Borrowing for College

With stagnant wage levels and increasing costs of living, higher education has become a fact of life for anyone wanting to get ahead. Rising costs of that education are making it harder for parents and students to meet the costs. The past two years, for instance, have seen tuition inflation averaging eight percent, and tuition is virtually guaranteed to increase by three percent every year, if the last two decades are any indication.

Students have some resources available, and a couple of tricks to minimize costs. Private and university scholarships are still a possibility to reduce the costs. The Pell grant can help with undergraduate expenses, but it has not been increased to meet inflation in recent years. Tax credits are a great resource for parents who want to help their children pay for school. Students are increasingly working part-time while attending full-time classes, and they are completing the first two years of core classes at community colleges or on-line.

Even with these options, most students face borrowing to pay for school and living expenses, or putting off their degree programs in favor of full-time employment. How much debt should students feel comfortable with? How much is too much? Are some loans better than others? Finance provider Sallie Mae offers help for those considering student loans.

Borrowing for College — College—401 K 2012 (Flickr.com)

Remember Why You Borrowed

Students often have difficulty making the transition from high school to college. The latter half of senior year for students planning to attend public universities adds to the confusion with frequent parties and road trips. Student loans can easily become a way of maintaining a particular lifestyle, whether it is eating out regularly, living in classy apartments or buying designer clothes. Every dollar of student loans should be directed to the costs of education. When used to cover housing and food, such as during the more hectic final two years, these costs should be minimized as much as possible.

Make Long-term Goals

A way to help control your use of loans is future orientation. What are your plans after school? Do they include buying a new car or house? Maybe you want to start a family or take a vacation to celebrate? Student loan debt will make all these things more difficult, so minimize the debt.

Calculate Your Payment Burden

Your monthly payments begin six months after graduation, and they can be calculated ahead of time. First you need to know the expected borrowing total. Tuition, income from grants and part-time jobs, and expenses should be used to create an informed total. Put this total into a loan calculator to receive your expected monthly payments.

Draw on Experience

Older family members, mentors, and even financial aid counselors are great sources for information. Share the details of your position, and ask them for honest advice. More sources will provide a better foundation for decision-making.

There is no hard and fast rule on loan totals for every student. Sallie Mae suggests keeping payments to less than ten percent of your expected starting salary. The pitfalls of excessive debt can largely be avoided by following the above advice.

About the Author:

Sheri Richardson is a freelance writer in London. She guest writes for www.loanscalculator.co.uk where you can find resources for useful loan calculations.