Planning For Debt
Student Loans
We recommend that you plan very carefully how much money you should borrow. If you prepare a budget each year by itemizing all your expenses--tuition, books, housing costs, food, transportation, and personal expenses--and subtracting all resources--family support, summer earnings, income from part-time jobs, all sources of financial aid, and any other resources--you can determine accurately how much loan money you will need to cover your remaining expenses. The Entrance Counseling Guide for Borrowers that you received when you applied for your first student loan includes a very informative section entitled "Budgeting Your Money." It also includes a budget planning worksheet that is extremely useful in assisting you in implementing a budget to live by.
The amount of loan money you can borrow increases as you progress in class rank (see Federal Direct Stafford Loan Program), but this does not mean that you have to increase the amount of loan money you borrow. It is wise to borrow only what you need to meet your expenses. Because obtaining student loans is a fairly simple and easy process and repayments seem years away, it is typical for students to borrow the maximum amounts per year without considering the amount of money they will have to repay when they leave school. Don't end up in the Red Zone.
You would also be wise to consider what your starting salary will be when you leave school. This is a very important factor when determining the maximum amount of loan debt you will be able to repay. Some typical starting salaries of our graduates have been:
| School of Allied Medicine |
$35,000 |
| Colleges of the Arts and Sciences |
$31,250 |
| College of Business |
$35,000 |
| College of Education |
$25,141 |
| College of Engineering |
$39,000 |
| College of Food, Agricultural, and Environmental Sciences |
$26,500 |
| College of Human Ecology |
$25,000 |
| College of Nursing |
$40,000 |
| College of Social Work |
$25,000 |
For an interactive tool to explore typical salaries in various professions, try http://hotjobs.yahoo.com/salary.
Use this worksheet to do a quick calculation to determine if your student loan debt is in the danger zone. In a national survey sponsored by Nellie Mae (a loan guaranty agency) in 1997, over 50% of students responded that they would borrow less if they were just starting out. At least 40% reported that their loan debt delayed their ability to buy a home and other desired purchases. Consider these examples of debt levels and payments for Federal Direct Stafford Loans.
Credit Cards
Students are inundated with credit-card applications when arriving on college campuses each fall. You would be wise, however, to avoid credit-card debt while you are a college student. The average student only works 10 to 20 hours per week, which in most instances does not provide enough income to support frequent use of credit cards. If you feel the necessity to obtain a credit card, limit yourself to one card to be used for emergencies only and never charge more than you can pay in full at the end of each month. Remember, that credit card is not a pot of gold! It is a debt that you must pay. If managed properly, it can give you a head start on establishing a good credit record.
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