(WBEN) - From selecting the college that's right for you, to choosing a major and figuring out how to pay for it, college planning for some can prove to be an intimidating challenge.
We asked our college planning expert, Jeff Boron with SendYourKidsToCollege.org, the need-to-know questions on borrowing as well as his thoughts on the recent U.S. Supreme Court decision Friday, which overturned the Biden administration's plans to forgive up to $20,000 in student loan debt per borrower.
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Q: For those college kids looking to borrow now, for the next fall semester, when do you recommend they should borrow? When is the appropriate time?
A: "We're kind of in that season right now. So it's summertime. The first step that students should do, for a source of money from from a loan perspective, would be the direct student loans, so the same loans that were on the table to be forgiven. But those are the loans that can be attached to income-based repayments later on. Most importantly, they're the only loans that the students can take out in their own names without a cosigner above and beyond those loan limits, they will need a co-signer to get a private loan. And that becomes a little more complex and the loan rates for those are also more expensive.
Q: How much should the average college student be borrowing? And how do you determine how much is too much to borrow?
A: "Well, there's a rule of thumb that we've been using in college planning for years. And that is try to borrow no more than your first year starting salary. So if you're going to come out, and the expected job that you will land when you graduate with this degree, is $50,000, do not borrow more than $50,000. It's actually very hard to do in today's world, because the cost of tuition and fees have increased so dramatically. But that's still a good rule of thumb to do if you can accomplish that."
Q: What loan type they borrow first? Should they go federal, or private? Or does that not really make a difference?
"Federal first all the way, lower interest rate, loans only in their name. They don't have to start repaying till after graduation. And then there's income-based repayment programs, in case the job does not pay what you thought it would be. So all around, it's going to be your best starting avenue. The next step from that is to examine private loans. There's a number of companies out there, banks and credit unions that offer those as well as other financing sources. I see some parents do home equities and things. So when we look at it, we look at the whole picture to figure out. first of all, how much debt is too much? And second of all, where should that money come from? But always, always, always, it's the federal loans first."
Q: The Supreme Court on Friday ruled against the Biden administration's plan to forgive student debt. After much delay, and an injunction, certainly you've probably expected this decision. But what are your thoughts and reaction on that decision made?
A: "I think if we look at it and step back from this, from an issue of fairness, it was probably the right decision. First of all, the idea of an executive order bypassing Congress for such a large expenditure, probably was not appropriate. But second of all, I had many discussions and calls about the issue of fairness for people that had already paid off their student loans, or had sacrificed certain things in life. So they didn't graduate with a lot of debt, and how that was unfair. And, I agreed, and it also wasn't going to help inbound students, students that are going to college, let's say, in the fall, because it was only for existing student loans. So all around, it was somewhat political. And I'm just glad it's over."
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Q: What does this mean for those who are still currently in college and those who have debt? Certainly now, if they haven't thought about paying it back, they now have to pivot quickly?
A: "They're going to have to start repaying the loans in October. And what I've been encouraging, because it's going to be a little bit of a chaotic time frame, many of these service providers that service these loans that you make payments to etc, have changed in the last three years. They've sold off blocks of business, transferred blocks of business. So students before October, as soon as possible, should go on to their student loan portal and just check to see who their student loan provider is, and get any updates and information from that. But many times they will find that their student loans service provider has changed."
Q: Any concluding advice for those who are still looking to borrow for the next fall semester?
"You want to sit down and do the math to understand how much you're borrowing and how much your payments will be after you graduate. And then put that in perspective with your income, and other things that you're going to have to pay for like rent, car insurance and food and all the things that it costs to live on your own and make sure the equation works. I've had way too many students come to me well after the fact, and they're having difficulty even paying for rent because of the excessive borrowing that they did for college and it just causes a lot of pain in their life."