How much should I borrow for college?

Posted by Lindie Johnson on Feb 17, 2012 11:37:00 AM

As of 2010, the average American student borrowed more than $23,000 while obtaining a four year degree. Even at a low interest rate of 5 percent, you'd have to pay $244 per month for 10 years to erase those student loans. However, the question of exactly how much is okay to borrow for college is less dependent the amount of debt you may rack up, but more about how much money you'll make once you graduate.

Research Your Career

dont rush to borrow for collegeDeciding your future career goals is one way to explore the approximate amount of money you'll make once you graduate. Visit the Bureau of Labor Statistics and peruse various occupations you're interested in making your career. They detail current average salary ranges for many different occupations. For example, racking up $50,000 might seem like a lot of debt, however, lawyers make a mean salary of about $129,000 per year. Conversely, racking up that same amount might prove prohibitive for a tax preparer who only has a mean salary of $37,000 per year. 

Determine Future Needs

Since paying for student loans does not generally begin until after you've received your degree, many students do not take into account the future impact of having to pay those loans in correlation with other life expenses. For example, if you plan on moving to a major city after college, the cost of housing will be higher than if you live at home for a period of time. Aside from housing, take into account the cost of transportation, utilities, insurance and healthcare. The less amount of money you need to dedicate to those categories, the more you may be able to take in student loans. Create your budget here.

Take Only What You Need

The conventional wisdom regarding student loans is to borrow only what you need to complete your degree. For example, if you receive graduation gifts from family members or have a job, these monies should be used to pay for school related expenses first. Additional money should not be taken just to be stored in your bank account to use for recreational activities. Estimate your student loan payments.

All Loans Are Not Equal

Seek out federally subsidized loans such as Perkins or Stafford loans before taking loans from other sources such as high interest credit cards. State-based student loans can also over low interest rate and little or no orignation fees. Keep in mind variable rate loans don't have fixed monthly payments so the estimate you receive now won't necessarily be what you pay each month by the time you graudate.


Topics: College Financial Aid, Borrowing for College