You might be laughing at the title of this post by now. How in the world is student loan debt affordable in today’s economy? Well, inherently, it’s not. But that doesn’t mean it can’t be. Here are a few tips for keeping your student loans affordable after graduation :
1. Look high and low for grants — People often assume that grants are hard to come by, or that they won’t qualify. The truth is that there are hundreds of thousands of dollars in unclaimed grant money each year, you just have to look. Talk to your school’s financial aid department and conduct an exhaustive search online for any grants or scholarship money you can claim. Every dollar given through a grant is a dollar less borrowed.
2. Know your prospective salary — Many students have a dream job in mind and go for it fiercely, without considering the actual salary involved. While money isn’t everything in a career, it can certainly have an impact on your ability to repay your student loan debt later. A good rule of thumb is to not borrow more in loans than the total salary for one year’s worth of pay in your future job. So if you are going to earn $35,000 a year, you should borrow less than that amount.
3. Keep your percentages low– Similar to knowing your annual salary and corresponding maximum borrowing amount, it is important to know the monthly breakdown of your salary and loan payment. Your student loan monthly payments should not exceed 8% of your monthly income. Payments higher than this amount can threaten your budget balance and put you at a higher risk of student loan debt default.
4. Don’t leave without a budget –Before you walk off stage and into the career field, you should take the time to outline and practice staying within your budget. You have approximately six months from graduation before your loan payments begin. Take this time to practice making your loan payments, by putting that amount into a savings account. This will help you iron out the spending kinks before your loans are due, and give you a bit of a safety net in case finances become tight later on.