Her parents may soon finish paying off their student loans.
College students today can graduate with serious debt, and many have to scramble for years to find a way to pay it off. Stories of students with $100,000 in debt aren't unheard of, especially for students who went to private colleges or for-profit institutions. Racking up $100,000 in student debt doesn't happen overnight. The nation's most expensive college, Sarah Lawrence, charges $58,716 per year for tuition in 2010-11.
Federal Limits
Federal Stafford loans offer low interest rates. But the amount students are able to borrow is capped according to how long the student has been in college and whether the student is still dependent on parents. In general, independent students can borrow more than dependents. Seniors can borrow more than freshmen. First-year dependent students can borrow up to $5,500. Seniors can borrow up to $7,500.
Aggregate Loan Limits
Dependent students can borrow a total of $31,000 through the program, and independent students can have a maximum of $57,000.Graduate and professional students may also borrow through the Stafford loan program, but the program will not lend more than $138,000.
Private Loans
Students who want to exceed the Stafford limits can turn to the private loan market place. In many cases, these loans will not have the interest rate caps that Stafford loans have. Whereas Stafford loans have maximum interest rates to 6.8 percent for unsubsidized loans, and 4.5 percent for subsidized loans in 2010, private loans can have interest rates above 10 percent. But these loans are readily available because federal law makes it difficult to discharge these loans in bankruptcy. So even if you borrow too much and cannot repay the loan, the debt could follow you for the rest of your life.
Some Good Advice
Experts say students should never end up with loans that exceed the annual salary they expect to make when they graduate. A high student loan burden could stay with you for years, forcing you to delay marriage, children and buying a home. Borrowing just $24,000 -- the average student loan debt in 2010 -- could equal $250 per month in payments over 10 years.
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