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How Much Student Loan Debt Is Too Much?

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How much debt is too much debt? It’s a question that anyone taking out a student loan needs to grapple with. According to a series in the New York Times a while back, the average debt load for a graduate was $20,000; students attending private colleges took out an average of $25,000. Those amounts have gone up…

But how much the average student carries in debt isn’t necessarily the answer to how much you should borrow. Financial planners typically recommend borrowing no more than 10-15% of your expected annual salary post-graduation. Of course, there are numerous variables that go into how much you will actually earn after graduation — and, given the current economic climate, whether or not you will be able to find a job right away in your field.

In general, however, your anticipated income when you graduate is a fair benchmark to use for how much debt to take on. If you’re planning to be an elementary school teacher with a starting salary of less than $30,000 per year, student loans of $80,000 will be nearly impossible to repay.

Which brings me back to my original question: How much debt is too much debt? How does one determine whether or not they will be able to afford to pay back their loans after graduation? And what do you do if you determine that you can’t afford it? Do you turn down your top choice of college? Do you have any other options?

For some expert opinions on this vexing problem, check out today’s New York Times, Room for Debate. It features the perspectives of five financial aid leaders:

  • Robert Applebaum, founder of ForgiveStudentLoanDebt.com (I wrote about Robert in this post on forgiving student debt)
  • Economist James Monks
  • Alan M. Collinge, founder of StudentLoanJustice.org
  • Anya Kamenetz, author of “Generation Debt”
  • Neal P. McCluskey, associate director of the Center for Educational Freedom at the Cato Institute

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