Borrow Wisely

Student Loans

You are in the process of making one of the best investments of a lifetime - your education. We’re especially glad you chose us here at UMD. We want to equip you for a lifetime of success, even after college. Let’s start the conversation about student loans so you’re in a great position when you get your first professional job with your degree.

If you are financing any or all of your education with loans, you are also in the process of making one of the largest purchases of your lifetime. The cost of your education will be second to a mortgage and will likely be more expensive than anything else you ever purchase. It is hard, but worthwhile, to keep tabs on your debt, what you can afford to borrow, and to decrease expenses to minimize borrowing - even for an education.

Keep Debt To a Minimum

If you are taking out student loans to pay for all or part of school, you are in the process of making one of the best - but costliest - purchases of your lifetime. Every decision you make from your first day as a freshman to graduation matters when it comes time to repay your student loan debt. Limit debt to things that increase in value over time - such as your education or a home.

If you’ve got a credit card or line of credit, always pay the balance in full each month. A credit card can be used as a backup for emergencies but only as a last resort. If you’re tempted to buy an item using a credit card, only do so if you have the funds available to pay the balance in full by the due date.

Start to think about student loan repayment from day one of your first year. Frame your future repayment with what you think you’ll make as a starting salary.

Mapping Your Future

Think about what you can afford to repay. What will you make upon graduation? www.mappingyourfuture.com/paying/debtwizard

$28,000 salary = $16,000 debt paid in ten years
$40,000 salary = $23,000 debt paid in ten years

Borrow Smart

DTI (DEBT TO INCOME RATIO)

Monthly Minimum Debt Payment ⁄Monthly Gross Income

Example:

Debt Income
Student Loan Payment $270 Gross Monthly Salary
Car Loan $190 $2,333 ($28,000/year)
Credit Card $75  
Total Monthly Debt $535  

$535 (debt) divided by $2,333 (income) = .23 x 100 = 23% (in the Overextended range)

10% or less..........Excellent
11%-20%...............Acceptable
21%-35%...............Overextended
36% or more........Danger