Deciding How Much to Borrow

Deciding How Much to Borrow

Deciding How Much to Borrow

When you are getting ready to start law, graduate or professional school, keep in mind: the less you borrow now, the less you will have to repay later! While that sounds simple, it is not always easy to follow when you are facing a large bill to go to school. Some early planning can make all the difference.

Your school has already calculated the expenses that a student is likely to incur during the academic year. This is called the cost of attendance (COA). COA varies from school to school and includes tuition and fees, books and supplies, and living expenses. Check your school’s website for more information.

The cost of attendance is a guideline provided by your school. It is not what you NEED to spend. Always borrow only what you actually need which may be less than the maximum amount for which you are eligible. Borrow less now… repay less later.

Why borrow less?

If you borrow student loans to pay for school, you are, in essence, paying for it with your future income. The challenge is knowing if you’ll have enough income to repay your loans and pay your other recurring expenses like food, clothes, housing and the occasional night out.

The key to reducing what you have to repay is minimizing what you spend while in school.

Figure out how much you need to borrow.

The cost of attendance is a guideline provided by your school. It is not what you NEED to spend.

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Deciding How Much to Borrow: Steps to Borrowing Less
Remember, what you need to borrow and what you are eligible to borrow are two different numbers. Some students will borrow the maximum amount listed on their financial aid award letter even though they need less. That is not a good strategy when it comes time to start your career.
When thinking about what you need vs. what you are eligible for, consider the following:
  • What are your out-of-pocket expenses you need to pay to school?
  • What are reasonable expenses for daily living, food, rent, utilities, etc.?
  • What will you need for books and supplies?
  • How much do you really need on a daily basis for things like eating out, your morning coffee or clothes?

Taking all of that into account with realistic expectations can lead to good budgeting, less borrowing and a better financial start when you finish school.

Helpful Tip
Follow these steps when determining how much to borrow:

1. Investigate the cost of attendance at your school.

2. Plan your in-school budget.

3. Compare your COA and in-school budget to come up with how much you can reduce your expenses to limit your borrowing.

4. Understand the cost of borrowing.

5. Estimate how far your future paycheck will go.

6. Make adjustments, as needed, before you incur education debt.