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Special section Save more, spend less in '07

Here are 10 ways to pay for college without relying on loans.

10 alternative ways to cut college costs

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6. Pay lower prices at out-of-state schools
Get an out-of-state education, pay an in-state price. That's the beauty of the Academic Common Market. Designed for students who can't find their desired program of study in-state, the Academic Common Market allows students from any of the 16 member states to enroll in an institution in another member state without footing an out-of-state tuition bill. Reciprocity agreements such as the Academic Common Market, the National Student Exchange, and the Midwestern Higher Education Compact (which allows students to attend out-of-state public schools in member states at 150 percent the cost of in-state public school tuition or offers a ten percent discount at out-of-state private schools in member states) are some of the best-kept secrets of the financial aid world. If you've got your eye on an esoteric program of study (18th century French architecture?) or are set on a certain out-of-state school, taking advantage of a reciprocity agreement can save you money.

7. Tap home equity
Parents who want to help out their children financially have heard this advice: Don't pull money from your retirement to pay for school. Cindy Bailey, executive director of education finance services for The College Board, recommends turning to home equity instead. "In general, it's not a good idea to divest your assets, including your retirement savings," Bailey says. "The exception to that is home equity loans. If your home equity has increased, you've got a cushion to borrow from. It's more like you're borrowing from yourself rather than a lender."

For students (in particular, adult students) who may not qualify for a federal Stafford or PLUS loan, home equity loans often offer lower interest rates than loans from private lenders. Additionally, the interest paid on your home equity line of credit or loan is generally tax deductible. Student loan interest is also deductible, but only up to $2,500 a year. Before you rush to the bank, keep in mind that home equity loans should be a last-resort consideration. First fill out the FAFSA and get a student aid report to determine how much private financial aid the school is offering. Leftover proceeds from a home equity loan will count as assets and will make you less eligible for need-based aid.

8. Qualify for free money as an independent
"If you qualify as an independent and your income is very low, you probably would be eligible for a Pell grant which would be for $4,100 and you would probably be eligible for an FSEOG grant which would be another $4,000," says Joseph Re. "Most families with adjusted gross income of over $50,000 wouldn't qualify for that money, but an independent (student) would."

-- Updated: Dec. 29, 2006
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