Managing Student Loans When You Have a Low Paying Degree

I recently wrote an article that asked if a college degree was worth the cost. The answer turned out to be that for the vast majority of majors, the answer is clear. A college degree is a very good investment. However, I also noted that, for some who choose a degree in a low paying major, the answer was not as positive. Some unlucky few of them will struggle to make as much as a high school grad without a degree. What kind of majors are we talking about? Primarily we are looking at students with degrees in the arts and social sciences. The following list from payscale.com shows the degrees with the lowest starting salaries:

Field of Study 2013 Annual Salary
Theology $34,800
Special Education $33,800
Animal Science $33,600
Social Work $33,000
Broadcast Journalism $32,700
Exercise Science $32,600
Elementary Education $32,200
Child and Family Studies $30,300

I tend to think of these as Degrees of the Heart because so many people enter these careers to help others. They often feel called to enter their profession. I admire people that make that kind of career choice. However, their choice means they will have the most difficulty in paying off their student loan debt.

Two thoughts come to my mind. They will need to minimize the amount of student debt they take on, and they will need to be smart about managing the student debt they do have. Let’s start by looking at the first issue.

How can you minimize the impact of student loans from the very beginning?
You should start managing your student loan debt before you decide which college or university you want to attend.

  • Know how much student debt you will be able to afford on your starting salary after college. Most financial experts recommend that your student loan payment should not exceed 10% of your take home pay.
  • Borrow as little as you possibly can. This might sound pretty obvious, but many students accept all of the loans that are offered to them without thinking about the payments they will have to make after graduation.
  • Look for grants and scholarships. The more student aid you can get without loans, the better off you will be. Apply for as many as you can.
  • Live at home and commute. When you live with your parents, you don’t have to come up with your living expenses.
  • Start at a community college and then transfer to a 4 year university. The community college will be much less expensive than a university.
  • Get a student job on campus or in the area. Working a few hours a week during the semester can mean thousands of extra dollars that you can apply towards your education.
  • Get a paid internship or summer job in your field of study. Not only will you gain valuable experience to apply towards your new career, you will also earn money for your college expenses. As someone that has hired many college grads, I always like to see a graduate that worked through college rather than the kid that took the summers off and went to the beach. Working in the field, even if it is only an internship, gets my attention even more.
  • Try to avoid getting private student loans. Private loans charge higher interest rates and do not offer the protections and repayment options that you will get from federal student loans.
  • Don’t choose the school based on emotional criteria. Just because your parents met at the expensive private school doesn’t mean getting your teaching degree there is a good investment. Remember that you are the one that has to live with the payments on your student loans.
  • Finish your degree on time. You don’t want that extra semester or year of loans and interest do you?

Manage your student debt wisely:
You’ve graduated and now you have to live with the payments that come with your student loans. How can you manage them in a way that is affordable, saves you money in the long run, and has a positive impact on your credit score?

  • Know who you owe. Your loans may have been made by different loan services. Ensure you know how much you owe and to whom you owe it.
  • Start paying right away. If you are lucky enough to find a job right away, don’t wait until your six month grace period expires to begin making payments. Paying early will minimize the amount of interest that accrues on your loans and will save you money and allow you to pay off your loans earlier.
  • Make all of your payments on time. It’s pretty basic. Making your payments on time and in full will increase your credit score. A good credit score means lower interest rates for things like home and car loans. Lower interest rates mean you save money.
  • Don’t bury your head in the sand. If you are struggling to make payments, get help. Student loan and financial counseling can be a big help.
  • Consider consolidating your loans. Loan consolidation will allow you to extend the time you have to repay the loan to as long as 30 years for some student loans. The longer term means you will have a lower monthly payment. The downside is that you will pay far more in interest over those extra years. If you can afford the ten year payment, you are better off not consolidating your loans. Do not consolidate federal and private loans together. You will lose some protections and repayment options if you do.

Get help when you need it.
Student loans are only a part of your personal finances. If you just can’t seem to get a handle on your personal finances and are struggling to pay your bills, get help. Ignoring your situation will just make it worse. Contact a non-profit financial counseling agency like Apprisen. Apprisen can look at your entire financial picture and help you get your finances back on track. The best part is that Apprisen’s student loan counseling is free.

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