Need money for college? Student loans might seem like the easy answer, but borrowing too much today could later limit your freedom to build the future you really want.
If you’re not sure how to figure out the appropriate amount of student loans to borrow, check out the guide below for answers.
How much student debt can I afford?
Planning out how much you should borrow will help you more effectively manage your student loans later. To find the answer, ask yourself the following five questions about your college, costs, and future.
1. How much will I need to borrow?
A big factor that could affect your student loan balance is the college you choose to attend. As you’re considering colleges, it’s helpful to estimate how much debt you’d have to take on to attend each one. To do so, follow these steps:
- Find the annual college costs you’ll face, including tuition and fees as well as room and board, textbooks, and more.
- Subtract any gift aid you’ll receive, such as college grants or scholarships, from the total cost. This will reveal your college net price, which is the actual out-of-pocket cost you and your family must pay.
- Consider your savings and cash. Think through how much of your net price you can afford to pay for out of college savings, earnings from a part-time job, or other funds.
- The result you come to is how much you’ll borrow each school year. You’ll need to multiply the amount by the total number of years it’ll take to complete your degree.
2. What will my student loan payments be?
Once you know how much you’ll need to borrow, estimate what your monthly student loan payments will be after you graduate. The easiest way to do so is using our student loan payment calculator.
This will tell you what the student debt you take on now will look like once you have to repay it. How financially burdensome will this debt be? Will the monthly payment lead to student debt burnout?
To know for sure, you might need to think through other factors affecting your post-college life.
3. How much can I expect to make after college?
Whether your student debt is affordable after graduation depends on how much money you make. No one knows exactly what the future holds, but you can do your own research and estimate how much you’ll make after college:
- Check your college’s website or ask its financial aid office for employment outcomes and average starting salaries of recent graduates.
- Look up post-graduation salaries for your college with the Department of Education’s College Scorecard.
- Estimate your salary based on your major, gender, and age with this interactive income tool from The Hamilton Project.
As a general rule, student loan payments should be less than or equal to 8% of your monthly income to be considered affordable. This calculator from Mapping Your Future can be used to compare your student debt balance to income.
4. What are my life, career, and financial goals?
Consider more than your income when you picture your future with student debt. Student loans could hold you back from many important goals, such as:
- Starting a business after college
- Getting married or taking another major life step
- Moving to a city with a high cost of living
- Pursuing nonprofit work or other typically low-paying careers
- Traveling the world or having other enriching experiences
Although it’s possible to do all of the above and more with student debt, there’s no doubt that borrowing less now gives you more financial freedom later. So ask yourself what life plans you have and how student debt will affect them. Is that a trade-off you’re willing to accept?
5. Can I change my plans to pay off student loans faster?
If you’re concerned that your student loan balances might get too high, revisit your college or career plans. Here are some ways you can change your plans now to keep student loans manageable in repayment.
Find more funds for college
If the amount you’ll have to borrow is too high, it’s time to start searching for ways to cover more of those costs without getting into debt:
- Find free money for college from state grants, scholarships, or employment benefits.
- Take advantage of work-study programs or find a part-time job.
- Work with your parents or ask other family members for help paying for college.
Choose a cheaper college
Choosing a less expensive college can make a huge difference in your student debt. Consider cost-saving strategies, such as attending a college that allows you to live rent-free with your parents.
You could even complete your first two years at a community college before transferring to a four-year school. Our study on community college found that this strategy saves students $11,377 on average.
Pursue a higher-paying degree
If your current area of study leads to low-income work, consider pursuing an in-demand degree that will lead to a high-paying job instead.
Engineering graduates, for example, earn the highest starting salaries out of college. Those in this major who graduated in 2017 were projected to earn an average salary of $66,097, according to a National Association of Colleges and Employers survey. For comparison, the overall average starting salary for the Class of 2017 was $51,022.
Get help from your financial aid office
Don’t forget to reach out to your school’s financial aid office for help. Peruse its online resources, set up an in-person appointment, and ask for assistance when you need it.
Through your journey, however, never forget your own responsibility: to limit your student debt to what you can reasonably afford to repay. Your future financial stability and freedom depend on it.
Need a student loan?Here are our top student loan lenders of 2019!
|2 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
(1)All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
(2)This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7% variable Annual Percentage Rate (“APR”): 96 monthly payments of $179.28 while in the repayment period, for a total amount of payments of $17,211.20. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
(3)As certified by your school and less any other financial aid you might receive. Minimum $1,000.
Information advertised valid as of 5/29/2019. Variable interest rates may increase after consummation.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
3 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
4 Important Disclosures for Discover.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
* Offer valid for new Custom Choice Loans for which applications are submitted for a credit decision between 12:00:00am EST on June 1, 2019 and 11:59:59pm EST on August 31, 2019. A 0.50% interest rate reduction will be included in the loan options presented to an applicant during the online application process, upon passing the initial credit review. The interest rate reduction will be applied as of the first disbursement date and will be effective for the life of the loan.
6 Important Disclosures for LendKey.
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.99% – 11.98%2||Undergraduate, Graduate, and Parents|
|4.50% – 11.35%*,3||Undergraduate and Graduate|
|4.84% – 11.99%4||Undergraduate and Graduate|
|3.27% – 10.80%5||Undergraduate and Graduate|
|4.46% – 9.43%6||Undergraduate and Graduate|
|3.74% – 9.72%7||Undergraduate, Graduate, and Parents|
|3.99% – 11.64%8||Undergraduate, Graduate, and Parents|