When college costs don’t add up

We often discuss the dangers of taking on more student debt than you’ll be able to repay. A recent Boston Globe article highlights the difficulty many students, particularly those who are low-income, have with repaying their student loans after graduation.

Comparing college net price to graduate salaries

In the interactive graphic below, you can see how the net price of many colleges compares to graduates’ average earnings 10 years after starting college.

Since the net price is the amount students pay for just one year, and many students thus must borrow nearly this amount in student loans for four years, only to come out of college only making about what they paid for one year, it’s clear why many borrowers end up falling behind on their payments.

According to the data, the national average salary for a college graduate 10 years after starting college was $44,141 at the colleges included in the study, while the average student debt was $74,472.

Since no one can put 100% of their income toward paying student loans (and most student aim for 10-20%), it’s no wonder why many borrowers struggle to repay their debt.

Keep student debt below first-year salary

Given the figure above, in general most experts advise not taking on more student debt than the amount of your first-year salary after college. That’s because higher debt means higher monthly payments, which can be difficult to afford on a lower starting salary.

A college graduate’s salary is affected by a number of factors. While the college you graduate from plays a role, your choice of major will have a larger effect. So if you plan to enter a lower paying field, you should scrutinize the numbers and figure out how much you’ll have to pay each month before choosing to take on a lot of student debt.

And remember, even if you defer your loans or get on a repayment plan that allows you to pay less each month, interest continues to accrue on your loans and can drive up your balance.

Understand the impact of student debt before starting college

Unfortunately, many students don’t realize the magnitude of taking on debt until it’s too late–often when they’re falling behind on their student loan payments after college.

That’s why we help families and students find affordable colleges, maximize their financial aid and figure out the best way to pay for college. We also stress the importance of considering a college’s return on investment before taking out thousands of dollars to pay for it.

And for students already struggling with debt, we help them get on the best repayment plan for their situation and sort through their options, including deferment, consolidation and student loan refinancing.

To learn more about how we can help you, call us toll-free at 1-888-234-3907 or contact us using this form.