At some point in your decision to go to college or get an advanced degree, you may need to ask yourself an extremely important question: How much money do I need to borrow?
The key word there is “need.” If you’re lucky (or plan extremely well), the answer is “none,” and you can enjoy getting an education without going into debt. For most people, it’s not that simple. The schools to which you have been admitted will send you a financial aid package, which may include student loans, but that letter does not serve as instructions for how much you should borrow — it’s how much you’re allowed to take.
Oftentimes, particularly if you’re an independent student, you may qualify for much more student loan money than you need. Determining that need — properly estimating your expenses so you have enough to cover them but don’t take on excessive debt — can be very challenging.
Reasons to Opt for Less
The advantage of taking out more loan money is it gives you flexibility while you’re getting an education. For students who aren’t working (or aren’t making much money) while in school, having the cushion of extra loan money may be helpful.
On the other hand, there are many advantages to minimizing your debt load, primarily the fact that you will spend less money in the long run (assuming you’re not going into other kinds of debt, like financing your lifestyle with credit cards).
“It forces you to be really thoughtful about every penny you do spend when you’re on a limited budget,” said Gerri Detweiler, Credit.com’s director of consumer education. There’s a lot of valuable life experience to be gained from living with limited resources. “By learning to live frugally, you may be in a better position to live in a more expensive area, because you know how to get by without a car or without eating out every night. I think generally less debt means more flexibility.”
That could manifest in several ways: When you graduate, you may be able to take a job that’s more exciting or in-line with what you want to do, even if it doesn’t pay as well as another opportunity. The less debt you have upon entering the workforce, the less pressure you may feel to find high-paying employment.
Consider the Long-Term Impact of Student Loans
There are limits to how much you can borrow from the federal government. If you’re an undergraduate who’s financially dependent on someone (likely your parents), you can only borrow $ 31,000 total, unless your parents don’t qualify for Parent PLUS loans. For independent undergraduates and undergraduates whose parents can’t get PLUS loans, the total limit is $ 57,500. For graduate students, the total limit is $ 138,500, including any unpaid debt incurred as an undergraduate.
If those loans, financial aid and your college savings don’t add up to your expected education expenses, private student loans are an option. Private student loans often have less favorable interest rates and less flexible repayment options (when compared to federal loans), but they are an option.
Taking out loans is expensive, but figuring out how to minimize those costs requires great care — if it gets to the end of your program and you haven’t borrowed enough to pay for your final courses, you could find yourself in a very costly predicament, like needing a private loan at the last minute or going into credit card debt.
Choosing to borrow more or less student loan money isn’t an easy decision, and it requires careful math.
“The first exercise you need to do is build your balance sheet and figure out your expected cost of living,” said Andrew Josuweit, CEO of Student Loan Hero. “Before someone dives into taking out an extra 5K or 10K in student loans, ask, ‘How can I subsidize that?’”
Explore your options for optimizing your cash flow, like getting a part-time job or significantly reducing your expenses, before going further into student loan debt. Student loans generally cannot be discharged in bankruptcy, and if you miss payments, your credit score will suffer, making even everyday things like getting an apartment or utilities in your name more challenging and expensive. You can keep track of how your student loans are affecting your credit by getting your free credit report summary from Credit.com — it’s updated monthly so you can check your progress.
This article originally appeared on Credit.com.