How Much Student Debt Can I Afford? Answer 5 Questions to Find Out

How Much Student Debt Can I Afford? Answer 5 Questions to Find Out

Note that the situation for student loans has changed due to the impact of the coronavirus outbreak and relief efforts from the government and many lenders. Check out our Student Loan Hero Coronavirus Information Center for additional news and details.

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If you’re wondering how much in student loans you can afford, you’re asking the right question. Borrowing only what you must — and can realistically repay — will save you a lot of heartache.

To figure out how much in student loans to borrow, ask yourself the following five questions relating to your financial situation, choice of college and major, as well as postgraduate goals.

1. How much will I need to borrow?
2. What will my student loan payments be?
3. How much can I expect to make after college?
4. What are my life, career and financial goals?
5. Can I change my plans to pay off student loans faster?

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. You can use your school’s net price calculator, which each college and university is required by law to share. If you can’t find it online, ask your financial aid office.
  • 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 dues will be after you graduate. The easiest way to do so is by using a student loan payment calculator.

Planning to borrow more or less or at different rates? Plug your potential loan into our calculator:

Student Loan Payment Calculator

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This will tell you what the student debt you take on now may 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 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.

Of course, student loan borrowing is rarely black and white. If you borrow multiple student loans, you’ll likely have a unique interest rate attached to each one. In that case, take your total borrowing balance, plus an average of your rates and plug those figures into Mapping Your Future’s calculators.

4. What are my life, career and financial goals?

Nearly 8 in 10 college graduates say their student loan debt hinders their ability to achieve personal and financial milestones.

With that in mind, consider more than quantitative facts like your income when you picture your future with education debt. Loan repayment 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
  • Buying a home
  • 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 in student loans is too high, it’s time to start searching for ways to cover more of those costs without getting into debt:

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 savings 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 2020 were projected to earn an average salary of $69,961, according to a National Association of Colleges and Employers survey. For comparison, humanities majors from the Class of 2020 were slated to earn $53,617.

Go a step further and consider your major’s ROI, or the return on your investment. After all, some majors call for greater student loan borrowing than others.

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 free advice on paying for college.

You might be directed to answer the question of how much student loan debt you can afford by employing a helpful worksheet like the one published by the Consumer Financial Protection Bureau.

Even when seeking guidance, 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.

Andrew Pentis contributed to this report.

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