Plenty of students and/or their families have to borrow money to afford college these days, but when it comes to student loans, do you know when to say when?
Too many students are reaching graduation full of excitement about the promise their future after college holds only to be hit with a harsh reality: the sizeable chunk of money that paying off student loans will take out of their budget. Unfortunately, these young adults are often unaware of what their debt will cost them each month until they see their first student loan bill. Want to prevent your teen from facing this scenario a few years from now? Plan, plan and plan ahead using this important information.
(Also, see how you can maximize your financial aid.)
Loan repayment is over 20 years
(the same amount of time most of your teens have been alive so far.)
To pay off a $25,000 student loan, your payments would be around $150 a month, roughly a used car payment. You would need a salary of $30,000 - $40,000 to pay it off in 20 years. Careers: News reporter, Graphic Designer, Event Planner
To pay off a $50,000 student loan, your payments would be around $450 a month, a monthly grocery allowance. You would need a salary of $40,000 - $50,000 to pay it off comfortably. Careers: Teacher, Family Therapist, Coach, Interior Designer
To pay off a $75,000 student loan, your payments would be around $750 a month, equivalent to food and transportation for a month. You would need a salary of $60,000 to afford this payment. Careers: Zoologist, Accountant, Public Relations Specialist
To pay off a $100,000 student loan, your payments would be around $1,075 a month, equivalent to a mortgage payment. You would need a salary of $80,000 - $90,000 to afford this payment. Careers: Civil Engineer, Veterinarian, Physical Therapist
To pay off a $150,000 student loan, your payments would be around $1,700 a month, the majority of your monthly income. You would need a salary of $100,000+ to pay it off in 20 years. Careers: Dentist, Physician, Pharmacist, Political Scientist
Avoid Extra Debt
“We often see families take out the full amount that they qualify for, rather than the amount that they actually need. When families borrow the full amount, regardless of need, the student often ends up using the “extra” funds for living expenses, food, etc., that could have been paid for by means other than borrowed money that has to be paid back with interest. Educate yourself to know what you need so you don’t over borrow. You don’t want your teen coming out of college and working to pay back huge student loans; you want to provide them with a fresh start for their future.”
- Jessica Pigg, Guardian Credit Union
Did You Know?
The cumulative amount that a student can borrow is called the aggregate limit. The current federal limit for a dependent undergraduate student is $31,000. Private loans must be sought for additional funds.
Student & Parent Federal Loans do not evaluate the borrower’s ability to pay back the loan, only their credit worthiness over a 90-day period. (Learn how your bad credit can effect your teen.)