8 Ways to Avoid Taking Out More Student Loans Than You Need

how much student debt is too much

The average 2016 graduate left with $37,172 in student loan debt. But when it comes to loans, how much student debt is too much?

How much student debt is too much?

While this answer is different for everyone, there are steps you can take to estimate your student loan limit and keep debt down. Before taking out student loans, consider these eight tips.

1. Don’t take out more than your annual starting salary

Most advisors warn students against taking out more in student loans than they expect to make in their first year’s salary after college. If the average student is $37,172 in debt, their starting salary should match or exceed that number.

As long as your salary is greater than your loan debt, you’ll be better able to handle a 10-year repayment plan. With $37,172 in loans at a 5.7% interest rate, for example, you’d pay about $407 per month for 10 years, according to our student loan payment calculator.

But if your salary dips lower than your total debt, you’ll likely have more trouble handling the monthly payments.

2. Start researching majors and careers today

But how can you estimate your starting salary if you have no idea what job you want after graduation? Even if you do know your future career path, there’s no way to predict whether or not you’ll find full-time employment right away.

There is a certain element of risk here and you may have no idea what your career plans are. But before taking out student loans, reflect on your interests. And use sites like the Bureau of Labor Statistics or Glassdoor to learn about starting salaries.

This research will help you clarify your career goals. You might decide to choose a lucrative college major with a high return on investment. Computer engineers, for instance, have an average starting salary of almost $70,000. Liberal arts majors, on the other hand, average a starting salary closer to $40,000.

You don’t have to shun the liberal arts if that’s where your passion lies. But if that’s the case, think twice about taking out more than $40,000 to pay for school.

3. Learn about your repayment plan

Before taking out student loans, learn the details of your repayment plan.

How long will you be paying off loans?

What is your interest rate?

What will your monthly payments look like?

Many students feel they should go to the most highly ranked college they get into, but the cost of tuition is an important consideration. Even if student loan repayment feels far off in the future, you will have to deal with that monthly bill someday.

By understanding the numbers, you can make a clear decision about taking out student loans. If you’ll be stuck with an $800 monthly payment, consider attending a less expensive school.

4. Opt for federal loans over private loans

Federal loans typically have lower interest rates than private student loans. Interest rates for undergraduate federal loans range between 3.4% and 6.8%. But private interest rates can creep much higher.

Plus, the government offers more borrower protections than private banks do. For instance, you may qualify for federal loan forgiveness or income-driven repayment plans if you have federal loans.

At the same time, the government sets a borrower limit for dependents of $31,000. Some students take out private loans to make up the difference. Since banks usually require a good credit score, parents tend to cosign on these loans.

If you’ve hit your federal limit, consider whether taking out more student loans is the right choice. The college experience you’ll get now might not be worth all the additional years of repayment  —or the potential burden on your parents.

5. Search for as much free money as you can get

One excellent way to reduce the amount you take out in student loans is to get scholarships and grants. Scholarships are essentially free money; you don’t have to pay them back.

There are tons of scholarships at both the local and national level. Websites like Scholly and College Board Scholarship Search help you locate funding opportunities. And this can reduce your reliance on student loans.

6. Learn about careers that offer loan forgiveness or assistance

Both the federal and state governments offer loan forgiveness and assistance programs. These programs are for those in certain occupations — like doctors, nurses, and teachers.

To qualify, you typically need to work in a high-need or critical shortage area. Research these programs to see if any match your career goals.

7. Find a part-time job during college

Prevent your student loan debt from ballooning out of control by taking a part-time job during college. By making some income, you won’t have to keep taking out loans to cover living expenses.

Some jobs, such as academic tutor and mystery shopper, pay a good deal more than the usual minimum wage options on campus.

8. Don’t spend student loan money on other expenses

Finally, be careful not to spend student loan money on expenses such as monthly bills or going out to eat.

Student loan money comes with strings attached. Due to compounding interest, you’ll end up paying way more in the long run than you realize today.

Do your research before taking out student loans

Student loans can be a huge burden. Many studies show that debt-saddled millennials are waiting longer to get married or buy houses.

Before signing on the dotted line, find answers to any and all of your student loan questions. Make sure you understand exactly what your repayment plan will look like.

If you decide how much student debt is too much before taking out loans, you’ll ease the financial burden on your future self.

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