12.23.09 | Before you borrow think about life after graduation
Taking out graduate student loans on top of undergraduate student loans can be risky. Therefore, it is important to exercise responsible borrowing. Before you borrow make sure you know what your goals are and have a solid plan about what you are going to be doing in life after graduation.
If you have made the decision to go to grad school you probably know what job field you will end up in. As a potential borrower it is best to look at the median annual salary of the job you hope to have and borrow no more than that. With a ten year repayment plan you will be looking at putting 10% of your income towards paying off your loans every year.
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Filed under: Graduate Loans
This is all good advice, especially the part about not borrowing more than what you can expect to earn in your first year on the job. Be aware that there are now millions of people whose lives are overwhelmed by student loan debt. This is because they get into financial difficulty and let their student loans default. Don’t ever allow that to happen to you. There are huge penalties for defaulting, as well as huge fees for collection. To avoid default you have rights to defer payments with federal student loans. You can also change your repayment plan if necessary and lower your monthly payments based on whatever income you do have. It is a fact that student loan companies make more money from students who have defaulted than from students who pay their loan on time. How can that be? The government has guaranteed about 97% of the loan. So they collect that money and then start collecting on the entire amount of the loan, plus interest and penalties. So they can eventually double dip. This practice should tell your something. The title of this post is spot-on. People should know what the worst-case scenario might be before they take on student debt.
January 19th, 2010 | #