It can be pretty exciting when that financial aid award letter arrives from the financial aid office of your chosen university. Even more exciting is when you realize that you can get enough financial aid that you won’t need a part-time job while attending school.
BEFORE GETTING TOO EXCITED, IT’S IMPORTANT TO CONSIDER WHAT LIMITS TO SET ON YOUR STUDENT LOAN BURDEN.
Determine how much money you’ll need to borrow to attend each college you’re considering. Include in your calculations the living expenses while you’re at school. This probably will be a different number for each university, as financial aid packages, tuition, and living expenses will vary greatly per educational institution.
Construct Simple Post-Graduate Budget: How Much Can You Afford To Borrow Now?
1. Contact your college and get salary figures for graduates with your intended major. What you’re interested in are the starting salary figures and the salaries for those with 5 years of experience.
• It’s important to have a good idea of what you can expect to earn, since your student loan payments will come from this income.
• Verify these figures to the best of your ability. Schools have been known to exaggerate to increase the number of applications.
• Consider where you want to live. It’s not critical to know the exact location, but you can probably figure out if you want to live in a large city, the suburbs, a small town, or out in the country.
2. Get living expense information for the type of area in which you’re likely to find yourself after graduation. That means finding figures for housing, utilities, groceries, entertainment, clothing, medical, insurance and anything else you’re likely to spend money on.
• Also consider other items that aren’t likely to vary from location to location. This would be items like your car payment and cell phone.
• Living expenses can vary dramatically from location to location. Do your research and get accurate numbers.
3. Create a budget from these figures. Take your expected salary into account and look at your expected expenses. How much money is left over? Remember to set aside money for savings each month.
4. Figure out how much you’ll need to borrow. Some simple math will quickly show you just how much you’ll need to borrow in student loans in order to attend a particular school.
5. Determine your monthly student loan payment. There are numerous student loan calculators online that will show you the loan payment for a given loan amount. Remember that there are many different payment options. You can play around with the numbers and consider all the possibilities.
6. Face the truth of the situation. Armed with this information, it’s time to be realistic. If you’re going to live in a large city and can expect to make $40,000 a year, then you simply can’t afford $100,000 worth of student loans.
• Look at the numbers and make a responsible decision. Hopefully, the numbers will work in your favor.
You might not be able to attend your dream university and still afford your student loan payments. You may need to get a part-time job during school or after graduation. Is your first choice school worth the extra time and work? Only you can decide.
On the other hand, a more affordable university is another option. Take the time to determine how much you can afford to borrow. You can save yourself a lot of challenges later on.
A little planning can make life after graduation easier and more enjoyable. Debt can be one of the most challenging burdens in life. Follow these tips to avoid taking on more debt than you can handle.