Student loans: friend or foe?

By Tkrause

Last year, more than 70 percent of students who graduated with a bachelor’s degree left college with student loans, and that number is not expected to decline anytime soon. It’s almost as if student loan debt has become something students expect to receive along with their diplomas. But, is borrowing money for your education necessarily a bad thing? It probably depends on who you ask.

A graduate student who borrowed $100,000 for a law degree, but cannot find a position, is probably questioning his/her decision to take out student loans. But, a nurse who recently graduated from a community college with less than $20,000 in debt is probably grateful for the opportunity. It’s all a matter of perspective … and choices. Under the right circumstances, student loans can definitely be your friend, but if you borrow blindly, they can also be your foe. Here are a few things to keep in mind if you don’t want to graduate with student loan regret.

Consider cheaper alternatives

Whatever degree path you are considering, make sure you research your college options. Many community colleges now offer bachelor degree programs, as well as transfer programs with area four-year colleges, which could save you quite a bit of money. Look into schools that will give you credit for AP and IB classes or those that have accelerated degree programs. Less time in school could mean less money to borrow.

Borrow only what you need

You may be offered student loans (federal and private) that cover up to the Cost of Attendance (COA), but that doesn't necessarily mean you should take all that money. Draft a budget and only borrow what you need to cover your educational expenses. If you think you’ll need some spending cash for entertainment and other non-essential items, you may want to consider looking for a part-time job instead of adding to your student loan debt.

Pay the interest while you're in school

A good way to keep your student loan debt in check is to make interest payments while you are still in school. Just sending $25 a month (or more) may not seem like much, but it can really pay off over time.

Calculate your Return on Education (MyROE™)

One of the best ways to keep your student loans in check is to estimate your potential earnings for the first year after you graduate from college. This not only helps you determine which college may be the best fit, but it could also help you calculate the total amount of money you should borrow while you are earning your degree. To ensure you get the best ROE™, never borrow more than your first year’s anticipated salary. For example, a journalism major (bachelor’s degree) may expect a starting salary around $39,000, so that would mean borrowing no more than $39,000 while you are in school. Most college students will need to take out a student loan at some point to help fund their education. But, if you make smart decisions and keep your borrowing to a minimum, you should graduate without buyer’s remorse. Student loans are meant to help, not hinder, but it’s ultimately your choice to make them your friend or your foe.

Have questions about student loans or want to share your experience with borrowing for school? Start a conversation by adding something in our comment section.