Default Prevention and Debt Management

Managing Your Student Loan Debt

Educational loans are a financial resource for students that are trying to bridge the gap between expenses and other forms of aid, but you should cautiously consider the amount of student loan debt that you incur. Student loan debt has serious long term financial obligations and it is a debt that must be repaid. You will be charged interest in addition to the amount that you borrow. If you fail to make your monthly payments on time, it could affect you credit rating and your ability to borrow money for other purposes, such as purchasing a car or a home.

Before you take out your first student loan, FAU strongly recommends you review the information presented in this section. The section is broken down into 5 topics, each designed to help effectively manage your student loan debt. A brief description of each section is as follows:

Determining Your Borrowing Needs

The links below will allow you to estimate the cost of attending FAU.

Loan Fundamentals

The links below will provide you with an overview of the different types of student loans.  The terms of the loans and the interest rates are important factors to consider when borrowing is presented:

Determining Your Affordable Debt Level

How Much Can I Afford To Borrow?

Estimate your expected starting salary for an entry level position in your career path and project your monthly payments for your level of debt to see if the amount you are trying to borrow is realistic. Develop a financial plan for the total cost of obtaining your college degree. If you can’t afford your anticipated payments, then think about borrowing a smaller amount. Look for other sources of aid, such as scholarships and grants, to help meet expenses. You should reevaluate your future income and expenses each time you consider obtaining a student loan.

Steps for Determining an Affordable Level of Borrowing:

  1. Research your anticipated entry level earnings.
    • You can research your anticipated starting salary at the US Department of Labor, using the US Department of Labor Outlook handbook at
  2. Get an idea of what your interest rate will be in repayment.
  3. Calculate your maximum manageable debt level.
    • A good general rule for a sound budget is that your monthly student loan debt should not exceed 10% of your monthly projected gross salary.
    • Use the following formula to determine if your anticipated entry-level salary will be sufficient to pay back your projected education loan indebtedness:  Multiply your monthly student loan debt by 12 to get your total annual student loan payments. Divide the annual total by .10. This result is the annual income required to repay the amount you borrowed.
    • You can also use the Repayment Chart to help you estimate your monthly payments and the corresponding annual income that is required to repay your Stafford loans.
  4. Determine your outstanding Direct Loan balance
  5. Calculate your monthly student loan payment.
  6. Create an in-school budget.
    • Creating an In-School Budget will help you estimate your education and living expenses while in school.
  7. Create an after-graduation budget.
    • Estimating an After-Graduation Budget will help you determine how much you can realistically afford to borrow in student loans.

Repayment Strategies and Tips

Additional Resources on Student Loan Debt Management and Debt Management

Federal Student Aid Videos