WCCU Investment Consultants
Brandi Walton
Wealth Advisor
2403 Hwy 14 East
Richland Center, WI 53581
608-647-8835 x1109
BrandiWalton@WCCUInvestmentConsultants.com
www.WCCUInvestmentConsultants.com
 
 




How much money should a family borrow for college?

There is no magic formula to determine how much you or your child should borrow for college. But there is such a thing as borrowing too much. How much is too much? One guideline is for students to borrow no more than their expected first-year starting salary after college, which, in turn, depends on a student's particular major and/or job prospects.

But this guideline is simply that — a guideline. Just as many homeowners got burned in the housing crisis by taking out larger mortgages than they could afford, families can get burned by borrowing amounts for college that seemed reasonable at the time but now, in hindsight, are not.

Keep in mind that student loans will need to be paid back over a term of 10 years (possibly longer). A lot can happen during that time. What if a student's assumptions about future earnings don't pan out? Will student loans still be manageable when other expenses like rent, utilities, and/or car expenses come into play? What if a borrower steps out of the workforce for an extended period of time to care for children and isn't earning an income? There are many variables, and every student's situation is different. A loan deferment is available in certain situations, but postponing loan payments only kicks the can down the road.

To build in room for the unexpected, a smarter strategy may be for undergraduate students to borrow no more than the federal student loan limit, which is currently $27,000 for four years of college. Over a 10-year term with a 5.05% interest rate (the current 2018-2019 rate on federal Direct Loans), this equals a monthly payment of $287. If a student borrows more by adding in co-signed private loans, the monthly payment will jump, for example, to $425 for $40,000 in loans (at the same interest rate) and to $638 for $60,000 in loans. Before borrowing any amount, students should know exactly what their monthly payment will be. And remember: Only federal student loans offer income-based repayment (IBR) options.

As for parents, there is no one-size-fits-all rule on how much to borrow. Many factors come into play, including the number of children in the family, total household income and assets, and current and projected retirement savings. The overall goal, though, is to borrow as little as possible.



WCCU Investment Consultants

501 N Main Str., Westby WI 54667; Ph. (608)634-3118

1302 N Main Str., Viroqua, WI 54665; Ph. (608)637-6200

 2403 Hwy 14 E, Richland Center, WI 53581; Ph. (608)647-8835

1333 South Blvd., Baraboo, WI 53913; Ph. (608)355-5500

820 Viking Dr., Reedsburg WI 53959; Ph. (608)768-9228

70 Commerce, Lake Delton WI 53940; Ph. (608)678-4000

 

Securities and Advisory Services offered through Commonwealth Financial Network®, Member FINRA/SIPC, and a Registered Investment Adviser. Fixed insurance products and services offered through CES Insurance Agency or WCCU Investment Consultants. Non-deposit investment products are not federally insured, involve investment risk, may lose value, and are not obligations of or guaranteed by Westby Co-op Credit Union. Westby Co-op Credit Union aka WCCU Credit Union, WCCU Investment Consultants, Commonwealth Financial Network®, and CES Insurance Agency are separate and unrelated entities.

This communication is strictly intended for individuals residing in the state(s) of AZ, IL, SD and WI. No offers may be made or accepted from any resident outside the specific states referenced.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019.