The Ultimate Student Loan: How Much Can You Afford to Borrow?

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.


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.

PFME Guide On How to Live for Free Off-Campus

One of the major expenses in almost everyone’s monthly budget is housing expenses. Being a college student is no different; unless you live at home, you’re going to incur a significant expense to have a roof over your head. You might be surprised to find that there are ways around that and maybe even make a few dollars.

First, you’ll need to find a place to live that can comfortably house several people. In most cases, you’re looking for a decent-sized house.

 Basically, you have two options for the property:

1.   Buy it. Unless you’re an exceptional 18 year-old in exceptional circumstances, you’re probably going to need the help of your parents to purchase a home. This is especially true if you’re going to school full time instead of working. But it might not be a hard sell if you explain the following to your parents:

  • Your parents could actually make money on the deal. Imagine buying a house and then renting it out to 5-8 people. If all the expenses are $800, and you charge 6 people $250 each, that’s a profit of $700 a month and you can live there for free.
  • You’ll be there to ensure that the property is cared for properly. What could be better than having a family member watching the property?
  • At the end of your academic career, the option would be there to sell the property or keep it and continue renting it out.

2.  Lease it. This option might be a little more challenging, but it’s accomplished all the time. You can find a house to lease yourself and then find roommates. Find enough people and charge enough money to pay all the bills and have something left over.

  • The only challenge is finding a landlord that will let you sublease. Most don’t like the idea, but there is always someone that won’t mind. Most landlords stay pretty happy as long as the bills are getting paid. If you keep the numbers under control, you’re unlikely to have any problems.
  • Spend a couple of days on the phone and call people with homes for rent. It might take a couple of days, but in the end you’ll make/save thousands of dollars. When is the last time you made thousands of dollars in a couple of days? And all you have to do is talk on the phone.

Finding Renters

 This can be tough your first year, but the key is to plan ahead. Get out to the university early, preferably in the spring before everyone takes off for the summer. Plaster the area with flyers and take advantage of any social media opportunities. Be sure your flyers stand out; college campuses are covered with them.

Something simple like this is enough:

 “Great house available, Near Campus… Cheap! I need roommates to share the costs. Call 555-555-5555”

 Always get a deposit, preferably a non-refundable one. In some states, you can spend the deposit however you want. In other states you must save the deposits (if the deposit is refundable).

This strategy will take some work, but it’s not difficult at all. Find and control a house that will hold a few people and find some renters. You can live for free, and even possibly make a few hundred dollars each month in the process.

Five Important Factors to Consider About Credit Cards For Your College Student

It isn’t easy sending kids off to college. You know they’ll still depend on you for some financial support, even though you think it’s time for your child to experience life on their own. One of the biggest questions you may struggle with is the whole credit card issue.

College Students and Credit Cards – What to Consider

You may ask yourself if it’s the right thing to do to turn your teen into a credit-card-carrying adult with no strings attached.  It is our belief at PFME that credit card usage leads to mismanagement of your finances, resulting in spending money that you don’t have to impress people that you don’t like. We do realize that not everyone feels that way.

Not so long ago, new college students were flooded with credit card applications and could easily apply for and receive a card without their parents even knowing about it. However, this situation changed dramatically after the passage of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. This act made it more difficult for a student under 21 to get a credit card without his parents’ approval.

When questioning whether your college student might do well with a credit card, consider these points:

