Planning for Student Debt


Hi, I’m Carly Cherry and welcome to personal
finance 120, information from managing your financial life in about two minutes. Today, we’re going to be discussing the student
loan debt: How you can plan for it and how you can repay that debt after your education
is complete. When young people think about college, they
rarely think about the debt they’ll have to repay afterwards. Fortunately, there is a way to find out if
you’re taking on too much debt. Typically, college websites list the cost
of tuition, books, and other school fees. They might not list the other costs you’ll
incur while living on or off campus. Your first step is to create a monthly budget
for your living expenses outside of the cost described by each college you’re interested
in. If you’re a parent, it isn’t wise to contribute
more to your child’s education then you currently do to your retirement fund, or mortgage payments. It’s okay to tighten your budget, but don’t
shortchange your retirement. There are no scholarships for that. The toughest calculation, but perhaps the
most necessary, is to determine what the student’s income will be in the first few years after
college. Websites like salary.com can help you identify
what a particular occupation will pay and it lets you know how that salary could change
depending on where you live. Why is this important? Well, it would be tough for somebody with
seventy-five thousand dollars in student loan debt to make their payments on a starting
teacher salary, for example. A good rule of thumb is to keep student loan
payments under fifteen percent of your monthly take home pay. That also means plotting a full budget for
those post college years, which will help you know what you can afford for an apartment. If you’ve already started your research on
student aid, you know that there is an abundance of loans, scholarships, and aid for you. It’s important for you to pay attention
to the requirements of each. A loan such as the direct subsidized Stafford
loan is only available to students with financial need, the direct unsubsidized Stafford loan,
however, does not require you to be in financial need to apply. Depending on which student loan products you
choose and your personal situation, your repayment options will vary. There are already a number of choices available
for student loan repayment and more are being added as the federal government tries to deal
with this problem. Current options include deferment and forbearance
(if you need a temporary break from your payment schedule), and several plans that are based
on your income, family size, and occupation. There are also loan cancellation options to
suit some very specific circumstances, and a federal loan rehabilitation program that
lets you bring defaulted loans current. Your college will conduct entrance and exit
counseling about your federal loans, so pay attention. Your money and post college lifestyle will
be at stake. If your student loans are already in repayment
and you’d like to know more about your options, you can call one of Cambridge’s counselors
to discuss them in detail. That number is 888-661-7910. That’s all we have for today on your student
loans. Don’t forget to check us out on social media
for more videos, articles, and tips to help you with your financial needs. Until next time, I’m Carly Cherry for Cambridge
Credit Counseling.

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