Thank you for the great articles on how to pay for college. It's so important for parents and future college students to understand the best ways to approach this.
My future brother-in-law is a junior in high school. He insists that he cannot go to school in-state, but his family isn't in a position to help him pay for his education. My fiancée went through the same situation and we are now saddled with more than $100,000 in debt. I plan to pass on your articles in hopes that my future brother-in-law can avoid this mistake.
Thanks for the kind words. As I wrote at the start of my series, keeping college costs under control starts with an honest appraisal of how much your family can and should pay.
Surprisingly, despite all the attention being paid to student loans, only a small percentage of students say they choose a school based on affordability, according to a survey by Key Bank. Of the students polled, 36% said curriculum was the most important factor when selecting a school; only 12% selected a school based on affordability.
Of course, choosing a school is an educational decision. But economics also plays a big part -- as the students themselves discovered. Once kids got to college, making ends meet financially was the number-one concern of students in the Key Bank study -- cited by 25% -- ahead of keeping up with the workload (20%) and getting good grades (16%). But it's a little late to find that out after you've sent in the deposit.
To get an idea of how much debt is reasonable, start with the Student Loan Advisor calculator at www.finaid.com. Students plug in their field of study, expected graduation date and loan interest rate. The site gives them the maximum loan amount they can safely handle, assuming they want to limit their monthly payments to between 10% and 15% of their income.
Say your future brother-in-law plans to major in education. As a teacher, he can anticipate a starting salary of $35,100, according to the calculator. To limit his payment to 10% of his income, he could borrow about $25,500 at a 6.8% interest rate (the rate on new government-sponsored Stafford loans) with a ten-year repayment schedule.
If he's planning to be a chemical engineer, with a projected starting salary of $60,300, he can borrow $43,700, given the same assumptions.
That's more manageable than $100,000, but it's still a lot of debt. Which brings me back to where I started my series of columns: If money is an issue, consider going to school in-state at a public college or university, or start at a local community college and then transfer. If you still decide to borrow more money to attend an expensive school, do it with eyes wide open and have a plan to pay off the debt.
Janet's college-financing series:
Janet Bodnar is editor-at-large of Kiplinger's Personal Finance, a position she assumed after retiring as editor of the magazine after eight years at the helm. She is a nationally recognized expert on the subjects of women and money, children's and family finances, and financial literacy. She is the author of two books, Money Smart Women and Raising Money Smart Kids. As editor-at-large, she writes two popular columns for Kiplinger, "Money Smart Women" and "Living in Retirement." Bodnar is a graduate of St. Bonaventure University and is a member of its Board of Trustees. She received her master's degree from Columbia University, where she was also a Knight-Bagehot Fellow in Business and Economics Journalism.
5 Midsize Companies to Add to Your Portfolio
Midsize companies promise a long runway for growth, with less volatility than smaller firms. Here are five to consider.
By Kim Clark Published
10 Things to Know About Working in Retirement
Working in retirement could give you more money but also could impact some benefits.
By David Rodeck Published
Are Student Loans Being Forgiven or Not?
Student Loans The House and Senate voted to repeal President Biden’s student loan forgiveness plan, but does it even matter?
By Katelyn Washington Last updated
Are Scholarships Tax-Free?
Education Scholarships are generally tax-free if certain IRS and other requirements are met.
By Kelley R. Taylor Published
Student Loan Forgiveness Blocked For Now Due to Court Rulings
Biden's student loan debt forgiveness program is on hold until the U.S. Supreme Court weighs in.
By Kelley R. Taylor Published
529 Plan Contribution Deadlines
529 Plans Many states have year-end deadlines for making 529 college savings plan contributions.
By Kelley R. Taylor Last updated
3 Key Ways You Can Help a Child or Grandchild Pay for College
college Options such as 529 plans, education savings accounts and tax-free gifts can ensure you don’t carry a child’s student loan debt into your golden years.
By Tony Drake, CFP®, Investment Advisor Representative Published
Borrowers Over 50 With Student Loan Debt
Paying for College Millions of borrowers 50 and older are struggling to repay loans for themselves and their children, some delaying retirement. There’s a trick, though, to help with repayment.
By Elaine Silvestrini Published
How to Spend $1,000: Find Cheap (or Free) Online Courses to Build Career Skills
Smart Buying There's a huge array of skill-building online courses that can level up your career for under $1,000.
By Kim Clark Published
PODCAST: Tax Breaks for College Finance with Kalman Chany
Paying for College Paying for (ever-pricier) college is a challenge that this consultant meets head on with highly specific guidance.
By David Muhlbaum Published