Red Zone - Debt - The Ohio State University

Debt Management

1. Calculate your monthly student loan payment			Example
Your total student loan debt	$		$
Divide by 1,000
Multiply by 12.27* = Your monthly loan payment	$		$
*Assumes that the interest rate on all your student loans is 8.25% and that you'll pay back your loans using the standard ten-year repayment plan.

2. Calculate your expected monthly salary
Your expected annual salary*	$		$
Divide by 12 = Your expected monthly salary	$		$
*Hint: The median starting salary for college graduates is about $24,000.

3. Determine the percent of your monthly salary going to your monthly loan payments
Divide your expected monthly loan payment by your monthly salary
Multiply by 100 = percent of salary going to loans		%		%

How Much Is Too Much?

Green: Less than 5%	You should have no problem paying off your student loans and are in a good position to borrow more money for graduate school, if necessary.
Yellow: 5 to 8%	You are still in good shape, but you need to be careful. If you borrow more, try to keep your percent of salary going to loans around 8%.
Orange: 8 to 10%	You have borrowed as much as you can manage to repay without significant sacrifices in other parts of your budget. Consider using an alternative payment plan, at least until your salary increases. These plans will lower your monthly payment but raise the total amount you'll have to pay over the life of your loan. Think about paying down your undergraduate loans before incurring any additional debt for graduate school.
Red: Over 10%	It will be difficult for you to make your monthly payments. Contact your lender or financial aid office about an alternative payment plan. If you are considering graduate school, be sure to talk to your financial aid office.