How Much Is Too Much Student Loan Debt?

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How Much Is Too Much Student Loan Debt

Student loans can be helpful in funding your college education, but it’s important to be mindful of borrowing too much. The question is, how do you determine when student debt becomes excessive?

Ways to determine if you’re borrowing too much

Here are some guidelines you can use to gauge if you’re borrowing within a reasonable limit and avoid taking on an overwhelming amount of student debt. 

1. Keep loan amount lower than your post-college starting salary

As a rule of thumb recommended by the Consumer Financial Protection Bureau, try to ensure that your student loan debt remains within the amount you expect to earn in your first year after graduating. For example, if you anticipate making $40,000 annually, you’ll want to aim to keep your student loan balance below that threshold.

If you need information about starting salaries, you can explore reliable sources like the Bureau of Labor Statistics (BLS) or Glassdoor. 

2. Keep your payments at a maximum of 10% of your gross income

Think about your monthly loan payments in relation to your overall income. Aim to keep your student loan payments at a maximum of 10% of your future total gross income. You can figure this out by estimating your monthly payments based on factors like how much you borrowed, the loan term, and the interest rate. By making sure your payments don’t go over 10% of your gross income, you’ll be in a better position to handle your finances after graduation. For example, if you will bring in $3,000 a month, you’d want to keep your monthly student loan payments under $300. 

The risks of borrowing too much money for college

When you borrow too much money for college, there are some risks you should be aware of.

It can make it tough for you to save money for the future or reach other financial goals with the burden of student loan debt. Things like starting a family or buying a home might have to be put on hold because of the hefty loan payments.

Another risk is the possibility of high interest rates on those loans. You could end up paying way more than what you initially borrowed. It’s like a snowball effect where the debt keeps growing.

Borrowing too much money can mess with your credit score. If you miss payments or pay late, it can hurt your creditworthiness. And having a bad credit score can make it harder to get loans or credit cards down the line.

It’s important to understand these risks and make smart choices when it comes to borrowing for college. You want to avoid getting in over your head and find ways to manage your debt responsibly.

How to avoid over-borrowing for college

Here are a few strategies you can implement that may significantly reduce your reliance on excessive borrowing, making your college experience more affordable and financially manageable.

1. Compare college costs before attending

Research different schools and their tuition fees, housing expenses, and other related costs. By comparing these costs, you can find an affordable option that aligns with your financial situation. 

2. Apply for the FAFSA early each year

Filling out the Free Application for Federal Student Aid (FAFSA) allows you to access various forms of financial aid, such as grants, scholarships, and federal student loans. By applying early, you increase your chances of receiving more aid and potentially reducing the need for excessive borrowing. Statistics show that students who complete the FAFSA early tend to receive more financial aid.

3. Look for merit scholarships and grants

Many institutions and organizations offer financial assistance based on academic achievement, talents, or specific criteria. Research and apply for these opportunities to secure additional funds for your education. 

4. Consider federal loans over private loans

Federal student loans often have more favorable terms, such as more flexible repayment options. Data shows that federal loans have historically lower interest rates compared to private loans.  

5. Make your repayment plan a priority

Before borrowing, have a clear understanding of your future loan repayment obligations. Create a budget and ensure that your monthly loan payments are manageable within your expected income after graduation. By prioritizing your repayment plan, you can avoid falling behind on payments and accruing unnecessary interest.

6. Research loan forgiveness or assistance programs

Some professions or programs offer loan forgiveness or assistance options, particularly for those working in public service or certain fields. 

As an example, if you work as a full-time teacher for five whole and back-to-back school years in a low-income school or educational service agency, you might qualify for loan forgiveness under the Teacher Loan Forgiveness Program. This means you could get up to $17,500 forgiven on your Direct Subsidized and Unsubsidized Loans, as well as your Subsidized and Unsubsidized Federal Stafford Loans. 

7. Find work while in school

Explore part-time job opportunities on or off-campus to earn money that can be put towards your educational expenses. Many colleges offer work-study programs that provide employment opportunities for students.

8. Cut unnecessary expenses

Analyze your spending habits and identify areas where you can make adjustments. For example, reduce eating out, minimize entertainment expenses, or find cheaper alternatives for textbooks and supplies. Small changes can add up and free up funds for other college expenses.

9. Pay loan interest while in school

By making interest payments while still in college, you can help prevent it from capitalizing and adding to your loan balance. This action can save you money in the long run. 

10. Open a 529 college savings plan

These tax-advantaged investment accounts allow you to set aside funds specifically for college costs. By starting early and regularly contributing to a 529 plan, you can reduce the need for borrowing or lessen the loan amount necessary.

Stay informed and take control of student loans

While it may seem challenging to estimate your loan burden while still in school, there are resources available to help you stay informed.

The Federal Student Aid website provides details such as your loan balance, payment status, current loan servicer, and the interest that has accrued on your federal student loans. 

By being mindful of your borrowing and regularly monitoring your loan details, you can take control of your financial future and work towards a successful repayment plan. 


How much student loan debt is manageable?

The amount of manageable student loan debt varies for each individual. It depends on factors such as future earnings, budgeting skills, and personal financial circumstances. It’s important to borrow responsibly and aim to keep your loan payments within a reasonable percentage of your income to ensure manageability.

Can you defer or postpone your student loan payments if you hit financial hardship?

Yes, if you experience financial hardship, you may be eligible to defer or postpone your student loan payments. Deferment or forbearance options are available to temporarily suspend or reduce your loan payments. However, it’s important to understand the terms and conditions of these options and to contact your loan servicer to discuss your specific situation.

What happens to your student loan debt if you become disabled or die?

If you become disabled or die, there are options that may impact your student loan debt. If you become permanently disabled, you may qualify for loan discharge or forgiveness programs. In the case of your death, federal student loans are generally discharged, meaning the debt is forgiven. However, private student loans may still need to be repaid by your estate. Consult with your loan servicer and review the specific terms and conditions of your loans for detailed information.

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