Ever since I started Student Debt Diaries almost eighteen months ago, I have received hundreds of emails from individuals across the country. Many people want to know how they can earn extra money so that additional cash can be devoted to student loans. Other folks are interested in ways that they can cut expenses so that any savings can be used to pay down student debt. Numerous individuals have also asked me how much student debt is too much to borrow when earning a degree.
Of course, everyone is different, and no two student debt borrowers are going to have the same experiences paying off their student loans. As a result, it is difficult to estimate the maximum amount of student loans an individual should borrow to earn their degrees. However, I think there are certain factors that should be evaluated when asking how much student debt is too much to attend college or graduate school.
The type of job that one will pursue after graduation will likely have the biggest impact on how much student debt is too much to earn a degree. If you wish to enter public service, then the amount of student debt you borrow is not that important. Many public interest workers are eligible for income-drive repayment and public service loan forgiveness, which caps the amount these individuals have to pay towards student loans each month. After ten years of payments, the remaining balance of federal student loans is forgiven. Of course, there is always the possibility that the government will impose limits on the amount of debt forgiven under this program, but this possibility is unlikely, so public service workers often do not need to be too careful about how much student debt they borrow.
However, if you intend to enter the private sector, you should only borrow the amount of student loans you can comfortably pay off within a reasonable amount of time. An individual’s expected salary is one of the most important considerations that should be assessed when determining the maximum amount of student loans someone should borrow. Individuals entering lower-paying jobs should likely borrow less student debt than people who expect to earn higher salaries. The conventional wisdom is that individuals should not borrow more student loans than the first annual salary they hope to earn upon entering the workforce.
Generally, I think this is a good “rule of thumb” to live by when asking how much student debt is too much to earn a degree. However, salary alone should not be evaluated in a vacuum. My total student debt exceeded my first-year salary after graduating from law school, but my salary from my full-time job was not my only source of income. As previously mentioned on this website, I made tens of thousands of dollars most years during my student debt repayment saga by working a number of part-time jobs. Since the salary from my full-time gig was paying my rent and other expenses, any money I earned from part-time pursuits could be completely devoted to my student debt.
From my own experience, your salary at your first job alone should not be used when evaluating how much student debt is too much to earn a degree. Rather, you should estimate your annual income considering your full-time salary, part-time pursuits, investments, and any other sources of income. This broader analysis will allow you to make a better assessment of how easily and quickly you will be able to pay off student loans after graduating.
Of course, your expected salary alone will not be the only factor that will impact how much student debt is too much to earn a college or graduate degree. Indeed, an individual’s family situation will also have an impact on how much student debt they can comfortably borrow.
For instance, I have a friend who took out an insane sum of student debt to earn her undergraduate and law degrees. She later accepted a job at a small law firm that had great hours, but did not pay a lot of money. My friend told me that she was not worried by her student debt situation, since she expected to inherit money from her grandparents when they passed! I would caution against incorporating expected inheritances when deciding how much student debt is too much, but other personal factors should definitely be considered.
For example, if you are married during your student debt repayment saga, you might want to consider the expected debt burden and salary of your spouse when determining how much money is too much to borrow to earn your degrees. Furthermore, family responsibilities, such as taking care of parents and children could also impact the total amount of student debt you can comfortably borrow. Of course, there are a number of other unique factors in everyone’s lives that must be assessed when deciding how much student debt is too much to borrow.
All told, it is very difficult to determine how much student debt an individual should borrow to earn a degree. The typical “rule of thumb” that an individual should not borrow more than their expected first-year salary is good advice, but you should also include any money you expect to earn from side-hustles. In addition, a variety of personal factors must also be assessed when evaluating how much student debt is too much to borrow in order to attend college or graduate school.