Guest Blog: How to Stay out of Student Loan Trouble

June 15th, 2015

By Jessica Ferastoaru, Take Charge America

How to Stay out of Student Loan Trouble


Jessica Ferastoaru - reduced headshotStudent loan borrowing has become a necessary part of the college experience for the majority of students today. And while student loans may offer an opportunity for students to achieve their higher education goals, the impact of student loan debt on one’s financial future is often
overlooked. Prospective college students should consider the following in order to stay out of student loan trouble:

How much will my college education cost?

When deciding where to attend college, the total Cost of Attendance (COA) should be an important part of the conversation. The Cost of Attendance includes not only tuition and fees, but also room and board, books, equipment, and transportation. You can use the College Scorecard to compare the value of the schools you are considering. Making cost-effective decisions, such as deciding to live at home while attending school, or renting instead of purchasing new books could make a big difference in lowering the total price tag.

And just because you may qualify for a large amount in student loans, that doesn’t obligate you to accept the full amount. Since all loans must eventually be repaid, it is wise to borrow only what you need. If you could use extra spending money for living expenses, consider finding a part-time job while in school, or working during the summers to supplement your income rather than using student loans.

How much will I make after college?

Once you know how much your college education will cost, the next step is to weigh your school’s Cost of Attendance against your future earning potential. Most students see a college education as a stepping stone towards achieving professional and financial security. But a higher education will not always translate to a high-paying job, and students need plan realistically for life after graduation. A student pursuing a career with a starting salary of $30,000 may want to reconsider borrowing $75,000 to pay for college, as a high debt-to-income ratio can lead to challenges in post-college life. Students can search the federal Bureau of Labor Statistics to compare the average earnings from various occupations in different parts of the country. Other websites with free tools, such as Salary.com and Glassdoor, also provide insight for students looking to gather salary information.

Will I be able to afford my future payments?

With an understanding of your earning potential, you will be able to determine whether you can reasonably afford your future student loan payments. You can use the federal Repayment Estimator to calculate how much you will need to pay each month toward your student loans. Here, you can also see approximately how long it will take to pay off your debt, and the total overall cost with interest.

Many students are surprised when they realize how much they will pay in total on their student loans. For example, a borrower with $50,000 in student loans at 6.8% interest will pay over $69,000 on a Standard Repayment Plan with a repayment term of ten years. That’s $19,000 in interest paid. Borrowers who need lower payments and choose to extend their repayment term can expect to pay much more. To counteract the total interest costs, you can choose to make payments toward interest while still in school. That way, you will not be surprised by a much higher loan balance upon graduation.

For many, student loans are essential to achieving the goal of a higher education and attaining greater financial stability and personal success. But that same financial stability may be threatened if you’re not prepared. By borrowing wisely, being realistic about what you can afford, and making practical spending decisions while in college, you can stay out of student loan trouble.

Jessica Ferastoaru is a Student Loan Counselor for Take Charge America

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