Tips and resources on smart borrowing

What is “smart borrowing?”

“Smart borrowing” could be described as taking out loans with an understanding of how much loan debt is enough and how manageable the loans will be to pay back. Some people think of smart borrowing as good debt. That is, by borrowing this money, a person’s long term financial health will be better through new career prospects and the ability to increase wealth over time.

In the video below, the Federal Student Aid program talks through responsible — or smart — borrowing.

Balancing debt with your future salary

As mentioned in the video, there’s a relationship between the amount of money you borrow and the amount of money you will be able to make when you graduate. This means that it’s valuable to have a general idea of what kinds of jobs you might pursue upon graduation. With that information, you can deduce what your salary might be and therefore how much you can afford in loan repayments. If your career interest is one that will likely pay well, you may be justified in taking out more loans in order to make that career possible. However, if your career choice will likely offer a more modest salary level, you may have to think more carefully about how much you borrow now.

How do I know if I’m smart borrowing?

It’s normal for students to feel overwhelmed as they work through the financial aid process, and especially when thinking about student loans. To get a sense of what smart borrowing for you might look like, visit the website below. It will walk you through a few basic calculations to help you get a sense of what an ideal borrowing limit might be.

Finally, If you have questions about smart borrowing or your financial health in general, check in with your financial aid advisor or coach if you have one. They will be able to help you think through your situation and get some ideas for next steps.