How Much Student Loan Debt Is Too Much?

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Kate Dore

By Kate Dore

January 28, 2023

As you prepare for college, the cost and how you plan to pay for it might be among your biggest concerns. Whether you’re a student or parent, you may be grappling with some tough decisions about student loans. The general rule is to make sure you don’t borrow so much that you’ll be paying more than 10% of your expected gross income. 

The best way to cut down on the total cost of college is to plan ahead. You can open a 529 plan for yourself, your kids, or your grandkids. A 529 plan is a tax-advantaged account that enables you to save money and use those funds that grow over time for college expenses. 

How Much Student Debt Is Too Much?

According to our findings, two-thirds of students graduated with an average of $29,900 in student loans. That’s no small chunk of change. But how much student loan debt is too much? There are several recommendations that studies and experts have provided to give you a good idea of how much debt might be too much.

Here are the two most popular ways to determine if you’re borrowing too much:

  1. Borrow Less Than Your Post-College Startin Salary: If you know what your expected profession is then you should be able to find a range of salary data for what you’ll likely be making after you graduate. It’s important to make sure that you can repay your loans relatively quickly. If the total amount borrowed is less than your starting salary then experts say you should be able to repay it within 10 years. 
  2. Your Payments Should Be Less Than 10% of Your Gross Income: Another way to look at the problem is to see how much you’ll be paying on your student loans each month after graduation. This is calculated based on how much you borrow, what the term of your loans is, and what interest rate you’ve received. Your payments shouldn’t be more than 10% of your total gross income each month. 

It should be noted that these are just recommendations. It’s really important to make sure that you feel comfortable with how much you’re borrowing. Everyone should have an expectation for both how much they will make after graduation and how much they’ll be repaying on their student debt. 


The Risks of Borrowing Too Much Money 

Often, it’s tough to estimate how much you can afford before college. You may sign a bunch of paperwork without understanding the future payments—or the long-term consequences. But student loans may impact your finances for many years beyond graduation.

With a large balance, it may be tough to afford student loan payments, which could put you at risk of default. Over one million borrowers default for the first time every year, according to our research. First-time defaults typically happen within the first three years.

Three out of four millennials have some type of debt, according to a 2018 NBC News/GenForward survey, and they are delaying major life events. Folks are putting off buying a home, saving for retirement, getting married, and having children. It can be a massive burden for parent borrowers, too.

The amount parents borrow has tripled over the past 25 years, according to a 2018 report from the Brookings Institute. What’s worse, 37% of borrowers 65 and older are currently in default on federal loans.  These large balances can put parents’ financial futures at risk—including retirement plans, depending on how many working years they have left.

Ways to Avoid Borrowing Too Much

Now that you have a rough idea of the levels that you should consider keeping your borrowing levels at, it’s important to find ways to reduce you need to borrow. There are things you can do to limit your total loan amount as well as cut down in overall college expenses. Here are some of the most popular. 

1. Compare College Costs Before Attending

You might have a dream school in mind but if your chosen profession won’t allow you to borrow enough to pay for it then you may want to choose a different option. Know what the total costs of attendance are at each college you’re considering so that you can compare and contrast to make the right financial decision. 

2. Get Scholarships and Grants

You can dramatically decrease the total cost of college if you’re able to qualify for scholarships or grants. Each are essentially free money for school that you can use to cut down your total cost of attendance. This is one of the best ways to limit your borrowing so that you don’t take on too much debt. 

3. Work While In School

Working while you’re in school is a good idea to help pay for your living expenses. Many student that borrow for money to pay their rent or to buy food while they’re in school end up borrowing a lot more than they should. Having a source of income to pay for your essentials can be key to limiting the total costs. 

4. Live Like a Student

Students are expected to have cut expenses as much as they possibly can because they can’t typically afford more. The old saying is to live like a student while you’re in school so that you don’t have to live like a student after graduation. You can likely cut your expenses while in school so that you don’t borrow to fund your lifestyle. 

5. Open a 529 Plan

One of the best ways to limit borrowing is to plan ahead for college. A 529 plan is a tax-advantaged account that can provide you with tax benefits on an account where your funds can grow tax-free if you use the funds to pay for college expenses. Find out the best 529 plans available today. 

What to Consider If You’re a Parent 

As a parent, you may be eager to help your children achieve their college dreams. But before taking on large amounts of Parent PLUS loans, consider your own financial future. Take a hard look at your annual salary and budget.

Be honest: how many working years do you have left until retirement? What about your spouse? Taking on large amounts of student loan debt could put your projected retirement timeline at risk—especially if you can’t work for as long as you expect. 

If you take on too much student loan debt, it may be possible to lighten the burden by changing repayment plans. Instead of the standard 10-year term, you may decide to switch to an income-contingent repayment plan or extended repayment. This may create enough room in your budget to save more aggressively for retirement. 

The Bottom Line

It’s important to understand how much you can afford to repay after graduation before agreeing to take out student loans. You don’t want to borrow more than you’re likely to make in a year or make payments that are more than 10% of your gross monthly income post-graduation. If you know how much you can afford then it becomes much easier to navigate potential struggles future struggles. 

Frequently Asked Questions (FAQs)

What is considered a lot of student loan debt?

A lot of student loan debt is more than you can afford to repay after graduation. For many this means having more than $70,000 – $100,000 of total student debt. 

Is $100,000 in student loans too much? 

It’s hard to say what’s too much for everyone, broadly across the board. However, borrowing $100,000 or more is considered to be a lot and isn’t normal for the average student. Most jobs don’t pay over $100,000 right out of school so it could be a struggle to have that much student loan debt. 

A good place to start:

See the best 529 plans, personalized for you