Families that want to get schooled on the smart way to finance a degree should consider these rules:
1. STUDENTS ALWAYS borrow before parents. Always.
2. STUDENTS USE federal Stafford loans. These are fixed-rate loans with flexible repayment terms, and everyone, regardless of financial need, is eligible.
3. STUDENTS BORROW no more than they expect to make at their first job. Financial aid expert Mark Kantrowitz (finaid.org) has found that when total debt exceeds your starting annual salary, the odds of defaulting go way up.
4. IF THE STAFFORD LOAN limits ($5,500 to $7,500 for a dependent undergraduate) don’t cover what the student needs, don’t be tempted by private loans.
5. PARENTS BORROW ONLY if their retirement savings are on track. No ifs, ands, or buts.
6. PARENTS BORROW ONLY through the federal PLUS program, which offers fixed-rate loans with flexible repayment options.
7. IF THE STUDENT STILL can’t swing it, consider a less expensive school. Parents and students should not be willing to take on massive debt.