COLUMBIA, Mo.–Student loan debt is like a hammer.
“You can either build something like a great career, or you can hit yourself on the thumb a lot,” says Andrew Zumwalt, University of Missouri Extension state financial planning specialist.
As high school seniors start the school year, many are looking ahead to next fall and their first year of college. They and their parents are probably also thinking about how to pay for it.
About 60 percent of college students take out loans to pay for college. Zumwalt urges students do some research and think carefully about taking on a large debt.
“Before students take out a loan, they want to consider the career they are looking at,” he says. “If they get a degree that leads to a career with a low salary, they may want to reconsider how much in student loans they take out.”
Don’t automatically take out the maximum amount of debt, he says. “Take out what is needed, and to do that you have to create a spending plan. Not only will a spending plan keep you from going deep in debt, you’ll actually be able to plan your expenses and have an idea of where your money is going.”
Students can offset some of their costs through part-time and summer jobs. Parents and their college-bound children should also do some research to find out what grants, scholarships and work-study programs might be available.
Students may be able to take advantage of different payment options.
“With income-based repayment, which is one of the more unique options, your payments are based on your income,” Zumwalt says. “So if you have a low income it is not going to take too much from you. Also, if you’re in a public service job, whether it be federal, state or local, you can actually get your loans forgiven after 10 years.”
Students need to be careful with the order that they take out their debt. Zumwalt says starting with federal debt is always best and then maybe going to the parent loans and finally going to the private loan industry.
Regardless of the type of loan and repayment option, Zumwalt says the most important thing is to have a plan for how to pay off that loan.
More information
Articles from MU Extension
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