Plan your debt

Avoid financial hardship by planning out how much debt you will have to repay after graduation. Clear goals will help. Consider your plans after graduation. Do they include:

• travel and/or job relocation?
• marriage and children?
• internships or volunteering?
• buying a house?
  

Each of these choices presents different financial challenges that may require more savings and minimal debt. You will need savings for non-salaried internships that offer valuable experience; money for relocation expenses to maximize your employment opportunities; for a house down payment; planning a wedding; or having children. 

An excellent resource for comparing your career choice and the average starting salary is the Occupational Outlook Handbook at the U.S. Department of Labor Web site. The handbook is updated annually and lists all careers alphabetically. It includes potential earnings based on education level, job growth in the field as well as basics of what to expect when you start work. Click on the OOH Search/ A-Z Index to start your search. Go to iSeek for a Minnesota-based job search Web site that also offers good information on exploring career options and educational requirements.

The rule of thumb is to borrow no more than half of your starting salary. The average undergraduate loan debt is $19,000, which means making $38,000 to start. Is that realistic for you? Another way to look at it is try to keep your debt burden to 10-15 percent of your income. Use the Student Loan Advisor calculator at http://www.finaid.org/calculators/ to determine what loan amounts to borrow, using:
--Your estimated starting salary
--10-year standard repayment plan
--a 15 percent debt-to-income ratio

More information on debt-to-income ratio is available at http://www.onestop.umn.edu/onestop/Services/Money_Management/DebttoIncome_Ratio.html

EXAMPLES

Graphic Designer—$31,900 starting salary

Loan interest rate:	6.80%
Loan term:	10 years
Highest degree expected:	B.A./B.S.
Field of study/career:	graphic arts/design
Expected year of graduation:	2007
Projected starting salary:	$31,900.00
Educational debt-to-income ratio:	15%
Maximum monthly payment:	$398.75
Maximum debt:	$34,649.71

Recommendation: Given the projected starting salary for graphic designers, you should borrow no more than $8,662.43 per year (for four years) for a total educational debt of $34,649.71. If you borrow more than this amount, you may find your monthly loan payments too burdensome. Please note that these figures are not targets. The less money you borrow, the better off you'll be. Live like a student while you are in school, so you don't have to live like a student after you graduate.

Accounting—$43,600 starting salary

Loan interest rate:	6.80%
Loan term:	10 years
Highest degree expected:	B.A./B.S.
Field of study/career:	accounting
Expected year of graduation:	2007
Projected starting salary:	$43,600.00
Educational debt-to-income ratio:	15%
Maximum monthly payment:	$545.00
Maximum debt:	$47,358.22

Recommendation: Given the projected starting salary for accountants, you should borrow no more than $11,839.56 per year (for four years), for a total educational debt of $47,358.22.

Teaching—$32,500 starting salary

Loan interest rate:	6.80%
Loan term:	10 years
Highest degree expected:	B.A./B.S.
Field of study/career:	education/teaching
Expected year of graduation:	2007
Projected starting salary:	$32,500.00
Educational debt-to-income ratio:	15.00%
Maximum monthly payment:	$406.25
Maximum debt:	$35,301.43

Recommendation: Given the projected starting salary for teachers, you should borrow no more than $8,825.36 per year (for four years), for a total educational debt of $35,301.43.

Nursing—$42,100 starting salary

Loan interest rate:	6.80%
Loan term:	10 years
Highest degree expected:	B.A./B.S.
Field of study/career:	nursing
Expected year of graduation:	2007
Projected starting salary:	$42,100.00
Educational debt-to-income ratio:	15.00%
Maximum monthly payment:	$526.25
Maximum debt:	$45,728.93

Recommendation: Given the projected starting salary for nurses, you should borrow no more than $11,432.23 per year (for four years), for a total educational debt of $45,728.93.