Since college is expensive, many students need to borrow money to help pay for it. But, how do you know how much to borrow.
Our friends at U.S. News & World Report offer six steps to help you figure out how much to borrow.
Estimate your full cost of college
This is a biggie. You need to figure out how much it’s going to cost, and we mean more than just tuition. If you’re living on campus, you’ll have room and board fees. You’ll be buying books. Most colleges charge assorted fees. You may have transportation costs. Consider it all.
Borrow only what you need
This is important because you’re going to have to pay back what you borrow – plus interest. So, you don’t want to borrow more than you’ll need so you can live large. It’s better to keep your living and entertainment expenses as low as possible.
Research your earning potential
For student debt to be manageable, you shouldn’t owe more than your starting salary once you graduate, according to Mark Kantrowitz, founder of FastWeb.com and FinAid.org. He says that if you owe less than your annual income, you should be able to pay off that debt in about 10 years. You may wonder how you can figure out what your future salary may be. Remember, there are many published resources that include starting salaries of recent graduates and what their college majors were. Nerdwallet.com is one of them.
Weigh loan options
Research the two student loan options: federal and private. Federal loans come with fixed interest rates and borrower protections, including the opportunity to lower or postpone your payments if you fall on financial hardship. Private loans can have fixed or variable rates and typically don’t offer repayment flexibility.
Keep a healthy mindset about debt
Debt doesn’t have to be bad. In fact, the experts say that a reasonable amount of debt can be one of the best investments a student can make.
Next: 12 insider tricks to pay for college