Managing Student Loans

It is no secret that the cost of a college education continues to increase. Additionally, because of the rising number of college graduates, it is now near impossible to get a decent job with having some kind of college degree. These two factors put together equate to the need for student loans.

Student loans are loans given by the government and by private companies to help a college student pay for things like tuition, books, and living expenses. The money comes through the financial aid office of the university that you are attending. Generally, the university will have you do some sort of student loan entrance and exit program. These programs basically tell you that student loan money must be paid back, that you should never borrow more than you need, and that defaulting on a student loan has the same negative effect on your credit as if you defaulted on any other kind of loan.

Even though a university gives you all of this information and the government sets up a table to calculate what your living expenses will be, the majority of students still fall into the student loan trap of borrowing more money than they need. As a result, once the payments on the loan become due, the money troubles begin. This is due to the fact that, although a wonderful thing to possess, a college degree does not immediately get you a $100,000 per year paying job. Thus, if you max out your student loans (meaning you have anywhere between $50,000 and $100,000 in student loans) and your first job out of college pays about $50,000 per year, you loan payments may cost you more than you can afford (especially since you may be looking to buy your first home, get married, buy a car, etc.).

How is it that students are surprised about the total amount of student loans borrowed? This happens mostly because students do not keep track of their borrowing. All students think about is the money they receive and not about the total bill. The point is, this money has to be paid back, so it is important to keep a running total of your student loan debt so that you can plan an appropriate repayment schedule.

If students would heed the advice of the financial aid offices and borrow only what they need and keep track of their total debt, students would be better prepared to pay off this sizable debt once graduation is complete.