I don’t know about you, but I left college with about $20-25K in loans. It’s been so long I forgot the exact amount. But I do remember that my freshman year of college cost about $19K for tuition and another $7K for room and board (19-meal plan).
I just ran across a NYTimes article and in it someone says that you should borrow only what you will make in the first year after college.
Mark Kantrowitz, publisher of FastWeb.com and FinAid.org, recommends that students follow a simple rule of thumb. “Do not borrow more than your expected starting salary for your entire undergraduate education,” he said. “If your starting salary is going to be $40,000, then you should borrow no more than $10,000 a year for a four-year degree.”
Well, funny they should say that because my first salaried job after college was for $27K. However, I was still killed by my loans. And I was lucky too. My federal loans were for 4.5-5%, but a few years after me, kids were paying 7+% for the same kind of loans. I felt pretty bad when my friend told me he was paying credit card rates on his loans and I was almost done mine. (He’s a lot younger than me.)
So what were/are your student loans like? Are/Were you making an annual salary that was more or less than your total student loans your first year out of college?
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Graduated in the mid-90s with 30k in loans (4 years of college plus 1 miserable semester of grad school). My initial starting salary was in the mid-30s. My loans were killing me too until I got a significant salary bump a year and half later.
This particular rule of thumb will get harder to follow since the rate of tuition increases has greatly exceeded starting salary increases. However, I do think one needs to have an honest assessment of their earning potential in choosing where they go to college and thus how much they will need to borrow. That is, I don’t think borrowing 60k to major in psychology is very smart (maybe OK for engineering majors).
I graduated ‘02 with about $18k from a private university. Starting salary was $40k. I really lucked out during school. Subsidized loans were easy to get and after I graduated the interest rates dropped and I locked in at less than 3%. It seems a lot harder now.
“Assessing earning potential” is something that a huge number of college students never do.
The number of folks graduating private colleges with non-business humanities degrees seem to back that up.
Hell, friends who are in debt for forty years on art school degrees back that up.
I left college with a little less than $25,000 in student loans. Thankfully, I earn a little more than 2.5 times that amount.
I recently wrote a post advising high school graduates that are headed off to college to be careful when they take out those student loans.
http://www.singleguymoney.com/2009/05/important-financial-tips-for-high.html