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Student loan debt should not exceed the expected first year salary after graduation to remain manageable.
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Federal student loans are generally safer than private loans because of their fixed rates and repayment options.
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Starting at a community college or applying for financial aid can significantly reduce student debt.
A parent posted a question on Reddit’s student loan forum that probably keeps thousands of families up at night: Their child wants to take out student loans for their dream school, and they’re not sure what to tell them.
This is a tricky question because student loans can feel like such a burden. The average student loan debt of a typical student can be as high as $42,673. And the loss goes beyond bank accounts. In one survey, 78.7% of respondents said they experienced anxiety because of their student loan debt. One in 16 respondents had suicidal thoughts because of their debt, and for borrowers who were unemployed or owed less than $50,000, it was one in eight.
No one wants to be a parent who doesn’t follow their child’s dreams. But no one wants their child to be in debt.
Financial planners have one guideline: Your total student loans shouldn’t exceed your first year’s salary.
So if an engineering graduate has a job earning $78,000 a year (which is on average about what an engineer would make just out of college), they can manage up to $78,000 in loan payments.
On the other hand, a communications grad making $60,000 a year (again, the average salary for a recent college graduate with this major) will feel overwhelmed if they take on $80,000 in student loans, because the monthly payment will be more than what is considered manageable (8% to 10% of freshman gross income).
For the 2025-26 school year, federal graduate loans have an interest rate of 6.39%, while graduate loans are 7.94% and parent and graduate PLUS loans are 8.94%. Personal loans can be anywhere from 3.39% to 17.99%.
It’s generally better to go federal, rather than private, if you’re taking out student loans. Interest rates on federal loans are fixed, while interest rates on private loans can be fixed or variable. Additionally, with a federal student loan, you have the option of doing an income-based repayment plan. From a parent’s perspective, personal loans can be dangerous. Personal loans require co-signers more than 90% of the time, and many of those co-signers—usually parents—end up paying.
Encourage your child to start their degree at a community college. Then they can transfer to university after two years. They will pay about half of what they would have spent four years at university. It’s the same diploma at the end, potentially with thousands less in debt.
