Facing the Prospect of High Student Loan Debt at a Prestigious College
July 18, 2011
$20,000 a year is a lot of debt for a Bachelor’s degree. Your debt at graduation will be about $80,000, more debt than 99% of Bachelor’s degree recipients. If you can use the AP credits and take a heavier workload to graduate in three years instead of four, your debt at graduation will be about $60,000. That’s still higher than most Bachelor’s degree recipients. You might be able to cut the debt further by economizing in other ways, such as by buying used textbooks, reducing the number of trips home from school and by minimizing personal and entertainment expenses. For example, if you skip eating out and don’t buy specialty drinks while you are in college, you can save thousands of dollars over the course of your college career. You can also get a summer job to earn money to help pay the college bills.
Mathematics and computer science are marketable majors with strong job prospects and high salaries, so you may be able to afford to repay the debt after you’ve taken steps to minimize the amount you will be borrowing. You should aim to have less total debt at graduation than your expected starting salary, and ideally a lot less.
Still, you need to recognize that you are facing an extreme amount of debt and may encounter a lot of financial difficulty. Your family’s financial circumstances may change, leading to a need to borrow more, but you don’t have the flexibility to absorb more debt, given that you are already borrowing excessively. If you borrow private student loans, the interest rates will probably start increasing in a few years. An increase in the interest rates on a variable-rate private student loan will cause significant increases in your monthly loan payments, perhaps by as much as a quarter to two-thirds. If you drop out of college, you’ll be stuck with a lot of debt and no way to repay it. If you don’t get a good job, you may struggle to repay the debt. You may be forced to choose a higher-paying job just to cover your loan payments even if a lower-paying job is a better match to your interests. You will be driving a used Yaris, while your colleagues are driving sports cars or a new Prius loaded with all the latest gadgets. You may be forced to choose a longer repayment term to reduce the monthly loan payments to affordable levels, which means you’ll still be repaying your own student loans when your children enroll in college.
Your first step should be to sit down with your parents to prepare a budget for your college costs. That will help you determine whether you can afford this college, or whether you should switch to a less prestigious but also less expensive college, such as an in-state public college.
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