The most important question for all future students who plan to take out loans… how much debt is too much debt?
Use this calculator to see the impact of future debt and pay attention to the income needed to sustain the debt comfortably in the paragraph after the results grid.
A rule of thumb I’ve heard is to take out less than the total pre-tax income you plan to make your first year in the workforce.
Be aware that undergraduates are generally limited to federal loans on their own without a cosigner. Federal loan limits are $5,500, $6,500, $7,500, $7,500 from first to fourth year (total of these is $27,000).
In my opinion…loans exceeding the Direct STUDENT loan amounts are too much. So…total for four years…
Freshman $5500
Sophomore $6500
Junior $7500
Senior $7500
Total. $27,000
Any loans above that amount would need to be co-signed by parents…or taken out by parents.
@thumper1 is right.
What is your major and career goal?
Economics. Investment banking on Wall Street is the ultimate goal. @mom2collegekids
For most students the federal loan limit is a good place to draw the line. Those loans also have better protections for the borrower than most private loans, too.
What college will you be attending? There are some schools, Cornell for example, with excellent placement records in IB, with very nicely paying jobs. It’s hard to predict how you will do in college…and whether you will be successful landing a well paying IB job…but if you do…paying off more loans is possible.
The Financial Aid Handbook was a great source and they stated a figure of $32k
The goal of Wall Street investment banking is extremely popular. Of course, most don’t ever make it. The danger is taking on a bunch of debt with the idea that a WS job will make it easier to pay back. Yet, most don’t end up on WS. It’s sort of like being premed and thinking it’s ok to take on debt as an undergrad because doctors’ salaries are high. But, most premeds never make it to med school…and imagine the debt that they struggle to pay back.
That’s why the max you should borrow is the fed student loan amounts listed above.
It looks like you’re looking at USC and UMiami. Would the debt be for one of those schools? How much willl your parents pay? Have you run the NPCs to see what aid you might get?
How much debt are you considering?
Usc and Miami aren’t targets (I’m not even sure they’re semi targets the way Middlebury or Hamilton are).
I’d say that you should stay within the federal limit, or very close (27k- that’s already 31k to pay back due to interest.)
Investment bankers on Wall Street are starting to recruit differently, there is no reason to go into debt to be at a target school when the net is being cast over a broader number of schools. http://www.businessinsider.com/goldman-sachs-careers-recruiting-2017-11 There was even an article recently about coveted hedge fund placements that included a recruit from Kennesaw (probably because that school gives students the opportunity to run an investment fund).
https://thecollegeinvestor.com/4440/schools-offer-students-hedge-funds-run/
Re: http://www.businessinsider.com/goldman-sachs-careers-recruiting-2017-11
Not sure the article helps its credibility by referring to BYU as a “higher-ranked public school”.
Are you saying Miami and USC are not good at all for IB? @MYOS1634
I’ve applied to Villanova, NYU, Uva, Boston college, Duke, Michigan, penn, Georgetown, and my state school as a safety. However my state schools are average at best so I hope I would be able to get in AND afford to go somewhere else.
They’re excellent schools- just not recruited for IB, which doesn’t mean you can’t get yourself recruited.
They wouldn’t justify debt.
What are your state schools?
BYU #61 National Universities tied with Fordham, Southern Methodist University, University of Maryland College Park and WPI
Rutgers #69 tied with American University, Stevens Institute of Technology, Texas A&M, University of Minnesota and Virginia Tech
2018 https://www.usnews.com/best-colleges/rankings/national-universities
This is exactly why rankings should be ignored and students should find the best program and fit for them. If it is too expensive it isn’t a financial fit. Rankings move up and down. If you pay for rank and it falls you are going to feel cheated. If you pick a school for program and fit you really won’t care how it ranks over time.
I don’t think Direct Loans amount is a good benchmark for how much loans you should take out for UG. It would be like saying how much SS you get should be how much you spend for rent and food. When I was in college, I was able to take out 2500/yr for student loans and my tuition was around 5K/ year at a private LAC. Today this LAC’s tuition is over 50K.
I think it all depends on what you are going to do after college and what you can reasonable expect to make when you graduate. If you could get a job in Wall Street or at a high paying tech job, then you could easily pay off 50-100K loans in 3-5 years. On the other hand, if you plan on going to medical or law school after graduation then it is better to limit amount of loans. I know many of my kid’s friends took out 50-100K student loans and were able to pay them off within 5 years.
School ranking matters a lot for IB and consulting jobs. School ranking doesn’t change that much. Duke’s ranking isn’t going to drop from top 10 to top 50. You should check out each school’s post graduate stats and find out what companies recruit at that school.
Debt looks different when you are cashing the check ( so nice and fun) and paying it back ( so long and hard). You really would be better off taking time off in the form of a year or semester and working your tail off rather than paying loans for ten years. The thing that someone 18-22 cannot fathom is that with heavy loans, they cannot start their lives. They cannot live well enough to chose their career, buy a condo/home, marry when they want.etc. When I see family members saddled with debt I only wish their parents had explained the implications in great detail. Your 20’s are a great time. You don’t want to have so much debt that you have to live at home or make choices that will impact you for 3650 days. That’s a long time. I think more than 25K is too much. Work hard in the Summer AND during school term and you will limit your debt. Use a debit card only and NO, you do not need a xxxx because someone else has it.
@ucbalumnus No worries- I emailed the writer of the article and it is fixed!