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 2018!
1 = Citizens Disclaimer.
2 = CollegeAve Autopay Disclaimer: All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
* 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.
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|3.69% – 10.94%2||Undergraduate, Graduate, and Parents||Visit CollegeAve|
|3.99% – 12.99%||Undergraduate and Graduate||Visit Discover|
|3.82% – 12.82%||Undergraduate and Graduate||Visit Ascent|
|4.12% – 10.98%*3||Undergraduate and Graduate||Visit SallieMae|
|5.03% – 11.23%||Undergraduate and Graduate||Visit PNC|
|3.88% – 12.88%||Undergraduate and Graduate||Visit SunTrust|
|4.68% – 9.77%||Undergraduate and Graduate||Visit LendKey|
|3.72% – 9.68%||Undergraduate, Graduate, and Parents||Visit CommonBond|
|4.04% – 12.01%1||Undergraduate, Graduate, and Parents||Visit Citizens|