How Much Debt Makes Sense?                                          by Patti Brugman

By Patti Brugman

         You're about to say, “Yes!” to The Perfect College and spend the summer in a hammock dreaming about the fun you’ll have in college. Lovely.  Before that hammock starts swinging, I hope you’ll consider one important little fact that might effect your entire future life.  Debt. When choosing a college, some students are completely bedazzled.  Each of your college acceptance letters starts with “Congratulations!”  Everyone (including us) is offering you a smacking “High-five.”  It’s hard to think in all the commotion.

         You want the best, but not the debt.  Right? While graduating without any debt is fabulous, graduating with some debt is also fine.  How do you figure out how much is right for you? Along with your “congratulations” letter, you might have received a financial aid package. A financial aid package is generated by your FAFSA and application for financial aid and is usually a combination of offers. You might have been given some merit money and a grant (which are free), plus a series of loans (which must be paid back.) There is the total of those numbers, let’s say $42,000, and the total cost per one year of education, let’s say $52,000.  The difference between the financial aid and the total cost (in this case, $10,000) is your expected contribution (the EFC). 

         While you’re dreaming of future greatness, take time to discuss the bottom line with your parents.  Will the EFC fit their financial plan?  Is the total debt you’d have to repay after four years all right with you? 

         One rule of thumb for future freshmen who still have a choice of schools is to do a little research.  First of all, if you are lucky enough to know what you’d like to major in and what you’d like to do with your life, you can pencil in an expected income for your first year of work after graduation.  (This is easy.)  If you plan to become an English teacher, consider your first year salary as $30k.  Wisely, that should be your total debt after college graduation.  If you plan to become an engineer, double that.

         Last week, I ended the blog with the advice that if money is a serious consideration for you and your family, look over your list again and consider buying by price.  A wonderful education is often more about you than about the name of the school.  There are plenty of graduates from Stanford, Columbia and even Notre Dame who are out of work and mired in debt while their peers with degrees from University of Portland and UC Santa Barbara are employed with money to save. (See this article for a particularly bad debt scenario:

         While fanning through your acceptance letters, shuffle them in order of favorites and best fit, then shuffle them again in order of price.  Maybe the same schools will end up on top.  If they don’t and you really like the most expensive school, consider this:  If you choose to be a music major at St. Olaf and spend every summer working or interning in music, your debt will be worth it, because you will graduate with a resume that will get you a top job at top pay.  Conversely, if you graduate from the Marshall School (at USC), but spend all your free time playing video games, you might have a loan you can’t repay.  Without a great resume, it will be hard to gain full employment after graduation, even with a degree from USC.

In the glory of these “hammock days,” dream (and research) a major that will lead to your best career path, one that motivates you to work in your free time. If there is such a major for you, a reasonable amount of debt won’t matter because you’ll be in a position for all your dreams to come true. And that’s what college is all about!

--All the best from Perfectfitcollege.Net