How Much Is Too Much Student Loan Debt? (2024)

Few people can pay for college with only their savings, grants and scholarships, and if they need to pay more, they’ll need student loans to cover the remainder.

Before you enroll in college, determine your student loan threshold and find ways to reduce your loan amounts so you don’t take on too much debt.

Student Loan Statistics

The average student loan balance was $28,950 in 2023, with an average monthly payment of $500. That may not sound too bad, but keep in mind that student loans can take decades to repay. Depending on your loan type and repayment plan, you could be in debt for 10 to 30 years.

So, how much is too much student loan debt? The Consumer Financial Protection Bureau recommends borrowing no more than you expect to earn in one year from an entry-level position after graduation.

However, this guideline does have a caveat. For some professions that require a significant amount of education, such as medical doctors or lawyers, it would be impossible to limit your debt to your first-year salary.

How To Establish Your Debt Threshold

When you apply for financial aid, you may be offered federal, institutional or private student loan options. Limiting how much you borrow now will lower your payments and reduce the amount of interest you pay over time.

Before you use any student loans, go through the necessary steps to determine how much debt you can handle.

1. Estimate Your Future Salary

Research your expected salary immediately after graduation and years into your career. Many careers start with lower salaries, but you could earn more as you gain experience.

The U.S. Bureau of Labor Statistics’ Occupational Outlook Handbook is a valuable resource with information on salaries and projected demand for different occupations.

2. Calculate your Expected Payments

Your student loan payments could take up a large chunk of your take-home pay. Use a student loan calculator to estimate your monthly payments based on your loan principal, interest rate and repayment term.

For example, if you had $40,000 of student loans at 5% interest and a 10-year repayment term, your monthly payment would be about $425 per month.

3. Consider the Cost of Living

Where you live can affect your ability to manage student loan payments. Living in an area with higher-than-average rents and other expenses can make it difficult to make ends meet.

For example, someone with a $40,000 income in Louisville, Kentucky, can likely live comfortably on that salary. But you’d need to earn $80,000 per year to maintain the same standard of living in San Francisco, California.

To find out how expensive your area is, use a cost of living calculator.

4. Determine Eligibility for Forgiveness and Repayment Assistance

Depending on your major and intended field, you may be able to get some help with your loans. Loan forgiveness and loan repayment assistance programs are usually for fields with shortages, such as healthcare or education.

For example, you may be eligible for one of the following programs:

• Public Service Loan Forgiveness (PSLF). Nonprofit or government employees with federal student loans can qualify for loan forgiveness after working for an eligible employer for 10 years and making 120 monthly payments.
• Teacher Loan Forgiveness. Highly qualified teachers who work for five full and consecutive academic years in a low-income school or at an educational service agency can receive up to $17,500 in federal loan forgiveness.
• Healthcare loan repayment. Licensed primary care clinicians can qualify for loan repayment assistance through the National Health Care Service Corps. In exchange for help with their loans, participants must commit to working full-time at qualifying sites in high-need areas.

5. Explore Income-Driven Repayment Plans

An income-driven repayment (IDR) plan bases your monthly payments on your income, giving you more control over your debt and monthly budget.

If you still have a loan balance at the end of your new loan term, the government will discharge the remaining balance. If you’re interested in an IDR plan, contact your loan servicer to discuss your options.

How To Reduce Your Debt

Student loans can be useful tools, but interest charges and lengthy repayment terms can make paying off your student loan debt difficult. You can reduce the need for student loans by taking advantage of these tips.

1. Reduce Your Education Expenses

If you want to reduce your potential student debt before attending a four-year program, you should consider:

• Attending a state school. Public universities cost about one-third of what private schools charge, so attending a public school within your state can drastically reduce your expenses.
• Commuting to college. College housing and meal plans can add thousands in costs every semester. Commuting to college and preparing your own meals may allow you to save a significant amount of money.
• Starting with community college. Community colleges are much cheaper than other schools. On average, a year at a community college is around $5,014 for in-state students. You can complete two years of school at a community college, then transfer to a four-year school to finish your degree. Attending a community college first can minimize the total cost.

2. Explore Scholarships and Grant Opportunities

Scholarships and grants are forms of gift aid that you don’t have to repay. They can be combined to pay for your tuition, textbooks and other college-related expenses. If you qualify, you can use scholarships and grants to reduce your student loan requirements.

You can use scholarship search tools to find grants and scholarships that match your circ*mstances.

3. Apply for Work-Study Programs

Some schools participate in federal work-study programs. If you’re eligible, you can get a part-time job related to your career goals and use the earnings to pay for a portion of your expenses. Talk to your school’s financial aid office to find out if work-study programs are available.

4. Complete the FAFSA

To qualify for the maximum amount of financial aid—including grants and federal loans—fill out the Free Application for Federal Student Aid (FAFSA). It’s a crucial part of the financial aid process. Schools, states and some scholarships and grant programs use it to determine your eligibility for assistance.

5. Borrow Only What You Need

When you’re accepted into a college, the school will send you an offer letter with your financial aid package. It will likely be a mix of scholarships, grants and student loans. If you’re offered more in loans than you strictly need, only accept what you need to cover your expenses.