How To Be Smart About Student Loans

There is one thing you can start doing this year to take away a lot of stress in your 20s, and that is to minimize your student loan burden. A lot of today’s students are graduating with the equivalent of a mortgage … but they have no house to show for it.

There is no reason to get apocalyptic about debt, but you need to be aware of what a high student loan debt burden means. For one, it means that you lose some flexibility. You will have monthly payments that you need to make, which means that you must be earning. If you want to change jobs, go backpacking, move, etc., you will need to take into account how you’re going to make your student loan payments.

A college degree is an asset, and borrowing to get that asset is sometimes necessary. With the high cost of tuition, it is a must for most college students. But that does not mean you need to put an unbearable burden on yourself for the next two decades (or more) of your life.

In some cases, this comes with the territory. If you want a medical or law degree, you will almost certainly have to go tens of thousands – or even hundreds of thousands – of dollars in debt. Those degrees usually lead to high-paying jobs, so that is a manageable amount of debt if, and only if, you are absolutely positive that this is what you want to do with your life.

If you are just getting an undergraduate degree, there is no reason to justify the accumulation of more than $20,000 in student loan debt over four years. Even that is a high amount and it will result in a monthly payment of well over $400. To put that in perspective, rent payments average $600 per month in the United States.

How can you minimize student loans while in college? Part of it is good planning. Choose the highest “value” school which gives you a great experience without making you overpay for that experience. Consider starting out at an inexpensive community college and then transferring to a more prestigious university.

In addition, there are practical things you can do. Get as much in scholarships, grants and aid from your family as possible. While you are in school, try to avoid wasting credits. Consider taking time off if you are unsure about your future.

And most important of all, do not fall for the marketing and social pressure that’s constantly encouraging you to overpay for college for “prestige” points. When you are actually paying off your loans, you will be happy you avoided that trap.