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Managing Student Loan Debt – Don’t Overborrow

In late winter or early spring, many families begin to find college acceptance letters in their mailboxes. As students try to decide which college or university to attend, it is vitally important to consider how much student loan debt you may incur by attending a certain school. The consequences of taking on too much student loan debt can be severe.

Risks of Overborrowing:

  • Increased Debt Burden and Delayed Financial Milestones: Overborrowing can lead to higher levels of student loan debt upon graduation, which can be particularly burdensome for individuals entering the workforce with entry-level salaries. High levels of debt can limit financial flexibility, making it challenging to achieve other life goals such as buying a home, starting a family, or saving for retirement.

  • Interest Accrual: Borrowing more than necessary means accumulating more interest over the life of the loan. Even a slight increase in the interest rate or loan amount can result in significant additional costs over time. This can extend the repayment period and increase the total amount repaid, further exacerbating the financial strain on borrowers.

  • Loan Limits: There are lifetime (or aggregate) limits to various aid programs including Federal Loans. These limits can be met quickly if a student borrows the full amount of loans offered each year; risking running out of eligibility before earning your degree.

Mitigating the Risks of Overborrowing:

  • Budgeting and Financial Planning: Develop a realistic budget that considers tuition, fees, living expenses, and other educational costs. Consider part-time work, scholarships, and grants to reduce reliance on student loans. Only borrow what is necessary to cover educational expenses. Avoid using student loans to fund a lavish lifestyle or unnecessary expenses.

  • Explore Alternative Financing Options: Research alternative financing options such as scholarships, grants, work-study programs, and employer tuition reimbursement programs to reduce reliance on student loans.

  • Explore Net Price of College and Other Factors: Net Price is the amount you will have to pay with savings, annual income, and loans to cover the bill after grants and scholarships have been applied to the cost. Educate yourself about the true cost of borrowing, including interest rates, repayment terms, and potential long-term consequences. Seek out resources and guidance to make informed borrowing decisions.

  • Consider Less Expensive Education Options: If you find that the colleges you plan to apply for would mean borrowing too much, you can look for others, as many schools still accept applications after May 1. The National Association for College Admission Counseling publishes a list of colleges with space still available. See the list at:

A general rule of thumb is to not borrow more than you expect to earn as a starting salary. You can estimate your future monthly student loan payment by using the Federal Student Aid Loan Simulator. The Loan Simulator helps you estimate monthly student loan payments and choose a loan repayment option that best meets your needs.
Reid Hall with the Arkansas Student Loan Authority provided the following reminder, “student loans are easy to get while you’re in school, but they can be a huge burden after you graduate. Be careful what you borrow today so you’re not buried in debt in the future”.
Overborrowing student loans can have serious long-term consequences, including increased debt burden, delayed financial milestones, and limited options for repayment. It's essential for students and their families to understand the risks associated with borrowing and to make informed decisions about financing their education. By adopting responsible borrowing practices and exploring alternative financing options, individuals can mitigate the risks of overborrowing and achieve financial success beyond graduation.