College debt is a big problem in the US. And while the media may talk about students graduating with $100,000+ in debt, that is actually not accurate unless they are graduate students. Undergraduate students can only directly take on up to $27,000 in debt ($31,000 if they take a fifth year of college). It is families that take on the rest of that debt.
The federal financial aid program offers loans that cover the full cost of college. If a family is paying full tuition, they can borrow that full amount which can be a staggering figure after 4-6 years of college – especially with more than one student in college. That is why families need to recognize how much debt they can afford.
If you are thinking of taking on a loan for your student’s college costs, it is important to calculate your monthly obligation before taking a loan. Too many families do not really understand what they are signing up for when they apply for the money. You don’t want your monthly loan payment to exceed 6 – 7% of your family “take home” pay.
Choice of Schools
However, if your student has not yet chosen a college, now is the time to make choices that will minimize college debt. You want to understand how much college costs before your student even applies. When your student applies to schools where they fall into the top quartile of students, they typically get a much more generous package to attend.
Rather than applying to “stretch schools” where your student will be likely to pay full retail and need to take on significant debt, apply to schools where your student will be in high demand. It will keep down your college costs and ensure you have more money for the things that matter to you.
Want to Keep College Debt to a Minimum?
The Center for College Solutions helps families figure out which colleges are likely to be a good fit financially, including helping you calculate your EFC. Once you know your Expected Family Contribution, we help you develop effective strategies to keep the cost of college and loan debt as low as possible. Learn more by scheduling a no-cost consultation.