Default Prevention and Debt Management

Smart Strategies for Managing Your Student Loan Debt

Student loans can help cover educational costs, but borrowing wisely is crucial. Loans must be repaid with interest, and missed payments can damage your credit and hinder future borrowing. Before borrowing, FAU encourages you to explore the tips and tools here to manage student loan debt and plan for your financial future.

Calculate How Much You Need to Borrow

Before borrowing, it’s helpful to estimate your costs for the semester so you know exactly how much you need. Use the links below to calculate your specific expenses, including tuition, housing, and meal plans. By understanding these costs upfront, you can make smarter borrowing decisions and avoid taking out more money than necessary.

Understanding Your Student Loan Options

Choosing the right loan is key to managing education costs. Each loan type has different terms, rates, and requirements. The links below offer an overview of each option, including factors to consider when deciding between federal and private loans.

How Much Can I Afford To Borrow?

Before borrowing, it's important to know how much student debt you can realistically manage. By estimating your future income, calculating your monthly payments, and setting a budget, you can determine an affordable borrowing level. Here’s a step-by-step guide to help you make informed decisions.

Steps for Determining an Affordable Level of Borrowing:

  1. Research your anticipated entry level earnings.
    • You can research your anticipated starting salary at the US Department of Labor, using the US Department of Labor Outlook handbook at http://www.bls.gov/ooh.
  2. Understand Your Loan's Interest Rates.
    • Check the interest rate on your Federal Direct Loans to understand how much you'll pay back over time.
  3. Calculate your maximum manageable debt level.
    • A good general rule for a sound budget is that your monthly student loan debt should not exceed 10% of your monthly projected gross salary.
    • Use the following formula to determine if your anticipated entry-level salary will be sufficient to pay back your projected education loan indebtedness:  Multiply your monthly student loan debt by 12 to get your total annual student loan payments. Divide the annual total by .10. This result is the annual income required to repay the amount you borrowed.
  4. Manage Loans | Federal Student Aid. 
  5. Calculate your monthly student loan payment.
  6. Create an in-school budget.
    • Creating an In-School Budget will help you estimate your education and living expenses while in school.
  7. Create an after-graduation budget.
    • Estimating an After-Graduation Budget will help you determine how much you can realistically afford to borrow in student loans.

Repayment Strategies and Tips

Additional Resources on Student Loan Debt Management and Debt Management

Federal Student Aid Videos