How much college debt is too much?
That's a question that I hear very frequently as an advisor. My answer is usually "it depends" which I know is not the answer most people are looking for. Generally speaking, my advice is that college students take out no more debt than what can be obtained through Stafford loans, which is about $27,000. And that guidance assumes that the graduate will study in a major where the job prospects at graduation are fairly good. If the student will be entering a field where jobs are scarce or pay is very low, a lower debt level would be more appropriate. Unfortunately, most students take out way more debt than that and it ruins them financially for many years after graduation. Some graduates are still repaying college debt decades after graduation.
A recent New York Times article featured a recent graduate of Ohio Northern who owed over $100,000 in student debt for her bachelors degree. Her monthly payment was over $900 and she was earning just $225 per week working at two waitressing jobs because she hasnt been able to find a job. Now, it might not be her fault that she couldnt find a job, but even if she had found a job in her field, very few occupations pay enough to cover $900 per month in student debt while having something left over to pay rent, own a car and eat.
Students and their parents really need to take a hard look at what is truly affordable BEFORE the students select a college. If they want to go to their "dream school" but doing so is only possible if the student takes on a huge debt level, I would suggest that is time to consider another less expensive college. Parents and students do not like hearing this advice but it needs to be said.
In 2011, the average debt level was $23,300 but 10 percent of graduates owed more than $54,000 and 3 percent owed more than $100,000. $100,000 is a ridiculous amount of debt for a 22 year old student to be saddled with before they even have their first job. It's not hard to see why one in ten borrowers who started repaying loans in 2009 defaulted within two years.
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