Many people wonder what affordable debt is. But this question is subjective. What is affordable debt to one person is not affordable to someone else. That’s because everyone has a different budget and each individual, person, or family has to decide individually what is an affordable debt to them.
College expenses are something that should be thought of long before it’s time to send someone to college. But life has many other expenses other than just college tuition, so it’s understandable that you might have some ambivalence of how to pay for it.
Discovering affordable debt has more to do with knowing someone’s own limitations and budget requirements than finding the perfect lender. But it is also important what kind of loan they decide to get and what the interest is.
From a practical standpoint, affordable debt is debt that is sustainable but that can be paid off within a reasonable amount of time. If a student finds that debt has gone on for too long or that the interest is increasing, it might be time to locate a good debt consolidation plan that would allow them to pay the debt under new terms.
If you are about to send someone to college, it’s a good idea to adjust your budget to include the future payments that will start once college days are finished. Always considering what the future may hold even when it’s not yet known is a life skill that will keep the college student ready for anything they may encounter along the way.
College should be used for the purpose of planning for a career. Even high schools across the country are starting to think of it this way. Parents, grandparents, and even schools are realizing that the earlier a student starts focusing on a career, the more closely they can align their school coursework with these goals.
How does this affect student loan choices?
If students work hard to receive a degree in an area they are interested in and know they can make money with, they are not going to have as much trouble paying back their loan once their school days are over.
The goal should be to not borrow more than they can reasonably pay back over a period of about 10-12 years. The mistake many borrowers make is that they keeping putting off payments until they are out of control and they owe too much to pay it back within that time. The longer it goes without payments, the higher the debt gets.
Debt seems to sneak up on people before they know how large the debt has grown. Life expenses including car buying, home ownership, and tools that someone needs for work often takes precedence over student loan payments. This can put new graduates behind on their student loan payments, making it more difficult to pay back.
The answer to this is to put student loan debt at the top of the budget list so that it will be paid first every month. Then it will always be on time and the debt will start going down rather than up.