When it comes to borrowing for college, a generally accepted rule is that you should not borrow more than your first year’s income.
The problem with that axiom is the assumption that future graduates have a good handle on starting salaries. Most don’t.
But don’t worry. We’re going to fix that right here, right now.
According to the National Association of Colleges and Employers, which looks at the first-year income of 45,000 college grads each year, the average starting salary for 2016 grads was $50,556.
But wait. Don’t get too excited. Averages are deceptive—some grads earn far more than that number (skewing the scale) but most get much less. If you inaccurately estimate your future salary, you could end up borrowing too much.
It pays to look at the details.
Take the time to find a detailed salary report, like this one on Payscale.
Thinking about becoming a teacher? Demand for teachers is a function of specialty and geographical location. Urban areas across the U.S. need teachers, and where the jobs are particularly challenging (e.g., inner cities) the salary is higher. In Indiana, the average starting salary for a new teacher is $33,000.
How about health care? Nursing is a big major at Indiana University’s seven campuses. Experienced nurses in Indianapolis make $60,000+, but new RNs are more likely to start closer to $39,000.
The maximum borrowing for Stafford Loans (dependent student) is $31,000, for good reason. Most students can expect to earn something close to that their first year.
In other words, resist the urge to get private loans in order to borrow more. If you do, you’ll be negatively impacting your ability to live well once you’re relying on that salary—and paying down your student debt.
