Students these days are leaving college with a mountain of debt. Student debt is now estimated at over one trillion dollars. Graduates are also heading into a tough job market to boot. Paying back student loans can be easier with some forward thinking. Here are seven tips to keep your student debt manageable:
1. Keep Debt No More Than Your First Job’s Salary
A good rule of thumb when you take out student loans is to have the total amount of debt not exceed your first year’s salary when you get into the workforce. When you decide what to major in you can develop a good idea of what a starting salary will be. Whatever you rack up in college debt should not exceed this. Students will eventually be working in the real world. Things like rent, car payments, food and utilities will need to be figured out as part of monthly budgets. College debt will be part of that budget. Having a debt payment you can afford will be essential in your future.
2. Choose Federal Loans Over Private Loans
Federal student loans traditionally have better rates than private ones. The loans are subsidized by the federal government. Private loans are provided by banks, credit unions and lending institutions. Federal loans have advantages that can help with repayment. Federal loans allow a grace period of repayment after you graduate. Private loans may not offer this. Federal loans also offer deferments if you are faced with situations that affect your ability to pay. Options like these are at the discretion of individual private lenders.
3. Choose a Career in Public Service
Some positions in public service have incentives that assist in making student loans easier to deal with. Occupations like teachers, fire fighters, and law enforcement can be subject to these options. One example is the Public Service Loan Forgiveness Program, made effective October 1, 2007. If you make 120 full, on-time, monthly payments to your student loan while working full time in the public service, the balance of your loan will not need to be paid.
4. Go to Community College
Many local community colleges are able to provide quality education at a lower price than private schools. This is another thing to think about when taking out student loans. If you plan on getting a four-year degree, think about going to community college for the first two years. Look at the criteria of transferring to a four-year school before enrolling.
5. Plan Your Course Load
One thing to plan for when taking out student loans is your course load. What will be your status, full time or part time? If part time, you may not be eligible for full or even only partial financial aid. If you work and go to college part time, you may be responsible for more out-of-pocket education costs than a full-time student. Know what courses you will be taking and when. Many majors have a course sequence where select courses are only offered in the spring or fall semesters. Make sure your course load is on track with anticipated completion dates so there are no outstanding courses you need to take to finish your program.
6. Cut Costs
For young students starting out, graduating and going into the world of work may seem far off. It’s something they may not give much thought to with college requirements taking up their present mindset. Thinking about student loans that have to be paid after completion of college doesn’t seem like a priority. College costs are an obligation that must be repaid. It’s only after graduation that the true realization of this may hit. To minimize the size of your debt and the possible shock associated with it, cut costs during your academic career. If you are able to minimize the need for student loans it will serve you well in the future.
7. Find Work That Works
One of the ways students have found to lessen the need for taking out large student loans is to find work. This can range from regular paid jobs to work-study programs with the school. Money made can help with expenses and even go toward tuition. Working can be great but find something that works with your schooling. Get something that has flexible hours around class to help with scheduling for class and life. Find employers that have access to cost-effective transport. College is still arguably the best option for securing and maintaining a successful career. But taking out student loans the smart way can help in the years ahead. Featured photo credit: Simon Cunningham via lendingmemo.com
