Pursuing a college degree is an investment that can result in worthwhile returns. Yet the cost of an education and student debt could mean that not every college graduate will realize the returns they expected on their investment.
While a higher education can have big payoffs, every student should focus on limiting expenses and keeping student debt affordable.
Failing to keep tabs on student loans now could lead to financial obstacles after graduation. Find out if your student debt might not be worth it, as well as how to get back on track.
1. You haven’t considered student loan repayment
Getting your student loan money is pretty easy. But repaying it can be much harder.
Current students and recent graduates can look ahead and project their repayment to avoid feeling blindsided by student loan balances and payments.
Our student loan payment calculator can show you how much you can expect to pay each month based on your interest rate and repayment term. It’ll also calculate the total interest you’ll pay over the life of the loan.
If your monthly costs look too high, research ways to lower your student loan payments. For example, you could enroll in income-driven repayment or refinance your student loans.
Maybe the total amount you’ll repay seems too high compared to what you borrowed. If that’s the case, consider paying ahead to lower your interest costs. Use our student loan prepayment calculator to see how fast you could get out of debt.
2. Your college is too expensive
If attending your dream school comes with a hefty price tag, you might rack up a higher student loan balance to cover costs. But the further into debt you get, the more daunting it could be to repay it.
While attending an expensive college might seem worth the cost now, you could end up regretting your choice. A 2017 Gallup poll found that 28% of those who pursued a degree or graduated wished they’d chosen to attend a different institution.
Decide whether taking on this debt is worth having the name of a certain school listed on your diploma. Consider attending a community college for your first two years or choosing an in-state public college.
These options could shave tens of thousands of dollars off the cost of your degree.
3. Your major won’t lead to high-paying work
In the Gallup poll, 36% of respondents said they’d choose a different field of study if given the chance. One reason why may be because some majors don’t lead to good-paying jobs.
Among 2018 college graduates, degrees in the top-paying field (engineering) will lead to starting salaries of over $66,000 a year, according to projections from the National Association of Colleges and Employers. That’s $15,000 higher than the average pay for those who studied communications.
While choosing a field of study and work that you’ll enjoy is a good idea, it’s also important to have a realistic idea of how much you’ll make after college. Consider these two steps:
Visit your campus career center to get help researching employment opportunities and compensation for your major.
Compare your projected pay to your costs of living and monthly student loan payments after graduation.
If your major isn’t one that’ll lead to high future earnings, that’s all the more reason to limit your dependency on student loans. You might also consider switching majors to be in a higher-paying field.
4. You’re borrowing more than you need
If you default to student loans to cover all your college costs, you’ll quickly fall deep into debt.
Taking out more student loans than you need now can become a major obstacle later. Our recent survey found that among people who paid off student debt, 14% said borrowing too much was their biggest setback to repayment.
Before turning to student loans, consider other ways you can pay your expenses.
As mentioned, choosing an affordable college could help you keep costs and loan balances low. But you could also participate in work-study or hold a part-time job to help you cover certain costs. And don’t forget to apply for scholarships.
Besides looking for funds outside of student loans, limit how much you borrow to only what you need. If you can cover your costs with a $1,500 loan, for example, don’t take out $2,000 just because you can.
If you end up with leftover funds at the end of the semester, use them wisely. You can always return unused student loan funds to lower your balance.
5. Your student loans are too expensive
Pay attention to your student loan rates and costs to make sure you’re picking the cheapest borrowing option.
Use Direct Subsidized Loans first if you qualify. With a federal subsidized loan, the government will cover your interest charges while you’re in school, during your grace period, and during deferment. Direct Unsubsidized Loans are a good second option.
If you’re a graduate student or have hit federal student loan limits, however, you might need to borrow without these Direct Loans. You can get federal Grad or Parent PLUS Loans, but these carry some steeper costs: 7.60% rates for the 2018-19 school year, plus a loan fee of 4.264% for loans disbursed before Oct. 1, 2018.
You could also consider private student loans. If you have a cosigner with good credit, you could qualify for lower interest rates than what’s offered on a PLUS Loan.
But be careful about taking on unsubsidized student debt with high interest rates. This debt will accrue more interest while you’re in college and will cost more to repay. It’s important to keep these balances as low as possible by exhausting cheaper options.
Knowing the most cost-effective approach to getting a degree, understanding your repayment options, and choosing a career you like are important steps to getting the degree you want at a price that you can afford. Do your due diligence to ensure your student loans are worth the cost.
Need a student loan?Here are our top student loan lenders of 2019!
|1 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
2 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 2/1/2019. Variable interest rates may increase after consummation.
3 Important Disclosures for Discover.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.26% – 13.26%1||Undergraduate and Graduate|
|4.20% – 11.44%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.62% – 11.47%*,4||Undergraduate and Graduate|
|4.38% – 13.38%5||Undergraduate and Graduate|
|5.85% – 6.99%6||Undergraduate and Graduate|
|3.95% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.47% – 12.34%8||Undergraduate, Graduate, and Parents|