How Much Student Loan Debt Is Too Much?

Written by: Kristyn Pilgrim
Updated: 7/14/20

While most college students will proudly walk across the stage, diploma in hand, many will also graduate with something else: student debt. 

As it becomes more and more expensive to pursue postsecondary education, students must weigh the benefits of a four-year degree against the costs of college. While some students may expect to borrow, others may wonder, “How much student loan debt is too much?” Luckily, students who prepare can avoid borrowing more for college than they can afford. This article will explain how.

Facts About Student Loan Debt

While college costs vary from school to school, there is no doubt that a four-year degree can be expensive. The cost to attend college has risen around 25% over the past decade. And, during the 2017-2018 academic year, the average price for one year at a private university was about $43,000

As college costs have soared, financial aid packages have not kept pace. Faced with high costs and fewer aid options, many students borrow to cover college costs. In 2018, 65% of graduates left school with debt. Even students who attend public universities are graduating with debt. Clearly, student debt has become the new normal. 

According to the College Board, during the 2018-2019 academic year, the average bachelor’s degree recipient borrowed roughly $29,000 each year to attend college. However, this amount can be higher or lower, depending on the cost of the school and the type of degree. Pursuing a graduate or professional degree can also add to these costs.

How Much Is Too Much? 

Unfortunately, there’s no easy answer to the question: “How much debt is too much?” 

Repaying a loan is not only a financial obligation; it’s also an emotional one. Before taking out a loan, students should consider how they feel about making average payments of $400 per month. Some people hate having debt of any sort. For these people, even one dollar of student loan debt might be too much. For others, the ability to pursue a dream career is worth any amount of student loans. 

Another factor students should consider is how much disposable income they want. Some people don’t mind getting by with a limited budget for dining, entertainment, travel, and other nonessential items. However, for others, losing access to $400 each month might be a challenge. 

An additional consideration is family obligations. Those who are tasked with caring for children, parents, or other dependents may not be able to afford additional stress on the family’s monthly budget.

A final factor is the length of time students will be affected by this financial commitment. Most people underestimate how long repaying a student loan can take. A recent study found that while most students think they will repay their loans in about six years, it actually takes the average person 20 years to pay off their debt. If you want to avoid a long-term financial obligation, you should limit your borrowing.

Can I Afford to Take Out a Student Loan? 

When students ask about debt, they usually want to know whether they can afford to repay their loans. Both the amount a student owes and the amount they earn will determine the affordability of their loan. 

The amount students owe can rise or fall based on a variety of factors. One major factor is family contributions. While some parents can afford to help with their student’s education, others cannot. Students without financial help from parents may need to borrow more. 

Another factor that increases the amount owed is the cost of the school. Some schools – particularly private universities – charge higher tuition. Moreover, because students must pay for each semester, taking more time to graduate can also increase their debt load. 

However, students can possibly begin paying back loans once they enter the workforce. For students with loans, their starting income is a key number. Their initial salary lets them predict how much they will make after graduation and over the course of their career. Those entering careers with high starting salaries can more easily repay large loans than those entering less lucrative professions. 

In the end, the math is not complicated. To minimize debt, students should keep the amount they owe as low as possible while maximizing the amount they will later earn. Those who plan to enter lower-paying professions should not change their career plans but take steps to limit their borrowing. 

How to Reduce Your Student Loan Burden

Although student debt is becoming the norm for more and more students, borrowing doesn’t need to be scary or stressful. Here are a few ways you can reduce your student loan burden.

Look for free money. 

Scholarships and grants are two of the best ways to reduce student debt. Unlike loans, scholarships and grants do not need to be repaid. Every dollar of “free” money reduces the amount of money you must borrow.

Do well in high school. 

While grants are awarded based on financial need, scholarships are awarded to students who excel in academics, athletics, the arts, or other areas. Most colleges base scholarship decisions on a student’s performance in high school. Students who are serious about getting scholarship money should do their best in high school and highlight their high school accomplishments in their college applications. 

Evaluate the school’s net cost. 

The net cost of the school is its posted tuition and fees minus any aid award. For instance, the net cost of a school with a $12,500 tuition and a $6,000 aid offer is $6,500.

Attend the most affordable school. 

Students are often told to attend the most prestigious school that accepts them. However, when faced with a choice between two schools with different tuitions, financially minded students should choose the less expensive school unless there is a very compelling reason to pay more (e.g., a unique major that does not exist at another school). 

Ask for more money. 

If the school’s financial aid offer is less than you’d hoped, you may be able to ask for more depending on if you have a special circumstance. However, make sure that your request is specific (e.g., explain in detail what the special circumstance is) and explain why you need more funds. 

Negotiate aid offers. 

Students should apply to multiple schools. That way, when one school makes an offer, that offer can be used to negotiate for more aid at another school. 

Look for scholarships while in college. 

Although most scholarships are awarded to those heading to college, many colleges offer scholarships for current students. Scholarships awarded during your sophomore, junior, or senior year can further reduce your debt load. 

Attend a community college. 

If your aid award is low, and you are unable to negotiate a better offer, consider community college. Because community colleges tend to be less expensive, you can save thousands of dollars by taking your core courses there and transferring to a four-year institution later. However, before taking this route, you should confirm that your community college credits will transfer over to your chosen school. 

Research the school and your career. 

Your earning potential after graduation will be influenced by your educational institution and the starting salary of your chosen career, so before accepting an offer, research the school’s job placement rates and graduate salaries. The school’s career services website or office should have this information. 

Calculate your payments. 

A calculator or simulator can help you determine your monthly payments. 

Look into loan forgiveness. 

More industries and employers now offer loan forgiveness as a perk. The federal government has offered loan forgiveness programs for teachers for many years. And even cities are beginning to offer forgiveness programs. Choosing a career or employer wisely can help you reduce your debt.

Keep Your Student Loan Debt in Perspective 

College is expensive. But the money you spend on college is usually money well spent. Government data shows that high school graduates earn $718 per week while bachelor’s degree recipients earn $1,189. Furthermore, college graduates have higher job satisfaction, better job security, and even better health than those who do not attend college. Taking on a manageable amount of debt to obtain the benefits of college might be a wise decision. 

Have more questions about student debt and college financing? You can always turn to College Finance for financial guidance you can trust. Our expert team will provide you with the latest information to guide you through every step of the student loan process.