How Much Student Loan Debt is Too Much?

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Here at Edmit, we are hearing from both parents and students that they are afraid student loan debt will harm their futures.


Students tell us:

“I can’t afford college unless I take out student loans—but I’ve heard such horror stories about student loan debt. How much student loan debt is too much?”

Parents tell us:

“I don’t want my kid to take out any student loans, and I don’t want to take out any loans under my name either. How can we afford to pay for college?”

We at Edmit ask: How can the average family use student loans to get access to college—but not take on too much debt?

We believe borrowing an affordable amount of student loan borrowing can help students towards a career they love. To borrow in a way that promotes a solid future, we recommend starting with a consumer approach to find a college that matches both career goals and budget. Then, borrow as little as possible.

Here are the steps to do so:

Research careers.

The first step in picking a college is career exploration. You should be in touch with your high school counselor to find enrichment opportunities such as shadow days, where you spend two hours with a professional in an area where you have career interest. If you don’t yet have a field of interest, you can request a career inventory survey to match interests and talents with potential careers.

Students should also explore The Bureau of Labor Statistics Occupational Outlook Handbook. “You can look up (nearly) any career and get a sense of whether it’s a career that’s growing or shrinking, and what the average starting salary is,” says Kathy Ruby, director of college finance at College Coach. “Sometimes that’s hard for someone who might be an undecided major, but in that case look at average starting salaries for a bachelor’s degree recipient—or whatever degree that you’re getting.” Edmit has salary information by major also.

Research potential salaries.

What you think you’ll make after college can be a guide to how much you should feel comfortable taking in loans. The benchmark we use: you shouldn’t borrow more than your starting salary during your first year out of college. This ensures that you have enough income to comfortably make your student loan payments. So if you anticipate that you’ll earn $40,000 in your first entry-level job after graduation, you shouldn’t take out more than $40,000 in total student loans.  

Use tools to research potential college financial aid awards.

The mission behind Edmit’s college search tools is to help families see beyond school advertisements. In the free version of our tool, you can enter one college. We’ll give you borrowing guidelines and an estimate of potential financial aid in the form of federal student loans, grants and merit scholarships. The estimates are based on information you input about family income and the student’s GPA and test scores.  We’ll also show you five alternate schools that may offer better financial aid packages.

When you are accepted, review your financial aid letter; look at the student loan area as a gap that could also be filled by private scholarships, student employment, or changes that reduce the costs of attending college. For instance, you can save several hundreds of dollars by changing meal plans or using a good strategy for saving on textbooks. The cost of attendance that the school provides estimates textbook costs based on the school bookstore prices, and not one based on using smart strategies to save money. I bought and sold my textbooks on Amazon and only spent $500 on textbooks for two master’s degrees.

Decide how much parents can contribute now and through loans.

The answer to how much student loan debt that parents should take on, and how much to pay from their own finances, will be different for every family. “Parents have to take a lot of different factors into account,” says Ruby. If you’re a parent, look at your own goals and life plans and assess how contributing to the education of all your children will affect your life. If you’re unsure how to calculate what you can afford to borrow long-term, talk to your financial planner. If you don’t have one, talk to a credit counselor at a local credit union; they will help with budgeting and credit counseling for the community.

When you apply for student loans you’re approved based on family income, not on what you can safely afford. PLUS loans could give a family making $60,000 per year $120,000 in loans over the course of four years. Don’t simply accept whatever is offered. Look at your budget at this moment. If you can’t afford to make the payment now, you more than likely won’t be able to afford it when your student finishes college.

The 5 Most Important Takeaways

  • Start with career exploration.
  • Calculate what the student can borrow based on their first year salary. This number should include both federal and private student loans in the student’s name.
  • Use tools to figure out how much college will cost.
  • There isn’t a set number for what parents should borrow or pay.
  • Parents should review their long term plans on their own or with a financial professional before deciding how to borrow and / or contribute from their own finances.

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