Farmers & Merchants Savings Bank

Student Loans / College Financing Considerations

Whether you are heading out to college in 2018 or will be in 2019, consider these college financing and student loan tips.  The more knowledgeable you are before you go, the better financial outcome you will have once you have obtained your degree.

  1. Have a conversation early on with your parents on how your college education is to be funded.  Know what they can and cannot contribute financially to your education.  You can then research colleges to find the one that is the best fit financially for you.  You may want to consider a community college to start and living at home.
  2. Don’t over spend in student loans in relation to what your earnings will be once you have your degree and are employable.   Your total student loan debt should be in proportion to what your earnings will be plus you will need to factor in your housing expenses plus a possible car payment or other monthly payments.   A common guideline is your total debt to income payment (gross salary / your housing costs + all debt payments you currently have) should not exceed 35% of your gross salary.  Consider too that the first few years you won’t be at your full earnings potential, but after 6 months your student loans will be in repayment.  Research now your future job earnings considering you may not be immediately employable in your field.
  3. Apply for only the loans you need.   They will add up fast over four years or more of schooling and can financially haunt you for 10, 20 or even 25 years after school.   
  4. Consider working part time while you are in college and full time in the summer.   Apply those earnings to your student loans to knock down on the amount that will go into repayment once you do graduate.
  5. Unsubsidized student loans accrue interest from the day you take them out.   Pay this interest monthly while you are still in school so that it doesn’t accrue and capitalize once you go into repayment.  




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