Should You Take On Student Loans? How Much is Too Much?

We have been told by our parents, grandparents, aunts, uncles, and friends that college is a necessary part of life if you want to succeed.

Whether you agree with that or not, chances are that you are attending college just in case. The second dilemma you should be contemplating is your future debt load.

should i take out student loans

I have heard countless stories (and I’m sure you have too) about students that graduate from college with a worthless degree and have amassed tens of thousands of dollars in student loan debt in order to get it! Now that they’ve graduated, they have no job, no money, and absolutely no way to pay back those loans. So should you even take on student loans? How much is too much?

To Beg For Loans or Not to Beg For Loans? That is the Question.

There are many students that don’t think twice about taking out student loans. They were told that if they get a college degree they will be successful, so why stop to think about student loan debt? Hopefully this is not your mentality. Debt can be a tool for gaining wealth, but is more often than not a disease that will keep you poor. Be very careful with debt, even student loan debt.

So when are student loans ok? Here is how I measure the validity of your student loan usage:

• What is the average yearly salary for your desired position?
• What are the odds of you landing this job?
• Take the average salary and multiply it by the percentage of you landing the job, and then multiply by 50%.

So, if you are going to college to become a teacher, do some research and find out what the average teacher salary is in the first couple years. Let’s say it’s $35,000. Then, what are the odds of you finding a teaching job? With your internships and good grades, you figure that you have a 95% chance of landing a teaching job.

$35,000*0.95*0.50 = $16,625 of student loans

In your four (or five) years that you are in college, you should not exceed a total of $16,625 in student loan debt. By keeping your student loans this low, this will provide you the opportunity to pay off your entire debt within the first five years of work. If you acquire more debt than this, you will no doubt be strapped for cash for many years.

In reality, if you can find a way to get through college with absolutely no debt, this is the best option. Work extra jobs, eat cheap food, live at home – do whatever you can to keep your expenses low and your income high (you know, high for a college student).

If you succeed at earning your degree without any debt whatsoever, you could become a very wealthy individual. While your friends are making house payments, car payments, and student loan payments, you will be smiling at your full bank account. Instead of getting yourself into debt, invest in assets that will produce money for you in the future. This is how you become financially successful in life.

Do you have student loan debt? Do you wish that you would have worked harder to avoid it?

This guest article has been written by Derek Sall from Derek has a great passion for helping people get out of debt, save up money, and become wealthy!


Should You Take On Student Loans? How Much is Too Much? — 15 Comments

  1. My wife and I have quite a bit of student loan debt from college, and she’s taking out a bit more for grad school. While the payments are annoying, it has allowed me to make about triple what I would have made without my degree. When my wife is done with grad school she will be in the same – if not higher – range. I think you can’t dwell too much on prior decisions but make the best decisions TODAY for your life.

  2. No student loans is my favorite, and the only way, that I go to school! Does this formula change? Because the difference of disposable income to pay off loans for someone making $35,000 ish/year vs someone with an anticipated income of $75,000 seems like it could make a drastic difference. I’ve never carried student loans before so I may be way off on this, but with $16,625, what would an average monthly payment look like?

  3. I was definitely not cautious enough about student loan debt, and as a result I have a lot of it and will still be paying it off for a long time! It’s the single biggest thing in my life that I wish I could go back and do over.

  4. I have heard a few experts say that you shouldn’t borrow more than you can expect to earn during your first year in the workforce. That probably isn’t possible all the time, but it does sound like a good guideline. I personally hope that my kids don’t have to take out any loans. We’re saving now to try and make sure that happens.

  5. Great post. I had $30k in student debt when I finished college and grad school. It took me slightly less than 2 years to pay off once I “buckled down” and made debt pay down a priority. I think having no debt is the best case scenario, but if you do “have” to take out debt for school I would recommend taking out as little as possible and paying it down as fast as possible after you graduate.

  6. I’m so glad I got done with college when I did. It was a struggle for my parents and I to split the costs back then, and there’s so way we would have been easily able to afford it in today’s costs. I’m definitely a fan of public schools because they are a lore more affordable than private schools. Any way to save on student loans is worth considering.

  7. I have heard that you should only take out what you project to make your first year of employment.
    For me, I thought once I graduated that companies would be knocking down my door to hire me. Turns out, they weren’t.
    I was fortunate, I had a full ride for undergrad, and didn’t have to borrow money. But, when I went to grad school, I took out student loans, and had to deal with all that goes with it for the first time.
    Its so stressful having those loans, and no job to pay it back.

  8. I always encourage people to consider the economic environment and which career fields/industries are likely to be flourishing 10-15 years in the future to help guide them with respect to choosing a which degree to pursue. With respect to paying for school, no one needs to go to a 4-year university each year. Better to start at a community college (it’s all just core courses the first couple years anyway) where it’s a lot less expensive. Also, as an Army retiree, I always suggest people consider military service and all that it offers with respect to education.

  9. I am in the middle of this debate right now. I managed to get more scholarships than nessary (if possible) for the few years but now they all run out and grad school is around the corner. I like the idea of balancing and making sure what your paying now is worth what you be payed later

  10. Since I was college age, several things have changed which seem to underly the growth in student debt: 1) there’s more pressure to achieve and compete, so kids feel compelled to go to costly private schools instead of more affordable state schools (I attended the University of Illinois in my home state); 2) the anti-tax clan’s success means less taxpayer support of state schools and greater reliance by the schools on tuition & fees to cover their costs; and 3) sorry, but the ‘standard of living’ seemingly demanded by kids in college is far higher than what was common a few decades ago. When in university, I didn’t have a car, I almost never ate out (even fast food), I shared living quarters with as many as four roommates, and of course I didn’t have an iPhone. :-)

  11. Not thinking twice about student loans is a terrible idea and something I fear happens all too often. It’s really time for prospective students to start better assessing the value of their education and the projected return on investment before digging themselves into massive holes of debt.

  12. Education is essential, but here in the U.S. anyway it’s spiraled out of control from a cost point of view. Thus, I think that student loan debt that represents a likely high ROI situation is often okay. But that’s the key: understanding that it’s an investment, and different degrees/schools have different payoffs. Keeping that in mind, while striving to minimize debt, seems to be a balanced approach.

  13. I have some student loan debt thankfully at a very low interest rate. It is a manageable amount so it’s not too bad but still I’m very skeptical about taking out more loans if I ever decide to go to grad school. I just hate the thought of getting into more debt.

  14. Some of student loans offer high interest rates and it’s a must to research and look around first before applying for one. Also, doing some math makes wonder.

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