How Much Should You Borrow For School? These Tools Can Help

Right about now, you may be facing some big choices. You may be deciding where to attend college—or if you can afford to pursue higher education at all. And you may be trying to figure out how to pay for college, including applying for loans. For many students, borrowing is a necessary and appropriate piece of the puzzle in making college possible. Smart borrowing can be a great investment in you, but, like any investment, you want to understand it before you act!

Don’t Wing It!

You may feel overwhelmed—but just starting to make sense of the puzzle is a great first step. It may be easy to put off thinking about the consequences of borrowing until later. When later comes along, though, you’ll really wish you’d taken the time to think about the borrowing choices you make now!

So, how do you begin? First, follow a simple rule: Borrow as little money as possible to fund your education. Remember, all loans must be repaid, and you will always repay more than the actual amount you borrow because of fees and interest. As an example, even for subsidized Stafford Loans, which have interest paid for the qualifying student while the student is in school, every $10,000 borrowed will equal about $115 in repayment every month after graduation. For unsubsidized federal loans, the cost will be higher, and private loans are typically even more costly. That’s why you should fund as much of your education as possible every year through grants and scholarships. Even if you missed out on these options this year, be sure to fully explore them for next school year.

Make sure you understand the expenses you need to cover. Check out a list of college costs to see what you’ll actually be spending during the school year. In addition to considering all the resources you have available, make sure you know how to live like a student—and not rack up extra debt that you’ll have to pay off later, with interest.

Look Ahead

You don’t need to borrow the full amount of loans that your school or others may offer. It’s easy to sign a piece of paper now to get your loan funds without thinking about the impact on your life after college. But in reality, you may be signing away the extra bedroom in your future apartment, the ability to afford a car, or even your choice of city in your post-college life.

That’s why it’s important to look ahead before you borrow and do your best to make realistic choices. By estimating how much you’ll be able to earn after school, and what your living expenses will be, you’ll be able to calculate how much loan debt you’ll be able to handle. You may realize that you want to borrow less than you expected—even if that means attending a less costly school or living at home. Check out American Student Assistance’s borrower site for tools that can help you look into your financial future.

What other information do you need to make your financial aid decisions this spring? We want to hear from you!

Posted by Mike Ryan on May 29, 2009 at 02:58 PM EST

post a comment