  1. Has he had any money management experience? Perhaps you’ve let him use one of your cards in the past. Maybe he received an allowance or worked at a part-time job during high school. These things teach your child about money—how to get it, save it, and use it as he’s maturing.
    • By the time he’s ready for college, you’ll know how he’s handled money in the past. Use that info when deciding whether he should go off to school with his own credit card.
  2. How does your college student handle receiving, budgeting, and spending money? By now, you have a decent idea about how your son or daughter approaches the whole money thing. Does he spend every cent right away or carefully save a certain percentage?
  3. What are the college’s arrangements for payments of dorm and meal costs? These facts can play a major role in the credit card decision.
    • If your kid will be living in a dorm, room and board is usually required to be paid in a lump sum beforehand, which you could do.
    • Most colleges now have a meal card arrangement, which means each dorm dweller is provided with a meal card that’s scanned to “pay for” meals. So, no credit card is really necessary.
  4. Think about making your college student an authorized user on your credit card account. A card is issued on your account in the student’s name. Your monthly statement will show your child’s purchases.
    • Designating your college student as an authorized user on your card account is great because you can set the monthly limit on his card. Some credit-card-issuing institutions even allow you to change your student’s monthly limits as you like.
    • For example, if you know next semester’s dorm charges are due in December, you can bump up the monthly limit for December to $2,000 or whatever is required. Select the lowest monthly limit possible.
    • Handling the credit card dilemma by making your child an authorized user on your account gives your student a chance to show his financial chops while you monitor and control the amount available for his spending.
  5. Consider a secured credit card. Especially good for college students, a secured credit card account requires a certain amount of collateral be placed on the account, like $300 to $500. This deposit is placed in a low-interest-bearing bond or money market where it will be held up to one year.
    • If your student shows he can pay monthly credit card bills on time consistently, he’ll eventually receive back the initial deposit. In essence, your kid is rewarded for responsible, consistent money management skills when using a secured credit card.

Take the above points into account when you’re trying to decide whether your college student would do well with a credit card. Again, it is the belief of PFME that credit cards should be avoided whenever possible, using debit cards when practical.



***A NOTE on Political Correctness: The use of the pronouns he and him, etc. are used in a gender neutral fashion. Placing he/she and him/her throughout an article makes it difficult to read and frankly looks stupid. If you are unaware of the past practice of using the male terms in a gender neutral manner or are offended by the lack of female pronouns, then I’m sorry for your lack of education and your P.C. attitude.**


The 529 College Savings Plan: An Easier Way To Save For Your Child’s College

529 Plans – Send Your Kids to College and Save a Ton on Taxes

Paying for a child’s education is certainly one of the greatest gifts you can give. But the costs of higher education have been rising at a shocking rate. With in-state expenses at a public school averaging just below $20,000 per year, you may be wondering what you can do.

One excellent solution to ease the financial challenge of paying for college is the 529 College Savings Plan. These are state sponsored savings plans that allow for tax-free earnings. Contributions are not deductible for federal income tax purposes, but are deductible in many instances for state tax purposes.

To open a 529 Plan, here are some basics you’ll need to know:

  1. Tax write offs can be huge. Every five years, account holders can write off up to $55,000 from their estate per beneficiary without having to pay federal gift tax. For married couples, the limit is $110,000.
    • As an example, a wealthy couple with 5 grandchildren could deposit $550,000 ($110,000 x 5) towards their grandchildren’s education and eliminate that amount from their estate. They could do that every 5 years until the maximum is reached ($300,000+ per beneficiary in many instances).
  2. You maintain control of the assets. If you decided to close the account, you would have to pay a 10% penalty and income tax on any earnings. The balance is yours to do with as you wish.
  3. The beneficiary can be changed. If your son decides that he’s not going to college, the account can be reassigned to someone else. The account must be transferred to an eligible individual within the same family.
  4. Different states, different plans. Each state has its own plan(s), and some are much better than others. But you can invest in nearly every other state’s plans.
    • In theory, you could be an Arizona resident, invest in a Connecticut 529 plan, and send your child to school in Florida. A lot of flexibility is available, so be sure to shop around before you open an account.

The fees associated with the various plans are also important to consider. Some will be much higher than others. In fact, many experts consider the extra charges to be the most important criteria when choosing a plan. Some fees are incurred when opening the account; there are also annual maintenance charges.

If you know for certain where you want to send your child to school, many universities offer prepaid 529 plans. This would allow you to lock in the cost of future credit hours at the current rate. Unfortunately, there are penalties should you decide to later send your child somewhere else. So if you choose this option, be very sure where you’ll be sending your kid to college. On the down side, investment options are rather narrow, and the ability to switch between available investment options is also limited. The tax code currently curtails changes to once per calendar year.

Is A 529 Plan Right For You?

Like any investment, 529 plans may or not be right for you. There are numerous other options to finance a college education, each with their own benefits and limitations. However, if you’ve evaluated your investment options thoroughly, you may find that a 529 plan is an excellent option to ease the burden of paying for a college education. The tax benefits are considerable, and you always maintain control of your account. With the rising cost of college, your kids will thank you for investing in their futures.