Many students know theyâll have to borrow money to help with college expenses, and thatâs normal. Borrowing money responsibly and paying it back on time is a part of life for many of us. So, itâs important to understand what it means to take on student loan debt and how to handle it smartly.
The issues arise when people borrow too much money without a plan to repay it. Without understanding, theyâll pay more over time due to interest.
The question is: How much student debt is too much student debt? And how can you avoid getting in too deep?.
Most college students have to take out student loans in order to pay for school. The cost of college keeps going up faster than inflation, so most people have to borrow money to pay for it.
But how much student loan debt is too much? At what point does reasonable borrowing cross over into dangerous territory?
In this article, we’ll break down whether $50,000 in student loans is considered a lot and provide tips on managing student loan debt responsibly.
How Much Student Loan Debt Do Borrowers Have on Average?
Before determining if $50,000 is a lot for student loans, it helps to understand the current student debt landscape.
- The average student loan debt for bachelor’s degree graduates is $30,000.
- However, it’s common for students to borrow $50,000 or more.
- Around 10% of borrowers owe $50,000 or more in student loans.
So while $50,000 is above average, it’s certainly not unheard of. Many students legitimately need to borrow this much or more to pay for four years of college, especially if they attend more expensive private universities.
Is $50,000 in Student Loans Considered “A Lot”?
There’s no one-size-fits-all answer to this question. Whether $50,000 in student loans is too much depends on your individual circumstances. Here are some key factors to consider:
Your Expected Salary After Graduation
Financial experts often recommend borrowing no more for college than you expect to earn your first year out of school. While this isn’t always realistic, it’s a good guideline.
It makes sense to take out $50,000 in loans if you think you’ll make $50,000 after graduation. It might be hard to pay back $50,000 in debt if your first salary is only $40,000.
Your Debt-to-Income Ratio
Your debt-to-income (DTI) ratio compares your monthly debt payments to your monthly income. Experts recommend keeping your DTI below 36%.
A good rule of thumb for student loans is to make payments that are less than 10% of your gross monthly income. For example, if you make $4,000 a month, you wouldn’t want your student loan payment to be more than $400.
Your Field of Study
Certain majors and careers lead to higher salaries on average than others. STEM majors tend to earn more out of college than humanities majors, for example. If you major in engineering and get a $70,000 job, $50,000 in loans is probably manageable.
But if you major in social work and make $35,000, you may struggle with that debt load unless you enroll in an income-driven repayment plan.
Your Tolerance for Debt
Some people are comfortable taking on lots of debt as “good debt” that will pay off in the long run. Others want to minimize loans as much as possible. There’s no right or wrong preference, but know yourself.
If you lose sleep worrying about loans, aim to borrow below $30,000. If you see debt as a tool and feel fine borrowing more, then $50,000 may work for you.
Tips for Managing $50,000 in Student Loans
If you have or are considering borrowing $50,000 in student loans, here are some tips:
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Choose the right way to pay back your debt. For example, income-driven repayment locks in your payments at a certain percentage of your income. This prevents unmanageable monthly bills.
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Refinance for lower interest – You may qualify to refinance your loans at a lower interest rate through a private lender, reducing costs.
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Pay extra when possible – Making extra payments directly to your highest-interest loan knocks down principal faster.
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Claim deductions at tax time – If eligible, claim the student loan interest deduction to lower your tax bill.
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Stick to a budget – Track your income and expenses to free up as much cash as possible for extra payments.
When Student Loan Debt Becomes Excessive
While $50,000 isn’t outrageous for total student loan debt, there are points at which borrowing can become truly excessive:
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Owing over $100,000 in student loans unless you have very high earning potential.
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Monthly loan payments exceeding 15-20% of your gross monthly income.
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Borrowing more than twice your expected first year salary out of college.
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Taking on private loans before maxing out federal loan options.
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Borrowing more than the average debt load for graduates in your major.
The key is to weigh your unique situation against general benchmarks to make sure your loans remain affordable.
Alternatives to Borrowing Too Much
If you’re uncomfortable with $50,000 or more in debt, here are some alternatives to consider:
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Attend community college for two years to lower costs
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Apply aggressively for scholarships and grants
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Consider a public in-state college over private schools
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Live at home rather than on-campus if possible
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Work part-time while in school to help cover costs
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Limit borrowing by paying tuition bills from your income
The Bottom Line
There’s no single right answer for everyone on how much student loan debt is too much. The key is borrowing thoughtfully, considering your future earnings potential and only taking loans you’re confident you can repay.
While $50,000 in student loans may be manageable for some, it could be an excessive burden for others. Crunch the numbers for your situation and explore ways to reduce costs if needed. With smart planning, student loans can be a bridge to your future success rather than a barrier.
Late payments will hurt your credit score
When you donât make your student loan payments on time, youâre charged a late fee, meaning you must pay more. Whatâs worse is that repeated late payments negatively impact your credit score.
As an adult, your credit score is really important. You need good credit to get a credit card, car loan, or mortgage. Many property management companies will even do a credit check before renting an apartment to you. Late payments stick with youâand the consequences snowball.
On the upside, making regular, on-time student loan payments can help you positively build your credit.
Rule of thumb #2: loan payments should be less than 10% of your gross income
Another way to avoid taking on too much student debt and ensure affordable payments is to see how much youâll pay on your student loans each month after graduation.
This is calculated based on how much you borrow, your loan terms, and what interest rate youâve received. Your monthly payments shouldnât exceed 10% of your total gross income. With the free online Loan Simulator, you can play around and see what your monthly student loan payments might look like.
Hereâs an example:
If you expect to earn an annual gross income of $50,000 during your first year after college, you would want to make sure your monthly student loan payments arenât more than $5,000 per year ($50,000 x 10%) or $417 monthly.
Assuming a 6% interest rate and that youâll use the 10-year repayment period, a monthly payment of $417 would equate to a loan balance of about $37,000 in student loan debt at graduation.
Does allocating 10% of your gross income seem like too much for you? Think ahead and keep in mind what other expenses you might have to cover each month, like rent or a car payment.
Remember that this is a general rule of thumb and doesnât work in all cases. One important exception is federal student loan income-driven repayment plans, which cap student loan payments at five to 20 percent of discretionary income.
So, for many borrowers who are on income-driven repayment, the monthly payment amount will be determined by income and not the student loan debt balance.
What Everyone’s Getting Wrong About Student Loans
FAQ
Is 50k student loan debt a lot?
$50000 is more than the average amount of student loan debt in the US. Most graduates have debts between $20,000 and $300,000. However, it’s not uncommon for graduate degrees or certain professional programs to result in higher debt levels.
How long does it take to pay off $50,000 in student loans?
The time it takes to pay off $50,000 in student loans varies significantly based on the interest rate, the chosen repayment plan, and the monthly payment amount.
How much are payments on an $50,000 student loan?
No matter which type of student loan you choose, you should understand when the repayments begin and how much to factor into your budget. For instance, if you have a $50,000 loan with a 2010-year repayment plan and a fixed interest rate of 4% to 8%, you can expect to pay $500 to $600 a month.
What is considered a lot in student loans?
What is a lot of student loan debt? A lot of student loan debt is more than you can pay back after you graduate. For many, this means having more than $70,000 – $100,000 in total student debt.