8 tips to help you control college debt

June 10, 2008

Many families lack the financial resources to cover the entire cost of their children’s college education, which means they might need a loan. Even if a student qualifies for financial aid, part of the aid package might come in the form of loans that must be repaid.

The first key to unlocking college aid is to figure out what your expected family contribution (EFC) is.  This is the starting point on your student’s college roadmap. 

These eight tips will help families and students reduce the cost of borrowing for college.

1. Borrow only what you need to cover the cost of education.  A top of the line Alienware computer might be nice. Paying for it over the next ten years is not.

2. Pay the interest on education loans as it comes due. The sooner you start paying the less interest will accumulate.

3. Budget to control expenses. Include out-of-pocket education costs as well as expenses for living, transportation, personal items and entertainment. Analyze where the money goes and see if there’s a way to reduce your expenditures. Key word make a “Budget”!

4. Look at ways to cut expenses, such as buying used textbooks, using public or school-provided transportation, eating out less or finding roommates to split expenses. Before buying, always ask yourself, “Is this something I really need?”

5. Consider working part time, but be sure to plan your work schedule so your academic work won’t suffer. Investigate campus work-study opportunities. Start looking early, because funds are awarded on a first-come, first-served basis.

6. Keep a file of your education loan documents and other financial aid papers. Know as you go.

7. Analyze future earnings to determine how much education debt you can afford to repay. A rule of thumb is that monthly loan payments should not exceed 8 percent to 10 percent of your gross monthly income. How much will you earn annually in your career?

8. Check to see if the school has a payment plan that will allow you to pay tuition in installments rather than a lump sum. This could save you interest.

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