How Much Should We Borrow in Student Loans?

Borrow Only What You Need, But How Much is That?


It seems like a rather obvious statement, doesn’t it - borrow only what you need in student loans? But, when you are trying to figure out the costs of college, and weighing that with how much you and your student will be able to realistically repay in the not-so-distant future, it can get frustratingly difficult. It might feel like you need to be a bit of a future prognosticator, but here are a few tips that should help you settle on a reasonable amount:

1. Calculate the Total Costs of Attendance: Some parts are pretty obvious, but others can be a bit more obscure. Parents might already be covering some of these expenses, so they don’t necessarily need to be taken into consideration. Your costs might include:

  • Tuition, fees and expenses
  • Lodging - dorm or off-campus
  • Food - meal plan or cooking your own
  • Travel expenses to get back and forth to campus, either daily or for all breaks
  • Car expenses such as gas, insurance, parking and repairs if the student has a car
  • Books, computer
  • Cell phone and data plan, if not included in a family plan.
  • Health insurance, if not covered on the parents’ policy.
  • Appropriate clothing for different seasons.
  • Laundry.
  • Sorority or fraternity - if your student decides to join a Greek organization, there can be costs involved.
  • Entertainment - how many times does the student plan to go out each month, are there free movies and entertainment on campus, what is the cost for pizza parties and other entertainment?
  • Personal expenses - school supplies, hygiene items, daily coffees, snacks, hair care - it can be surprising how quickly seemingly small items add up.
  • Miscellaneous - athletic equipment, uniforms, dues for various clubs, allowance for tutoring if needed and other items that can increase your expenses.​

2. Estimate How Much is Available to Cover These Costs: The school should give you a pretty good idea of how much you have been granted in financial aid. This includes scholarships and grants from the college itself, federal financial aid to which you might be entitled, and any state grants that might be available. To this amount you can add:

  • Value of any federal work-study program the student can participate in through the school to earn money.
  • Private scholarships you have won on your own.
  • Additional money the family and the student can earn through part-time jobs.
  • College savings account.
  • Gifts from grandparents and other relatives.

3. Decide on a Loan Amount and Type of Student Loan: Once you have made these calculations, you should have a much better idea of how much money is needed. Try to borrow only that amount through parent or student loans. Use federal student loans first, and then do careful research to determine which private student loan lenders offer the best interest rates and repayment terms for your family situation.

Once you receive the money and have paid the school, work with your student to put a strict budget in place for spending any balance. Make sure the money is only used for reasonable purchases; it should not be spent simply because it is available. If there is any extra money left over, it should be saved to apply to the next semester’s tuition bill.

Keep track of your student’s spending so you can go through these calculations again for the next semester and school year. Look at areas where you think your student might spend more or less money. Make reasonable forecasts for expected tuition increases and additional costs as your student takes more advanced classes. Try to keep borrowing as low as possible so that you don’t place an unreasonable burden on your family or your student. You must keep a close tally on how much is borrowed so that you can reasonably estimate what your monthly payments will be upon graduation.

Although there are different types of repayment plans available, especially from the federal government, you want to make sure your students have a realistic probability of being able to make those payments with the money they will be earning.