Debt Management and Minimization
Many students seek a postsecondary education hoping to improve their career opportunities and financial future. Managing your money while in school is an important part of obtaining the lifestyle you want. However, poor money management, both while in school and after, can mean a large salary going towards debt and not much else.
Follow these steps to make getting your degree, minimizing your debt and repaying your student loans as easy as possible.
For those just beginning a postsecondary program:
- Identify your expected after-graduation salary by visiting sites like www.salary.com, as well as job finding services, like www.monster.com or jobs.mo.gov, to determine the demand and compensation for your profession.
- Determine how much the degree you want will cost and if you can afford it.
- Research and compare the total costs for each postsecondary institution you are interested in, including course fees, add-on fees (student health fees, recreation fees, etc.), room and board, etc. The national College Navigator website provides comprehensive cost and program information as well as links to each schools’ net price calculator. The U.S. Department of Education also publishes College Scorecards on postsecondary institutions to help you make an informed decision about which program, degree, or college in which to invest your time and money.
- Use online calculators, such as the calculator on Mapping Your Future to determine how much student loan debt you can afford (based on your expected future salary) or what salary you will need to pay your student loan debt. A general rule of thumb is to keep student loan payments to 8% of your income.
- Develop and follow a budget while getting your degree so you can avoid credit card and other types of debt.
- Try to find sources of free funding, such as Pell Grants and scholarships, before borrowing student loans. It is also a good idea to pay for a portion of your college expenses as you go through part-time employment.
Those with a degree or about to graduate should be aware of student loan repayment options. Once you have borrowed a student loan, use the National Student Loan Data System (NSLDS) to access your student loan account and keep track of your total debt. You may also get the information by calling (800) 4-FED-AID.
8 percent rule
Most financial advisors recommend student loan payments not exceed 8% of your monthly gross income. Multiply your estimated gross income (before taxes and other withholdings) by .08. Your student loan payments should not exceed this amount.