Today's college education costs A LOT! Most everyone has to borrow something to cover all the expenses. The big question is - When do you stop? When is the amount you borrow no longer worth it in your future? What is practical in the long run?
Ther are several questions there, but they amount to the same thing: What is enough? You and/or your parents should not just borrow blindly or to fulfill a wish. You and they have to be reasonable and protect yours and their futures.
Borrowed money is not easily written off. It used to be you could declare bankruptcy to reduce the amount of college loans you have to pay back. That loop hole has disappeared. Now you have to prove you can not live a minimal existence if you continue paying for your loan to have that payment defrred. Month by month payments are not exorbitant, so it would be hard to prove you could not live while paying it. Of course, you can not live in a decent apartment, pay for a decent car, or have any entertainment costs, but thta's not the point.
Interest rates have gone up. Stafford loan rates were at 5.3 %. Now for existing loans the interests rate has gone up to 7.14%, for new loans the interest has gone up to 6.8%. If you were to borrow $10,000 today you would be paying $5,000 plus more than before in interest.
Credit cards will kill you. If you think you can cover extra costs beyond your loan by charging it to your credit card, you are right, but that kind of debt is strangling. If new parents were to borrow $5,000 with their credit card to prepare a room in their house for a new baby and only paid the minimum balance, their child would be 32 before the loan was paid off. Imagine what putting a couple thousand dollars on your credit card each school year could do to you!
Starting salaries can not put a dent in your debt, but your college debt will put a dent in your starting salary. Think about it. If you have a debt of $60,000 when you graduate from college, how could you possibly make it on a $60,000 starting salary? And, $60,000 is a better than average starting salary! For every dollar of your loan, your have at least a dollar less for daily essentials such as food and rent, a dollar less for your retirement savings, a dollar less to put toward purchases or recreation you might like—and it may be more than a dollar less if you calculate the interest you owe on that dollar you have borrowed.
What Can You Do?
- Planning for College
- Applying to College
- Paying for College
- Going to College
- Admission News