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Categorized | Paying For College

Smarter Planning for a Better Future – Student Loans

Financial planners agree that there are certain kinds of debt that can be beneficial to your financial future.  Educational loans are among the strategic loans that can have a positive impact on one’s economic outlook.  Since graduates and postgraduates earn significantly more over the course of their lifetime than their non-degreed counterparts, taking out a private educational loan is an option to make graduation and opportunities in your career of choice a reality.  According to a recent report by the U.S. Census Bureau, college graduates earn on average $1.1 million more than high school graduates in the course of their lifetime, while those with graduate degrees earn $1.3 million more.  Better still are those with doctoral degrees who earn on average $2.2 million more than high school graduates in their lifetime.  Given these statistics, the argument for financing a college degree or postgraduate degree remains strong.

Planning a Future You Can Afford

In order to avoid pitfalls when it comes time to pay back the private education loan, there are some smart steps the loan bearer can take at the outset to ensure a realistic payment plan.  This upfront planning is essential when considering a private education loan – this includes proper planning for a right-sized loan given the uncertainties graduates face in what has been a difficult job market over the past several years.

Personal and Educational Needs Assessments

In order to minimize the amount of debt and size of loan payments due when entering the workforce the student should perform  a financial needs inventory and calculate the total cost of the degree program including personal living expenses such as housing, transportation, food, entertainment, tuition and books.  Given the high cost of undergraduate and graduate programs, the amount calculated after taking this inventory will likely be a sobering sum, especially when calculating the payments after entering the workforce full-time.  Once the total cost of ownership of the degree has been calculated the next step is to cut that cost down as much as possible.

Research Your Probable Earnings Following Graduation

Currently, the statistics are grim on the numbers of graduates who can’t find work in their field.  This makes sensible borrowing for your education even more important.  There are a number of websites that will allow you to calculate your probable starting salary following graduation.  Two of these salary calculating websites are and Use this data as a guide to calculate your income and budget this against your likely living expenses and loan payments.  This is the best case scenario though, since many graduates will have to seek out a temporary occupation until they land a job in their selected field.  The graduate may also have to seek out temporary living arrangements such as living with roommates or even with relatives until they enter their occupation.  Although these may be difficult scenarios to fathom, the borrower should note that there are certain planning options that will reduce the total cost of ownership of an undergraduate or graduate degree.

Slicing Your Loan Payment Before You Borrow

Following the  financial needs inventory, the student  may find that the starting salary and ensuing loan payments to afford the chosen degree program and selected school don’t match up to the earnings and income envisioned after making the loan payments.  That’s why considering low-cost education options is becoming a reality for many borrowers.  Some have opted to begin their undergraduate degree at a lower-cost community college to offset the average of $50,000 per year for the cost of a private four-year school.  Many community colleges offer excellent curriculums and the credits earned may transfer to the four-year college that the student has in mind for a bachelors degree.

Getting Credit Where Credit is Due

More careful planning is needed at this stage since the student will want to be certain that the majority of the credits at the two-year institution will transfer toward a four-year degree, otherwise the value of attending the two-year school will be lost.  Sometimes students find that the four-year college will not accept certain credits earned at the community college.  Making these inquiries upfront with the four-year institution is a prudent planning exercise, since the student can defray the cost and effort of possibly taking the same class twice!  If a community college is selected carefully and there is a reasonable transfer of the credits between the selected four-year school and two-year  school, the student will likely find that the total cost of ownership of the degree and the loan payments following graduation are significantly less.

Public Versus Private Education – Does it Pay to Go Private for Your Degree?

Other factors that will contribute to one’s financial outlook following graduation are the costs associated with the school one has applied to and have been selected to attend.  Especially in our current economy, many graduates of private institutions are similarly unemployed in their chosen professions along with those who have opted for a public education with the same kind of degree.  The difference for many who have selected a public education is that the total cost of ownership of their degree is significantly less than their privately educated counterparts – many argue that in today’s sluggish economy, one’s chances of landing a job following graduation are similar regardless of a public or private degree.  When planning one’s educational and financial future, the choice between a public and private education is an important one.  Comparing the costs associated with either public or private degrees, whether at the graduate or undergraduate level is essential in planning for the amount of student loans taken, and payments following graduation.

Proponents of private education argue that the quality of education delivered at costly but brand name institutions of higher learning trumps that which is found at the less expensive state schools.  Others ague further, that a quality education is one of the most important investments one can make, that will pay dividends throughout one’s lifetime, justifying the much higher cost of a private education.  The reality today is, however, that with diminished job prospects following graduation, along with the high cost of education whether public or private, the option of a lower cost public education is seeming more attractive, even to those who thought an ivy league or similar private education was in their future.

Research, Plan, Calculate and Communicate with Your Lender

Education loan providers want students to be able to pay back loans following graduation, and are an excellent source for straightforward advice when it comes to determining the right size loan that a student should take to finance their undergraduate or graduate education.  That communication can be face-to-face, over the phone or by email.  Regardless of the method, frank and open communication about one’s financial needs and their occupational prospects is a must with the education loan provider, and they have years of expertise in assisting students achieve their educational goals.  Although the cost of education remains significant, and will likely remain so in the future, it is still one of the most important investments one can make.  The good news is that the job market will eventually recover – those who have laid out the best plans for their education, and financing of their education will be well-positioned to enter the job market and be able to pay back their loans.

Today’s guest article is provided by Gabriel Gaetano and Andrea Wasik on behalf of

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One Response to “Smarter Planning for a Better Future – Student Loans”

  1. Michelle says:

    I can understand why some families may choose to take out a private loan to attend a private college. What I find disturbing is when families need to do so to attend a public university. As a student in the 80’s, I was only able to attend UT because my Pell Grant paid for my tuition and the Stafford student loan covered most of my living expenses with the rest coming from working part-time. I don’t think you could do the same today.