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We recently read an interesting Denver Post article entitled “Getting Student Loans? Link Borrowing to Your Expected Earnings to Find the Right Amount.” The author, Charlie Farrell, argues that students and parents need to rethink their approach to borrowing money for college. Too many students are exiting college with astronomical loans, requiring them to either depend on parents for financial assistance or to take jobs that aren’t the right fit.
His solution? Link loan amounts to projected future earnings. This won’t sound like new advice to those of you who read our recent series on college admissions mistakes. We talked in detail about why you need to have an end goal in mind before taking on loans or even accepting an offer of admission. Having some game plan about your possible career path or graduate school goals will help you make an informed decision about student loans. (Have no idea what you want to do? This might be a sign that you should take a gap year to assess.)
This is where we would take Farrell’s advice a step further: not only should you take out fewer loans if you plan on pursuing a less-well-remunerated career, you should ideally try to take out no loans at all. This might mean casting your application net wider or going to a lesser-known school, but the freedom of exiting school with no debt can often be worth it in the end.
If you do need to take out student loans (and it is certainly worth it in some cases), you should always be thinking about what your realistic earning potential is and how you might be able to expedite paying off your loans after graduation. Take a moment to look at all the interest you have to pay over the lifespan of a “normal” loan. Now think of all the other things you could do with that money! Putting down extra towards the principal and paying off chunks of the loan whenever you can are two great strategies that will get you out of debt as quickly as possible.
Need help making a realistic plan and thinking through possible scenarios? Our college planners are on hand to help. Call us at 720-216-2222 to set up an appointment.