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How Much Do You Really Need to Borrow for College?

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Find The Balance Between Borrowing Too Much and Too Little

When trying to analyze the student loan debt crisis, one of the first questions often asked is, “Why did these students borrow so much money in the first place?” All too often the only apparent answer is, “Because they could.” Nobody talked to them about the wise use of student loans, the dangers of over-borrowing, or the consequences on future financial liquidity.

Whose job is it to educate our students about the impacts of using student loans to pay for college? There could be many partners in this equation. Federal Student Aid offers a wealth of information on federal student loans and also requires financial awareness counseling, while many private lenders provide equally extensive information. Colleges themselves often try to educate students about credit, and some high schools have even jumped on the bandwagon. In the final analysis, though, the student and parents have to avail themselves of the information that is available so they can make informed decisions pertaining to their individual financial situation. Here are some hard questions to answer when trying to determine how much you really need to borrow for college:

 • Have we truly exhausted every other resource? Sometimes borrowing money through student loans seems to be the “easy way” out. Applying for financial aid, searching for scholarships, and participating in the federal work-study program all require a lot of effort, while taking out student loans is comparatively uncomplicated. The difficult part doesn’t really occur until the student graduates and the payment due notices start arriving.

 • Do we really need to borrow the maximum amount? You don’t have to utilize the entire student loan package that is available. You can choose to borrow only a portion of it, and make your future life much easier. Try to look at how much your college expenses will really be, and then see if there are any other ways of coming up with the money before you borrow. Do you have any savings that you put aside for college, can grandparents help out, or can you earn some extra money to help cover incidentals?

 • Can we agree on how this money will be spent? Some parents maintain tight control over student loan funds, while others give their student free rein. If you are going to let your student be in charge, you need to agree to stick to tight budget guidelines.

 • Will we be able to repay these loans? Most student loans have calculators which show how much monthly payments will be in the future. Take a look at these numbers, along with your estimated future income. If the numbers don’t add up, you’ve got some serious rethinking to do right now.

How much you should borrow for college is a personal decision that is based on each family’s individual financial situation. It is not something that should be left to fate, but something that should be carefully considered.

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