How to Pay For Study Abroad and Avoid Debt
While you can't put a price tag on the kinds of experiences that go along with living and studying in a foreign country, that doesn't justify sinking yourself any deeper in student loan debt than you may already be.
If you've managed to get through school by paying your expenses out-of-pocket up to this point, taking on loans to fund your overseas adventures isn't a decision you can afford to make lightly.
Figuring out how to pay for study abroad while keeping your debt load to a minimum isn't an impossible feat; it just involves crunching the numbers to decide whether the drawbacks of borrowing outweigh the benefits in the long run.
Here are some key questions to ask to make sure it's the right move:
What's the School's Package Going to Cost You?
Colleges and universities take a lot of the guesswork out of planning a study abroad experience by offering a complete package that includes your tuition, housing and travel costs.
While going with what the school is offering is a lot more convenient than trying to book your own flights or arrange for a place to stay, you're going to pay a premium for it.
The first thing you need to look at is how much the school's package costs and whether it would be cheaper to make the arrangements yourself.
For example, if you'll be staying for four months and the cost of room and board alone adds up to $5,000, would you be able to cut down on how much you have to borrow by looking into a hostel or other low-cost living situation?
If your plan tickets are going to cost $3,000, could you cash in on Mom and Dad's frequent flyer miles to knock a few bucks off the total?
If you're more focused on studying in a particular country rather than a specific city, you should also consider choosing a school that's in a less expensive area.
For instance, if you've got your heart set on South America, attending a school in a smaller country like Bolivia is going to be much easier on your wallet than it would be if you were heading to Sao Paolo or Rio, where the cost of living is astronomically higher.
How Much Will Borrowing Add to Your Student Loan Payoff?
According to CollegeBoard, the average student leaves school these days with somewhere in the neighborhood of $30,000 in student loans.
If you're going to be adding to that to finance a trip abroad, you need to be clear upfront about how that's going to affect your long-term student loan payback.
If you graduate with $30,000 in loans, it'll cost you about $300 a month in payments on a standard 10-year plan, assuming a 4 percent interest rate. You'd also hand over more than $6,400 in interest.
Now let's say your study abroad experience runs you the $17,000 average that we mentioned above so your total loans come up to $47,000.
In order to stick with the 10-year repayment plan, you'd have to shell out close to $500 a month for the payments and the amount of interest bumps up to just over $10,000.
The numbers get even more dismal if you think you're going to need an Income-Based Repayment plan after graduation.
For example, if you're single and making $30,000 a year before taxes, your payments under IBR would be somewhere around $160 a month but if you stay on it for the full 25 years allowed, the amount of interest you'll pay nearly triples.
Between the loans and the interest, it comes to about $77,000 so you have to be clear on whether it's worth going into debt in order to study abroad.
Tip: You'll automatically be put on the standard repayment plan when you leave school if you don't choose another option so it's to your benefit to read up on what the different choices are.
Have You Exhausted All Other Funding Options?
If your parents were smart about saving for your education, you may be able to tap your college savings account to cover your study abroad costs.
Certain international schools are eligible to participate in federal student aid programs, which means you can use money in a 529 account to pay for qualified expenses.
If you're not sure whether the school you've got your eye on participates, you can find a full list on the Department of Education's website.
Scholarships are another stone that shouldn't be left unturned if you're trying to fund an overseas experience.
A number of schools offer scholarship and grant awards to students who need a little financial help to study abroad and while many of them take academics into consideration, there are some that are specifically need-based.
Generally, you're not expected to repay either type of award so it's worth your time to see what's available.
Finally, you should also give some thought to whether it's possible to fund your trip using cash.
If you're working while you're in school, for example, is it feasible to delay your trip a year and try to save up the money yourself?
Do you have friends and family who might be interested in chipping in a few bucks to a GoFundMe account on your behalf?
Tip: Setting up a separate savings account to hold your study abroad funds makes it easier to track your progress.
When you're determined to study abroad while you're in school but the idea of adding to your debt doesn't really appeal to you, it may just require a little creativity and initiative on your part to reach your destination.
If borrowing is the only way to pay, the most important thing is to make sure you understand what the true cost is, so you don't get hit with sticker shock when it's time to pay your student loans.