Student Loans: Deciding How Much to Borrow

1.) Calculate the Costs

Figuring out how much college is going to cost should be every student's first step when deciding how much to borrow. Start by adding up the cost of tuition, fees, books and living expenses. Then, deduct the amount of money you are receiving from grants, scholarships and other forms of non-load aid. The difference is the amount of money you need. A number of websites offer cost calculators that you can use to determine how much you'll need to borrow.

2.) Analyze Your Ability to Repay

Your next step is to figure out how you are going to repay what you borrow. Some loan programs will allow you to defer payments until after graduation. Others do not. If your loan doesn't offer deferred payments, you will need to determine whether or not you will be earning enough money while you attend school to make the minimum monthly loan payment. If you cannot make the payment, you need to find a way to borrow less.

3.) Estimate Your Future Income

If your student loan payments will be deferred until after graduation, you can borrow against future earnings. However, you must still take the time to consider whether or not you will be able to make the required payments after graduation. While this can be difficult because it's hard to determine exactly how much money you will be earning, plenty of information is available online that can help you make an educated guess. Check out government sites that offer average salary statistics for your chosen career field or look for up-to-date salary surveys from reputable sources to help you make an estimate of your future salary.

4.) Get the Loan

It can be tempting to borrow more than you really need but it is never a good idea. The day will come when it is time to repay the money, and it is highly likely that you will have other financial obligations to take care of during that period. You should make every effort to keep your monthly student loan payments below ten percent of your gross monthly income (before taxes). Exceeding ten percent may make it difficult to pay other bills or get additional credit in the future.

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