, but food, housing, travel, books, supplies, and personal expenses. As of 2024, schools are required to list COA on their websites. Then separate the aid into two categories. “Your money later” includes all loans (subsidized, unsubsidized, parent PLUS) and work-study earnings—these require repayment or labor. “Other people’s money” includes grants and scholarships that never need to be repaid. This is the category you want to maximize. Finally, calculate the actual gap: COA minus all grants and scholarships equals what you will pay out of pocket or through loans.
At Great College Advice, the team provides families with a standardized comparison spreadsheet that breaks down every school’s offer using this framework—making it possible to see exactly what each institution will actually cost, side by side.
Can Families Negotiate Financial Aid Offers, and How Does That Work?
This is one of the best-kept secrets in college admissions: yes, you can negotiate financial aid offers, and it is something the Great College Advice team regularly helps families do.
“When it comes to negotiating with schools, it is not super common because a lot of people don’t know they can do it,” Farbman says. “But you absolutely can, and it is something that we can help with—especially with merit-based offers.”
The strategy hinges on peer institution leverage. If your student has a generous merit offer from one school, they can use that offer to negotiate with another school that considers the first a peer. The critical nuance is the word “peer.” Farbman offers a concrete example: “Let’s say you got $30,000 a year at the University of San Diego and $15,000 at Loyola Marymount, which is more of a peer institution. You say to Loyola Marymount: ‘You are far and away my top choice—here are three specific reasons why. USD is giving me double what you’re offering. Could you give me $10,000 more? That would be enough for me to commit.’ That is the type of negotiation you can engage in.”
However, if you take that same USD offer to Stanford, you will get a polite no—because Stanford does not consider USD a peer. Understanding which schools consider each other peers is specialized knowledge that experienced college admissions counselors bring to the table.
A community member in the Great College Advice Facebook group noted the impact of this approach: “Financial aid packages varied widely and made a difference. Glad we did not visit in person some of the ones she had to turn down.”
Should Families Avoid Early Decision If They Want to Minimize Student Debt?
For families where cost is a top concern, Early Decision (ED) presents a real tension. The ED admissions advantage is well-documented, but it comes at a significant financial cost: you lose the ability to comparison-shop financial aid offers.
While a student can technically be released from an ED commitment if the financial aid package is insufficient, this is the exception. And the system introduces another subtle disadvantage for high-need students: if a qualified but not standout applicant requires significant financial aid, admissions offices may defer that student to the regular round to “shop around” for applicants who cost less to enroll.
For families prioritizing debt avoidance, Great College Advice generally recommends a non-binding strategy: apply Early Action (EA) or Regular Decision (RD) to multiple schools, wait for all offers to arrive, and then compare the complete financial picture before committing. This approach preserves negotiating power and ensures you are making a fully informed decision.
There is one important exception: if your student is a standout applicant and their top-choice school is one of the few institutions that guarantees to meet 100% of demonstrated financial need, an ED application can still make strategic sense. But for most debt-conscious families, keeping options open is the wiser path.
What Are the Best External Scholarship Resources, and Are They Worth the Effort?
External scholarships can help close a funding gap, but families should understand their role clearly: the most significant financial aid will always come from the college itself. External scholarships are supplementary.
“The biggest chunk of change you’re going to get is from the college itself,” says Farbman. “But if you’ve gotten the most you can from a college and still have a gap, there are resources to explore.”
Where to start:
Your best first stop is your high school guidance counselor. They often have knowledge of local scholarships that are less competitive simply because fewer students know about them. Beyond that, explore aggregator websites that match students to scholarships based on their profile. Here are some resources:
Fastweb, College Board’s Big Future, Going Merry, Scholarships.com, Unigo, Cappex, and StudentScholarships.org.
However, be strategic about your time. Many external scholarships offer $500 to $2,000 and require essays or detailed applications. As Farbman notes: “If that scholarship is $500 to $1,000 and it takes you several hours to write that essay, you have to do the math and think—is it worth it to apply for this scholarship?”
One critical warning about “stacking” policies: Some colleges will reduce the merit scholarship they have already offered you by the amount of any third-party scholarship you receive—especially if that scholarship is paid directly to the institution. The Great College Advice Family Handbook warns: “This is unjust, but there is little you can do if a college has such a policy. Do your research before you spend tons of time hunting for money that will not affect your bottom-line costs.”
Start Planning Early, Plan Strategically
Avoiding student debt is not about finding a single silver bullet—it is about making a series of informed decisions that compound over four years of college. Know your family’s budget before your student applies anywhere. Build a college list that balances fit, ambition, and financial generosity. File your financial aid forms early and completely. Learn to read award letters critically. And do not be afraid to negotiate.
Well, it’s best explained by telling you about a family that came to me several years back. After having a great conversation with the student about her preferences and priorities, the parents got on the line and explained that they had a very clear and strict budget, and that their aim was to come in at or below that budget. It was a reasonable budget–a bit higher what what four years at the flagship university in their home state would cost.
My response?
My first task was to teach the young woman how to understand tuition pricing, and how to estimate what her costs would be at any college that might tickle her fancy. Once she learned how to do it, she became a pro at separating out those colleges that would offer her significant merit scholarships, and which would not.
This empowered her. And much of the emotion of the process was eliminated. She just started with an understanding of what her price would be, and she summarily removed from consideration any schools that would not offer a price within the budget.
In the end, she ended up at a school that she had initially disregarded (it seemed too close to home). But after looking at the school closely, she was able to see the enormous value of the school. It soon became her first choice.
Not only was she accepted, but she also gained entry into the college’s prestigious leadership program. She graduated four years later with an honors degree, a ton of leadership experience, and zero debt.
Thus for the price of our fee, the family was able to win from every perspective. And since she graduated, this young woman has been able to pursue exciting job opportunities in South America, Europe, and now the US. Unburdened by debt, she was free to follow whatever opportunity came along–without fear of financial ruin.
You, too, can achieve this win-win-win outcome. Just give us a call.
For personalized guidance on building a college list that maximizes merit aid and minimizes debt, schedule a free consultation with the team at Great College Advice. With over 100 combined years of experience in college admissions, their six-counselor team has the data and expertise to help your family make the smartest financial investment in your student’s future
