Finance Blog
Deciding How Much To Borrow In Student Loans
Deciding How Much To Borrow In Student Loans
Liz Weston, Excerpt from The 10 Commandments of Money
By every important financial measure, college graduates are vastly better off than people who only have high school diplomas:
- Their weekly earnings are 64 percent higher, according to the Bureau of Labor Statistics, and their lifetime earning potential averages over $2 million—nearly twice that of people who didn’t get an education past high school.
- They are far less likely to live in poverty: only 1.4 percent of college graduates lived below the poverty line in 2006, compared to 6.3 percent of high school graduates and 13.8 percent of those who never finished high school. College graduates also have longer life expectancies and enjoy better health overall than those without degrees.
- They fared far better during the recession. The unemployment rate for college graduates peaked at about 5 percent. The rate for those with just a high school diploma was twice as high.
There’s no doubt that college graduates on the whole make out far better than those with only high school diplomas. The gap will continue to increase, as the United States continues to shift from manufacturing to a service economy. The kind of unionized jobs that used to pay high school graduates well will continue to disappear, while the growth areas for those with little education will be in lower-paid service jobs.
The percentage of jobs requiring some college education is expected to grow to 62 percent by 2018, according to the Georgetown University Center on Education and the Workforce. That’s up from 28 percent in 1973 and 59 percent in 2007.
But you need to make sure you’re getting an education you can afford. If you’re borrowing money to pay for college, the amount of debt you take on (as well as the kind of loans you get) can skew the whole education-as-investment equation. It’s not only possible to buy an education that won’t pay off, it’s becoming far more common.
In general, college students shouldn’t borrow more for their educations than they expect to make the first year out of school. And they should first exhaust their federal student loans options before considering private student loans. Federal loans have fixed rates, numerous repayment options and the possibility that balances can be forgiven after several years of on-time payments. Private student loans have variable rates and few consumer protections. Both types of loans, federal and private, are extremely difficult to discharge in bankruptcy. Since this is debt that can follow borrowers for the rest of their lives, it should be taken on with extreme caution.
READ MORE at the Equifax Personal Finance Blog:
Credit Trends: Managing Student Loan Debt: Student Loans on the Rise
How to Build Credit in Order to Buy a Home
What To Do If You Think There’s An Error On Your Credit Report
Spring-Cleaning Your Debt with David Bach
11 Steps To Get You Out of Debt in 2011
Adapted fromThe 10 Commandments of Moneyby Liz Weston
The New York Times called her latest book, “The 10 Commandments of Money: Survive and Thrive in the New Economy,” a “wonderful basic personal finance book…[with] enough counterintuitive ideas to keep even people who know a bit about personal finance reading further.” Her earlier book, “Your Credit Score: Your Money and What’s at Stake; How to Improve the 3-Digit Number that Shapes Your Financial Future,” is a national best-seller and was recently published in a third edition.
Liz’s columns run twice a week onMSN Moneywhile her question-and-answer column “Money Talk” appears in newspapers throughout the country, including the Los Angeles Times, the Palm Beach Post, the Portland Oregonian, Stars & Stripes and others.
She also writes a money column, “My Two Cents,” for AARP the Magazine, the largest-circulation magazine in the world with 22 million subscribers.
No comments yet
We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.
Some other factors to consider when commenting:
- Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
- All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
- We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
- Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
- Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
- Stay on topic. Your comment should be concise and pertain to the specific post in question.
- Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
- Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.
RSS Feeds