Student loan debt is skyrocketing, and as a nation, it totals over $1.4 trillion. The average debt of college graduates continues to rise, and the Federal Reserve Bank of New York reported in early 2017 that the figure went up for the 18th consecutive year in a row. As of last year, the total doubled from just eight years prior.
If you’re considering post-secondary education and will need loans to make it happen, here are some things you need to know about debt upon graduation. We will give you statistics on the average load you can expect to graduate with, and what sort of a monthly payment you can expect when it comes time to pay them back. Finally, we’ll give you helpful tips and tools to manage your debt and graduate without any outstanding balances.
Average Student Loan Debt Upon Graduation
There are several reasons why the national student loan debt figure is rising. One is that there are more people attending college than one or two decades ago, which means that more students are applying for assistance to pay for their education.
Another reason is that the cost of schooling is going up. The average tuition cost varies widely depending on the type of institution you’re considering. For an in-state university, you can expect to pay an average of $9,410, and for a private school, you’ll play on average $32,410.
How Much Debt Does the Average Student Graduate With?
Unfortunately, those figures are just what is required to fund your education. Things like dorms or apartments, food, books, and other living expenses also come into play, and the average borrower in 2017 will graduate with more than $38,000 total in student loan debt. This doesn’t include other potential debt sources, like credit cards, car loans, or home mortgages.
Student Loan Statistics
Here are just a few interesting facts and figures related to student debt upon graduation.
- Tuition is one of the fastest-rising costs in the US. In 1980, average tuition costs at public universities were $2,119. Today, they are $9,410. That’s an increase of 344 percent.
- Private tuition hasn’t risen quite as much, but it is more expensive in general. In 1980, you would pay $9,500 for your four-year degree on average, and today you will pay $32,410. That’s a jump of 241 percent.
- For perspective, gas prices have risen by right around 200 percent during the same period.
- Although expensive, a college degree can more than pay for itself if you land a job in one of the highest-earning professions. College graduates make around $1.3 million more over the course of their working lives than high school graduates.
Monthly Student Loan Payments
Your loan repayment terms will vary depending on what type of a lender you use. Private loans will have specific requirements, and you’ll need to contact the lender directly to learn more.
Federal loans have some similarities and can be repaid in a variety of ways. The amount of your monthly payment will depend on your total loan, and which repayment method you choose.
For example, if you graduated in 2016 and carried the average amount of student loan debt of $37,172, you could choose to pay back the amount with a standard repayment plan. Under this option, you would have ten years to pay off the best at a 4.29% interest rate. This equals $382 per month for the next decade. Financial experts estimate that you’ll need a minimum salary of $47,000 per year to afford to pay off the loan.
Unfortunately, you won’t just be paying back the money you borrowed. Over the ten-year period in this example, you’ll also pay $8,607 in interest. That means, your four-year college degree will cost $45,779 in total.
There are alternative repayment programs available and some are based on your earned income annually. For example, the Pay as You Earn program will allow you to stretch your payments out over 20 years, which lowers your monthly payment to $231.
Be warned, lower monthly payments don’t mean you’re saving money. By extending the repayment terms, you pay significantly more interest. In this example, you’ll pay $18,262 in interest and your total education costs $55,434 when it’s all said and done.
How to Graduate Debt-Free
If these debt upon graduation numbers are concerning, you may want to consider alternate ways of paying for school. Here are a few tips to cut down on the amount you’ll need to take out in loans and ways to graduate debt free.
- Start saving as soon as possible. It’s never too soon to start thinking about your college education, or how you will repay your loans. Get a part-time job and save as much cash before and during college as you can so that you have funds set aside when the time comes to pay off loans. Making larger than the minimum payments will save you interest costs and lower your overall obligation.
- Pro-actively seek out scholarships. Sometimes student loans and scholarships get confused, but there is one significant difference between the two types of funding. You won’t ever have to pay scholarships back. There are hundreds of different ones available, so begin looking for opportunities and applying as soon as possible. It’s possible to be awarded more than one scholarship, and the funds can add up to an amount large enough to offer enough financial assistance to offset your need for a loan.
- Apply for grants. Just like scholarships, grants also don’t need to be paid back and can fund your college education. Typically available through the government, these are a little trickier to apply for and they may have more criteria than a scholarship. You’ll want to talk with a financial aid counselor to see if you qualify for one of the programs and to walk you through the application process.
- Live at home. Although going away to school is a rite of passage, it’s also an expensive proposition. You can’t avoid the costs associated with tuition, books, food, and transportation, but you can manage your living expenses. If you have an opportunity to go to a campus close to home, it could save you up to $40,000 over the course of a four-year education. If living with a parent isn’t an option, consider cost-effective housing by sharing your space with a roommate to cut spending.
- Don’t apply for credit cards if you can help it. Credit card companies are notorious for preying on college students as they can give you access to fast cash with seemingly no effort. Unfortunately, many credit cards come with extremely high interest rates that make it near impossible to pay off the balances. These can contribute to your overall debt and will just pile on top of your student loans. Credit cards are important to have as an option in case of an emergency, but shouldn’t ever be your go-to source for a night out or a pizza during a study session.
- Start creating a budget by writing down your expenses. Budgeting isn’t a skill that’s taught in school, but it’s a crucial component of being a functioning adult. While you’re in school, start by writing down a list of all of your bills and when they are due. Next, list any additional money you spend weekly on things like food, shopping, and activities. Set your budget so that you can afford your necessary expenses but don’t overspend on extras.
- Learn to cook. Shopping for and cooking your own food rather than dining out or grabbing fast food is not only healthier for you, but it’s more economical too. If you’re living in the dorms on campus, check to see if meals at the cafeteria are included in your tuition fees. If they are, take advantage of the program and eat there as often as possible.
- Shop for used textbooks. College textbooks can add hundreds of dollars per semester to your college expenses. At most school bookstores, you can find used copies that cost a fraction of the cost of the new editions. You can also look online for great deals on used volumes. If a professor requires the newest edition of a book, don’t be afraid to ask why. It may be for information in a single chapter or activity that you can find online without having to pay for the entire book.
Student loan debt is somewhat of a necessary evil to pay for your college education. However, there are ways to manage how much you owe to make it an affordable and worthwhile investment in your future.
Only borrow what you need, and keep a close eye on your expenses over the course of earning your degree so that you don’t overextend yourself financially. It will be worth it over the lifetime of your career with the additional money you can earn as a result of your higher education.