Student Loans: How Much Should I Borrow?
As the economic downturn continues, many recent college graduates are having a difficult time finding jobs that pay well enough to allow them to live comfortably and begin to pay off their student loans. Depending on the school that the student was attending and how long they had been in school, many of these students find themselves owing tens of thousands of dollars to the student loan companies after they have graduated. In order to minimize their losses, many student loan companies have become aggressive in their tactics to recoup the money that they are owed on student loans before their borrowers start to default on their student loans.
As the price of secondary education has become more and more expensive over the years, more and more people have turned to student loans in order to finance their college degrees. Because a college education is such an important part of getting hired for the best positions today, many people see obtaining a student loan to pay for college as their only option for getting ahead in the world. Thousands of recent high school graduates and people interested in furthering their education sign up for student loans each year.
So How Do You Avoid Getting In Over Your Head?
A good rule of thumb to remember is never apply for more in student loans than you would make as a salary in the first year of a job in your field. If the beginning salary for a typical position in the field you are earning a degree in is $35,000 per year, then you should try to restrict your borrowing to less than $35,000. Many people accomplish this by using money from other sources, such as a job or a gift from their family members, to pay the rest of the balance that is due to the university.
By holding the amount that you are borrowing from the student loan company to the amount that you should be making in your first year of employment, you will be ensuring that the loan payment for the student loan will not be an unmanageable percentage of your income. This will increase your success at building your life after you graduate from the university because you will be able to focus on other areas of your life, such as housing and transportation, rather than spending all of your money paying back student loans.
The money that is obtained from student loans should go towards your education and little else. Many student loan companies would be happy to loan you more money than you truly need for your tuition so that you can pay for your books, your food, and your lodging as well, but you must remember that every dollar that is obtained from a student loan will be charged interest and will need to be repaid in the future. You do not want to sacrifice your future comfort so that you can live well on campus today by applying for more money in student loans than you actually need.
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One reason lenders will finance students for more than the price of tuition and books is that college loans have more protection legally than other types of loans.
Lenders can easily garnish your wages and a default cannot be settled with bankruptcy. A default will ruin all your future prospects from employment to home ownership.