Thank you for the great articles on how to pay for college. It's so important for parents and future college students to understand the best ways to approach this.
My future brother-in-law is a junior in high school. He insists that he cannot go to school in-state, but his family isn't in a position to help him pay for his education. My fiancée went through the same situation and we are now saddled with more than $100,000 in debt. I plan to pass on your articles in hopes that my future brother-in-law can avoid this mistake.
Thanks for the kind words. As I wrote at the start of my series, keeping college costs under control starts with an honest appraisal of how much your family can and should pay.
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Surprisingly, despite all the attention being paid to student loans, only a small percentage of students say they choose a school based on affordability, according to a survey by Key Bank. Of the students polled, 36% said curriculum was the most important factor when selecting a school; only 12% selected a school based on affordability.
Of course, choosing a school is an educational decision. But economics also plays a big part -- as the students themselves discovered. Once kids got to college, making ends meet financially was the number-one concern of students in the Key Bank study -- cited by 25% -- ahead of keeping up with the workload (20%) and getting good grades (16%). But it's a little late to find that out after you've sent in the deposit.
To get an idea of how much debt is reasonable, start with the Student Loan Advisor calculator at www.finaid.com. Students plug in their field of study, expected graduation date and loan interest rate. The site gives them the maximum loan amount they can safely handle, assuming they want to limit their monthly payments to between 10% and 15% of their income.
Say your future brother-in-law plans to major in education. As a teacher, he can anticipate a starting salary of $35,100, according to the calculator. To limit his payment to 10% of his income, he could borrow about $25,500 at a 6.8% interest rate (the rate on new government-sponsored Stafford loans) with a ten-year repayment schedule.
If he's planning to be a chemical engineer, with a projected starting salary of $60,300, he can borrow $43,700, given the same assumptions.
That's more manageable than $100,000, but it's still a lot of debt. Which brings me back to where I started my series of columns: If money is an issue, consider going to school in-state at a public college or university, or start at a local community college and then transfer. If you still decide to borrow more money to attend an expensive school, do it with eyes wide open and have a plan to pay off the debt.
Janet's college-financing series:
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Take Charge of Retirement Spending With This Simple StrategyTo make sure you're in control of retirement spending, rather than the other way around, allocate funds to just three purposes: income, protection and legacy.
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Here's How To Get Organized And Work For YourselfWhether you’re looking for a side gig or planning to start your own business, it has never been easier to strike out on your own. Here is our guide to navigating working for yourself.
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529 Plans: A Powerful Way to Tackle Rising Education CostsContributions to 529 plans grow tax-free and are not taxed when they are used to pay for qualified educational expenses for the beneficiary.
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Are Student Loans Being Forgiven or Not?Student Loans The House and Senate voted to repeal President Biden’s student loan forgiveness plan, but does it even matter?
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Are Scholarships Tax-Free?Education Scholarships are generally tax-free if certain IRS and other requirements are met.
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Student Loan Forgiveness Blocked For Now Due to Court RulingsBiden's student loan debt forgiveness program is on hold until the U.S. Supreme Court weighs in.
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529 Plan Contribution Deadlines529 Plans Many states have year-end deadlines for making 529 college savings plan contributions.
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3 Key Ways You Can Help a Child or Grandchild Pay for Collegecollege Options such as 529 plans, education savings accounts and tax-free gifts can ensure you don’t carry a child’s student loan debt into your golden years.
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Borrowers Over 50 With Student Loan DebtPaying for College Millions of borrowers 50 and older are struggling to repay loans for themselves and their children, some delaying retirement. There’s a trick, though, to help with repayment.
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How to Spend $1,000: Find Cheap (or Free) Online Courses to Build Career SkillsSmart Buying There's a huge array of skill-building online courses that can level up your career for under $1,000.
