Borrow Borrow

The Calculations Every Family Needs To Run Before Borrowing For College

Joanna Nesbit  |  August 28, 2021

Moms, dads and students of all ages — listen up. Before you borrow a penny for college, it’s time to check out these loan calculators + formulas.

With college costs soaring, and student loans readily available, it’s all too easy for students to graduate without understanding exactly how much they’ve borrowed or what their projected loan payments might be. Many parents also end up co-signing private student loans or taking out Parent PLUS loans on behalf of their child. 

Just how much are people borrowing these days? The average college grad took out $30,030  for a bachelor’s degree at a public university in 2021 according to, and today, 3.6 million parents owe a collective $96 billion in Parent PLUS loans. 

But borrowing isn’t a bad thing. Loans are often the only way for a child to live their college experience of choice and pursue the career of their dreams. No one ever expects to get in over their heads with student debt… So how can you know when you’ve hit your limit? Enter student loan calculators — a must for any borrower before signing on the dotted line.The calculations you run today will help you determine the answer to your most pressing question: “Will I be able to handle the payments after graduation? 

The Department of Education recommends budgeting no more than 10-15% of your discretionary income for student loan payments. (Your discretionary income is the after-tax income left over after you’ve covered your basic needs, like rent, utilities, and groceries.) Beyond 15% ,those  loan payments can quickly become burdensome.  

Here’s a look at how to run the calculations that will ensure your educational journey is as positive as possible — for everyone in the family! 

ASK: What level of income can be expected after graduation?

A major in computer science or engineering stands a good chance of landing an entry-level job paying $90,000 or more, which means that taking on a higher level of debt should be manageable. But fields like elementary education or journalism pay far less, and starting salaries are likely to be around $35,000, making a large loan payment far less feasible. Try to predict your starting salary up front with a site like or the US Bureau of Labor Statistics Occupational Outlook Handbook. “It doesn’t make sense to borrow large amounts for education if the student is not expected to earn enough to comfortably repay the loan,” says Patti Hughes, owner of Lake Life Wealth Advisory Group in Chicago.

ASK: What are the federal student loan limits? 

Many families don’t realize their students can’t borrow everything need to cover college costs via federal student loans. There are thresholds. Students are allowed to borrow $5,500 for their first year, $6,500 for the second year, and $7,500 each for their third and fourth year. They can take an additional $4,000 for a fifth year if necessary for a total of $31,000. 

ASK: How much will we need to borrow? 

Many families will need to borrow beyond the federal student loan thresholds. Their primary options are co-signing private student loans and federal Parent PLUS loans. 

Even if you don’t know your student’s final college costs until late into their senior year of high school, you can still do some advance calculations on what you could reasonably afford as a loan payment, Hughes says. 

Let’s say your student is exploring your local in-state university and your funding gap will be around $15,000 after accounting for the $5,500 freshman federal student loan. According to the loan calculator, the estimated payment on a $15K loan with a standard 10-year repayment plan and 6% interest is $166. If you take the same amount at 8% interest the following year, that payment will be  $181 on top of $166. That’s for just two years of one student’s college. Can you handle $341 per month? How about double that amount? 

Consider all years of potential borrowing, says Luanne Lee, a college planner and owner of Your College Planning Coach. “I’ve seen people with $1,500 per-month loan repayments in addition to the student taking on their $27,000 in federal student loans — which could be roughly $250 to $350 per month on a standard 10-year repayment plan,” Lee says. “It’s a reality check.” 

Before saying “yes” to the top school on your list, run simulations to figure out what’s manageable based on your projected career choice + budget. The Mapping Your Future calculator shows necessary salaries for different loan payments. 

ASK: For everyone in the family: What’s the expectation with this debt? 

Many families co-sign private student loans with the understanding the loans will become their student’s responsibility and the parent’s name will eventually be removed as co-signer. That may work out, but according to Lee, well over 50% of students are turned down when they apply to release their parents as co-signers. “That’s because they’re not making enough, they haven’t been in the workplace long enough, or their credit-to-debt ratio is too high,” she says. That means the loan remains attached to the parent, and it can affect parents’ ability to borrow for other children or for something like a car. You’re liable for payments if your student misses making them. 

Meanwhile, Parent PLUS loans belong to the parent and can’t be turned over to the student. Even if a student plans to help with payments, the loan will always be in the parents’ name. 

Think about it this way: If your student can achieve the private loan release, could they handle typical federal student loan payments of about $250 (standard 10-year schedule), plus a private loan payment? College experts recommend students not take on more total debt than what they expect to earn in their first year out of college, though some say even that amount could be stressful. Don’t overestimate those first few years’ worth of earnings when running your loan simulations. 

Don’t be afraid to go back to the drawing board if necessary. 

Feeling a little stressed? We get it. College costs are enough to keep anyone awake with worry. But there are always options. 

It may be that a less expensive college option is the best route for now — starting in a community college or looking at in-state schools are two of the best ways to eliminate parent borrowing and keep costs down. There’s also living at home and commuting, or targeting colleges that are generous with merit or need aid.

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