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Student Loan Debt and the Right Way to Use Loans to Pay for College

Shannon Vasconcelos

Written by Shannon Vasconceloson April 17th, 2012

I came to College Coach with close to 10 years of experience in college financial aid offices. I began my career at Boston University, where I counseled students and their parents on the financial aid process and reviewed undergraduate financial aid applications. At Tufts University, where I served as assistant director of financial aid, I developed expertise in the field of health professions financial aid. I was responsible for financial aid application review, grant awarding and loan processing, and college financing and debt management counseling for both pre- and post-doctoral dental students. I have also served as an active member of the Massachusetts Association of Student Financial Aid Administrator’s Early Awareness and Outreach Committee, coordinating early college awareness activities for middle school students; as a trainer for the Department of Education’s National Training for Counselors and Mentors, educating high school guidance counselors on the financial aid process; and as a volunteer for FAFSA Day Massachusetts, aiding students and parents with the completion of online financial aid applications.
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Student loans have been all over the news lately, and most of the news has been pretty frightening.  The Boston Globe recently reported that outstanding student loan debt now totals $870 billion, surpassing both credit card and auto loan debt as a fraction of the economy, with over 14% of borrowers currently delinquent on payments.  And the Washington Post detailed how Americans over age 60 still owe approximately $60 billion in student loans, borrowed either for themselves or to help put children or grandchildren through school, putting the retirement of older borrowers at risk. While student loan statistics are scary, your family does not have to be a statistic.  The key to using student loans successfully is to consider them a part of your college financing strategy, not the whole.  Want to use them the right way?  Take the following advice from our college financial planning experts:
    • Save for college now, to avoid over-borrowing later.  Let interest work for you, not against you.  If you’re prepared to make $500/month loan payments in the future, start putting away $500/month now in savings.  If you’re not able to save that amount, think twice about borrowing so much.
    • Look for colleges that are inexpensive.  Or consider colleges that will offer your child scholarship money, to minimize your borrowing.
    • Consider using a college's monthly payment plan.  If twice yearly tuition payments are too much to handle, spread them out over the year.  While a college might charge a small service fee to do so, it will still cost less than the interest payments on a ten year loan!
    • Total student loan debt should not exceed a graduate’s first year salary.  When determining how much to borrow, consider future salary potential.  According to the National Association for Colleges and Employers, the average 2011 starting salary for engineering majors was $61,872.  For humanities and social science majors, the average starting salary was only $35,502.
    • If graduate school is in your child’s future, borrow minimally for the undergraduate years.  Loans may be inevitable when pursuing advanced degrees, as graduate scholarships are limited, so don’t over-borrow now.
    • Understand your loan terms.  How are loan amounts translated into monthly payments?  Check out the loan repayment calculators on
    • Look at government student loans first.  They have deferment and forbearance provisions designed to protect borrowers in financial hardship, protections that may be absent in private loans.
    • Consider other loans options. Those offered by your school, your state, or your home equity.  They might have better terms than some federal loans.  Of course, be sure to read the fine print.
    • Don’t co-sign excessive loans for your child.  Students can access limited loan amounts on their own.  Without an adult to co-sign, they can’t get themselves into too much debt.
Let’s face it, today’s tuition prices pose a real financial dilemma for a lot of families.  Student loans, while not the magic payment solution for which some have mistaken them, can be used as part of a successful college payment plan.  Consider the advice above, and remember:  student loans are just one piece of the college financing puzzle; they are not the whole picture.   201204_contact


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