College tuition rates are on the rise with a private four-year college costing an average of $35,000/year, while public schools average $9,000/year.
While these numbers may send some of you running for the hills, they do not take into account living expenses, books and other fees.
After recently graduating from college, I see many of my classmate’s way over their head in student loan debt. I graduated from a public college and see debt from ranging from $10,000 to $100,000.
Before obtaining a student loan, you should consider these factors.
Parent contribution: How much are they really covering?
Every parent wishes they had the disposable income or investments to pay for their child’s college expenses in full.
However, with many of us struggling to pay our mortgage and daily expenses, paying for expensive college tuition is far out of reach for the average American.
Before considering a student loan, for a public of private college, it is important to assess how much money your parents are contributing. Make sure you know the exact contribution, whether that is $5,000 or $200,000.
If the contribution is on the lower end, you may consider community college for two-years, or public school to offset the rising cost of tuition.
Can you afford your major: What major do you want?
Picking a college major is the most important part of college, aside from maturing and meeting lots of friends and contacts.
For instance, if your major is English you can expect an average starting salary of $31,976, while electrical engineering majors can expect a starting salary of $48,883.
Your major will greatly affect your earning power and your ability to pay back student loans.
Students interested in majors with lower starting salaries should consider limiting the amount of student loan debt they receive, while students who need a technical degree for a high paying major can take on more student loan debt because they will have the ability to pay the loan back.
Another important factor to remember is that with the economy doing poorly, it is difficult to find a high paying full time job.
How much money do you need aside from tuition?
My state tuition cost on average, $11,000/year, but the housing, food and books cost an additional $12,000/year. Don’t only rely on the cost of tuition when budgeting for college.
You need to consider how much more you will spend throughout the year and decide if you need to take out more money to cover these costs. You have to consider the interest rate when borrowing money.
Every expense you pay with student loans carry interest, which raises the cost of those loans even more.
What interest rate can you receive?
If you don’t qualify for federal loans, or don’t receive much in aide, you will have to rely on private loans. My highest private loan interest rate is a whopping 8%.
However, I only have $4,000 with this interest rate. Credit unions typically give very low interest rates; I received around 4.5%, for union members.
If you have good credit, it is important to minimize your risk by shopping around until you find the lowest student interest rates on your student loans.
High interest bad credit loans can double your total borrowed amount by the end of a typical 10-year term loan. Therefore, it is important to consider how you will pay for the loan once you graduate.