Debt Management

Borrowing and Repaying Loans | Establishing a Budget | Managing Your Credit Cards

Debt management is an important reality of attending college. Almost every student will leave St. Olaf with some kind of debt. Whether it be student loan, credit card, or other kinds of debt it is important to know how you are going to account for and pay off your debt.

Borrowing and Repaying Loans Intelligently

There are many issues to consider when borrowing student loans for college. It is important to consider the effects of borrowing loans for the present and future as well as the effect it will have on you and your parents.

Here are some things to consider:

  • Know How Much College Will Cost
    • It is possible to estimate the amount you will spend on college over the next four years by logging on to a College Cost Calculator. The Cost of Attendance (COA) for the 2007 - 2008 St. Olaf academic year is $40,250. Remember, this calculator can only estimate your projected college costs.


  • Know How Much Your Family Has to Pay Towards Your Education.
    • By filing the FAFSA, the Federal Government can determine your Expected Family Contribution (EFC) for one year of college. To learn more about how the EFC is determined see the Determining Your Financial Need page.

    To get a rough determination of your family's contribution use an EFC Calculator. Remember to calculate the EFC for the Federal Methodology.


  • Know How Much You Can Afford to Borrow
    • Your student loan payment should be no more than 8 - 10% of your post-college estimated income. To determine how much you can borrow:

    • Determine the average starting salary for your field. This number will help you establish future budgets and determine how much you can afford to borrow. You can find average starting salaries for a wide variety of career paths at US Department of Labor website.

    • Deduct 20% of your estimated salary for state and federal taxes. Then divide your remaining salary by 12 to get your monthly total. Finally, multiply your monthly salary by .08 or .1 to determine how much you can afford to repay each month. If you do not want to manually calculate this amount, use an Undergraduate Advisor Calculator.


  • Determine Your Loan Repayment Amounts
    • The easiest way to determine your monthly loan repayment is through a repayment calculator. One of the best is the FinAid.org Loan Payment Calculator. Information on interest rates and repayment terms for your loans can be found in the Graduating Students & Alumni Section of the Financial Aid webpage. Just click on the appropriate loan.

    Back to Top

    Establishing a Budget

  • Establish a Budget for the Time You are in School
    • It is important to know how much money you have and how far it will stretch. Having a plan for expenses like cars, or even knowing how much you can spend on a weekly basis will make loan repayment much easier.

  • Establish a Post-Graduation Budget
    • To keep good credit, it is important to set up a budget that you can live by. After you leave school, develop stradgies such as using a "spending diary" to keep track of all your puchases and most importantly, create a monthly budget.

    Back to Top

    Managing Your Credit Cards

    Credit Card Debt can pile up in a hurry. It is important to understand how credit cards work. This way, there is a smaller chance you will get burned by using too much credit. If you remember that a credit card is merely a convenience, not a source of extra money to spend, you are on the right track.

    There are a few important terms to remember when dealing with credit cards:

  • Annual Fees.
    • Today, most issuers do not charge annual membership or participation fees. However, some credit cards may charge fees that range from $25 to $50, sometimes up to $100 depending on the type of card you have. Always apply for a card with NO annual fee.


  • Annual Percentage Rate (APR).
    • The APR is the interest you will pay for credit. Generally, the lower the figure the better the offer. However, most offers today have "introductory rates" that will jump to a much higher rate later on. Make sure to compare the "non-introductory rate" found in the fine print to the other offers you are considering. On each statement, look for your current APR.


  • Grace Period.
    • During the grace period, you can avoid finance charges (interest) by paying your balance in full before the due date. Without a grace period, you may incur a finance charge from the date you use your card or from the date each transaction is posted to your account.


  • Special Delinquency Rates.
    • Some cards with low rates for on-time payments apply a very high APR if you are late a certain number of times in any specified time period. These rates sometimes exceed 20 percent. Avoid these charges by always paying your bill on time.


  • Transaction Fees and Other Charges.
    • A credit card may charge other costly fees if you use the card to get a cash advance, make a late payment or exceed your credit limit. Some charge a monthly fee whether or not you use the card. Look for a card that offers the lowest fees available.

    Tips for Successfully Using a Credit Card
    • Limit yourself to one low interest rate card.
    • Only use your credit card for emergencies.
    • Keep your maxium limit at a reasonable level to avoid over-charging.
    • Put your card in a safe place, not your purse or wallet, to help avoid impulse buying.
    • Keep from paying interest by charging only what you can pay for in one month.
    • Most importantly, use the "Do I need it or do I just want it?" test to determine what you should and should not charge.

    Tips to Avoid Troublesome Situations
    • Resist applying for or using more than one card.
    • Be aware of how much you owe.
    • Pay off the card with the highest interest rate first.
    • Always, always, pay on time!

    Back to Top