How Much Student Loan Debt Is Too Much?

Student loans are a burden that an estimated 44.7 million people throughout the U.S. are dealing with. Although it’s incredibly common, it can be hard for students to understand when they have too much student loan debt. 

Honestly, any debt is a lot when you don’t know how much money you’ll be making upon graduation. Unfortunately, many of us don’t have many other options outside of taking out a student loan to pay for our education. When 69% of students are taking out loans, you can at least be sure you’re not alone. 

Average Student Loan Debt

A recent study conducted in 2019 estimates the average debt students graduate college with is around $29,800. That number includes both federal and private loan debt. 

As for parents taking out loans for their undergraduates, Parent PLUS saw an average of about $35,600 per graduate.

Average Monthly Student Loan Payment

If you take into account how much students take out in loans, it’s estimated that the average student loan payment hovers around $400.

For students making the average starting wage between 30k-40k, this is a doable amount, especially if you’re on a Federal Repayment Program with lower payments.

About 72% of borrowers the average amount of debt when they graduate college. So, the question is, when does it get to be too much?

How Much Is Too Much Debt

It’s safe to say that going beyond the average loan amount is when you venture into dangerous territory as a borrower. 

The more debt you have, the higher your monthly payment is, which means you’ll start eating into your budget for other living expenses. This is how people get burdened with high payments that they can’t afford to make.

Think about it, even doubling the average loan amount (around 30k), means that your payments have the potential to exceed $800 a month. That’s rent for some students, and frequently, the amount of an entire paycheck for entry-level positions. 

While there’s no cut and dry number that determines too much debt, these are some questions to ask yourself before you take on more:

  • Will your estimated monthly payments be more than you can afford? 
  • Do you anticipate having trouble finding full time, entry-level position within six months of graduation?
  • Is 10-20% of your monthly loan amount going to fit into your budget?

If you feel like taking out additional student loans will leave you in a bad financial situation, don’t do it.

Additionally, thanks to interest and fees, the longer it takes you to pay off your student loans, the more you’re actually paying on them. Keep that in mind when you’re estimating your payments. If you can stick to a loan amount with a lower payment, you might be able to put more of your income towards paying it off faster. 

Student loans are a personal obstacle that you’ll have to learn how to navigate on your own. Whatever you decided to do, make sure it’s a decision you’re comfortable with when it comes to your financial future.