How to choose a college major with loan debt in mind?

How to choose a college major with loan debt in mind?

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Student loans allow many people to attend college and pursue their chosen fields. However, some students may enroll in expensive colleges and accumulate excessive debt. Student loans often compel individuals to maintain a more modest lifestyle, challenging their pursuit of passions. In fact, the debt burden can be so high that students are forced to readjust their dreams.

Some data highlights the escalating education loan debt in India. This report reveals that student loan disbursements increased from Rs. 16,766 billion to Rs. 18,436 billion between April 2018 and April 2020. Education loan debt has become a more significant burden compared to credit card or auto loans. Over half of student loan borrowers acknowledge that debt influenced their career decisions.

Now the question remains: How can you choose a college major while considering student loan debt?

The first step is to seek answers to the following practical questions:

  1. Can you comfortably afford your student loan payments with the starting income range for your chosen profession? If not,
  2. Are you prepared to sacrifice your financial future to continue pursuing the program you have chosen?

Next, to better comprehend how to choose a college major and the costs you might incur while attending college, you might also want to ponder upon the following questions:

  • What will be the cost of acquiring the degree or qualification you desire?
  • What factors influence college costs?
  • What expenses are covered by tuition?
  • What expenses are not covered by tuition?
  • How important is attending college to you?
  • What is your college budget?
  • If you need financial assistance, where can you seek help?
  • How much can you/your co-borrower realistically afford to repay for a college loan each month?
  • What are the current costs of student loans?
  • Do interest rates vary significantly?
  • How do you envision your life after college?

Once you enroll in a college of interest, your objective should not be solely to make low monthly payments on a substantial loan, which would result in a higher total cost. Instead, focus on paying for your education using various strategies to minimize your student loan debt. By keeping loan debt in mind when choosing a college major, you can make a more informed decision and work towards a manageable financial future. 

Also read: What Credit Score Do I Need for a Student Loan?

How to choose a college major more effectively?

Parents and students often ask, “How much debt should I have?” The answer to this question depends on your specific situation. For example, a software engineer working for a large firm in a major city may earn around 5,00,000 Rupees in their first year of practice. In such a case, having approximately Rs 10,00,000 in student loan debt may be acceptable. However, any other professional earning less than Rs 2,00,000 in their first year would struggle to repay such a loan.

Explore your expected starting salary

Start by researching the anticipated income you can expect after graduating. It is common for college students/co-borrowers to overestimate their potential earnings. Therefore, it’s crucial to gather realistic information about starting salaries. Seek advice from college lecturers or conduct informational interviews with human resource managers in companies you are interested in. Additionally, utilize websites and engage with staff members from potential future employers to learn more about starting pay.

Undergraduate Degree: 1 x Annual Salary

If you are pursuing a bachelor’s or associate’s degree, both of which are undergraduate degrees, try to limit your student loan debt to, or below, your expected first-year salary. For instance, if you anticipate earning Rs. 50,000 in your first year after graduation, it would be advisable to keep your student loans at or below Rs. 35,000 per month. This way, you can manage your debt by making some sacrifices in your monthly budget.

It’s important to remain flexible and adapt your college strategy as your circumstances and the job market evolve. You can adjust your plans based on the available funding options and the educational institutions in your locality. For example, you may choose to attend a community college if that aligns with your goals, or you can spend the first two years at a community college before transferring to a university. If feasible, living at home during your college education, whether for the initial two years or the entire duration, can save a significant amount of money.

By considering your expected starting salary and carefully managing your student loan debt, you can make more informed decisions when choosing a college major.

Also read: Know How Student Loans Helpful to Create Career Opportunities Across India

Advanced degrees: 1–2 x Annual Salary

After completing your bachelor’s degree, you may decide to pursue an advanced degree, such as a master’s, doctorate, law degree, or a degree in medicine. While these degrees can significantly boost your income, it’s still important to strike a balance between your student loan debt and your expected salary. As your projected annual earnings often increase with further degrees, the total debt for all your degrees should not exceed twice the amount you anticipate making in your first job. Keeping your student loan burden lower will make it easier to manage.

If in doubt, consider making a CHANGE

Entering college without a chosen major is perfectly acceptable. College is a time to explore various career paths. However, keep in mind that changing your major can prolong the time it takes to earn your degree and potentially result in additional debt. On the flip side, it may also lead to a fulfilling career that motivates you, ultimately increasing your income and ability to repay your debt.

To summarize, when selecting a programme or major, consider the range of career options associated with that degree and its earning potential. Put yourself in the mindset of having already obtained your degree, look for potential job opportunities and the income they offer, and assess whether it can help you manage your loan debt. If you’re unsure about what to study, opt for a major that won’t leave you with student loans you can’t repay. Remember, the amount of debt you take on should align with the income you expect.

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