Borrowing Smart

by Mark Kantrowitz, Publisher of and

Here are several good tips for borrowing smart:

Minimize your debt.

Live like a student while you are in school so you don't have to live like a student after you graduate. Every $100 you spend using student loan money now will cost you about $200 by the time you pay off your loans.

Avoid overborrowing.

Don't borrow more for your entire education than your expected starting salary after you graduate. A student obtaining a degree in sociology or art history will earn less and should borrow less than a student graduating with a degree in computer science or nursing. Be realistic about your likely starting salary. Not every culinary arts graduate is going to turn into the next Emeril Lagasse, Rachel Ray, Wolfgang Puck or Bobby Flay.

If you're borrowing more than $25,000 for an Associate's degree, $45,000 for a Bachelor's degree or $75,000 for a Master's degree, you may be borrowing too much. While income-based repayment provides a safety net in case your income falls short of your expectations, keep in mind that income-based repayment is not available for private student loans or Parent PLUS loans, so the ability to accommodate excessive borrowing is limited.

If you will need to borrow excessively to pay for your education (say, more than $10,000 a year), you should consider enrolling at a less expensive college. Cumulative debt at graduation correlates strongly with the tuition rates and cost of attendance. The more expensive the school, the more debt you will accumulate by the time you graduate. You may have your heart set on your dream school, but if it means graduating with a luxury car payment worth of student loans, you will struggle to repay the debt. Your second choice college may be just as good but cost a lot less.

Pay at least the interest while you are in school, if you can.

This avoids capitalization of the interest, which increases the loan balance. This will help you pay off the loan sooner and cut the total cost of the loan.


Mark Kantrowitz is an expert on paying for college. He is publisher of and, the leading free web sites for information about student financial aid, student loans and scholarships.

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