Avoid Too Much Student Debt

  • Determine which colleges are affordable – Tuition and fees are only the starting point in determining what a school costs. Other factors include room and board, books and supplies and personal and transportation expenses. To determine the total cost of attendance at the colleges of interest to your child, visit their websites. You also can consider the impact of any merit, athletic or need-based scholarships or grants (money that you don’t have to pay back) that your child may receive to calculate his or her actual cost of attendance.
  • Identify the average starting salary for a position in their future field – Experts recommend that a student loan payment be less than 8 percent of the student’s gross income. Of course, salaries will vary by field and region. For information about student placement rates and average starting salaries for different degrees, conduct an Internet search or consult the career placement office at the school(s) your child is considering.
  • Calculate the monthly payment on a student loan – The monthly payback amount on any loan will depend on its interest rate, repayment plan and payback period. For example, if the interest rate on a $26,000 student loan is 4% and equal payments are made over 10 years, the monthly payment is $263. The best way to test different loan scenarios is to use an online student loan repayment calculator.
  • Illustrate their future cost-of-living expenses – Many young adults don’t realize all the costs that come with living on their own. Although a $45,000 starting salary may seem like a lot of money to someone who may have previously worked for or near minimum wage, the number can look much different after you deduct: