The Definitive Guide to Student Loans

Money expert Dave Ramsey tells students: Skip the 'dream' college and go to school where you can afford

OKLAHOMA CITY, OK - FEBRUARY 19: Personal finance guru Dave Ramsey speaks to a crowd of thousands at his event 'Dave Ramsey's Total Money Makeover LIVE' at Cox Convention Center on February 19, 2011 in Oklahoma City, OK. (Photo by Jackson Laizure/Getty Images)
Jackson Laizure | Getty Images Entertainment | Getty Images

About 40% of students say that when it comes to picking which college they will attend, the most determining factor is the "overall fit," according to a recent survey by the Princeton Review. Only about 9% of students cited affordability as the most important element in choosing their school.

That's happening, in part, because parents, and society as a whole, are allowing students to "take a kid's approach to an adult decision," personal financial coach Anthony ONeal said during a Debt-Free Degree Town Hall event with personal finance expert and best-selling author Dave Ramsey.

Students are focused on attending that all-important "dream school," rather than seriously considering what student loan debt will do to their lives 20 or 30 years down the line. While finding a school that works for you is important, it's perhaps not as important as finding a school you can afford.

"We're not against you going anywhere you want to go to school, as long as you pay for it — and don't justify [your college pick] and rationalize it based on stupid stuff," Ramsey said. "You don't want to be stupid about education, it's kind of oxymoronic," Ramsey added with his famous brand of sarcasm.

Ramsey cited an example of a recent caller from his radio program who wanted to go to University of Mississippi, known as Ole Miss. When Ramsey asked the high schooler why she wanted to go to that particular school, she responded that she liked the campus. "She's going to be $40,000 in debt because the campus is pretty," Ramsey scoffed.

During the town hall, Ramsey and ONeal, author of the upcoming book "Debt-Free Degree," said it is possible to go to college and get your undergraduate degree without taking out student loans. Here are four of the money-saving ways they recommend students and their families approach getting a degree.

A student graduates from Southern Maine Community College.
Derek Davis/Portland Press Herald via Getty Images

1. Go to a community college

Contrary to popular perception, going to community college is not a "dumb move," Ramsey said. These schools are not simply for students who didn't get into a more prestigious university.

About 8.7 million students are studying at public two-year colleges, or community colleges, according to the most recent figures from the National Center for Education Statistics. On average, tuition at these schools for the 2018-2019 school year was $3,660, but many students end up paying significantly less. In Tennessee, residents can attend the first two years of community college for free.

"We've got to start hyping up community colleges and stop saying as a culture that community colleges are horrible," ONeal said.

However, that doesn't mean all community colleges are worthwhile, Ramsey said. "There are two kinds of college professors: great and sucks," he said. Similarly, there are two types of community colleges, some of which are substandard.

That means you need to do your research, just as you would with any other university. Visit the school and talk with professors and former students.

As long as the school can provide a solid education, don't stress about its prestige. "Think about this: When you go in to get your taxes done and the guy or gal is a CPA, how many times do you ask them where they went to school?" Ramsey asks. Probably not often.

"That's the biggest lie we've ever believed: where you went to school has some correlation with your future success — it has almost zero," he said. Employers just want to know that you received an adequate education and that you can do the job.

Baruch College is a public college located in New York City.
Source: Baruch College

2. Go to a public, in-state school

If you don't have the cash to go to school and you're looking at debt, the biggest "mathematical change in the equation" you can make is the choice of college, Ramsey said.

Many times, a public, in-state university is a more affordable option than going out of state or to a private college. The average cost of annual in-state tuition at public colleges is $9,970, while out-of-state tuition averages $25,620, according to finance research site ValuePenguin. Private colleges charge a yearly average tuition of $34,740, but many are much higher.

"You can't work enough while you're in school to offset the difference between $10,000 and $50,000 a year," Ramsey said. "Choose to go to the cheaper school where you can afford, it's that simple."

When it comes to picking not only your school, but your major, evaluate what your chosen career will pay once you graduate. "Don't spend $450,000 getting a degree in something that makes you $50,000 a year — you'll be in debt the rest of your life," Ramsey said.

A student studies for classes at the kitchen table.
Source: Twenty20

3. Live at home

Room and board can really add up. The average yearly cost at a public college is $10,800, and goes up to $12,210 at the average private college, according to ValuePenguin.

It may be more cost-effective to live at home and commute to campus if you can, even if that means sacrificing a bit of freedom. "If you can see the college years as a temporary season of necessary sacrifice for the victory of debt-free living, you'll be able to get through anything," Ramsey writes on his website. "Even a few extra years under the same roof!"

Chance The Rapper and scholarship recipient Alexia Feaster attend the Scholly Scholarship Summit.
Jeff Schear | Getty Images Entertainment | Getty Images

4. Chase down scholarships

Filling out scholarship applications can be time-consuming and, quite frankly, disheartening. But both ONeal and Ramsey say students and their families should persevere.

"You could apply for 1,000 scholarships and only get 40. But if you get 40, and they average $1,000 each, you just went to school for free at an in-state college," Ramsey said.

When applying, look for obscure scholarships, Ramsey recommended, adding that students typically have a better chance of getting scholarships that have fewer applicants. To help you find quality scholarships that fit your situation, ONeal has a scholarship search tool on his site where you can tailor your options by your GPA, state, school and major.

To stand out, your scholarship essays should talk about what you're going to do with your major and how you're going to further humanity, Ramsey said. Tell the scholarship committee how you're going to "add value."

In the end, it's a lot of hard work, but worth it. "Students just show up and they expect [school] to just magically pay for itself and the jobs to be there, and that's just not how the world works," John Delony, associate provost and dean of students at Belmont University, said during the town hall.

Don't miss: The FAFSA opens October 1—here's how to complete it, in 6 simple steps

Like this story? Subscribe to CNBC Make It on YouTube!

Paying off your student loans with Michael Torpey
Paying off your student loans with Michael Torpey