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How much can your child afford in college loans? Thumbnail

How much can your child afford in college loans?

As I was home over the holidays, I ran into one of my high school friends and ended up talking on the subject of student loans. For those that graduate college in May like my friend and I, the six month grace period on loan repayment ends in November and the first student loan payment is due. As my friend described to me, this was a monthly payment that he had forgot to calculate into his monthly budget. His $40,000 starting salary would be stretched that much further with a $400 per month student loan payment. This expense coming on top of his high costs of renting an apartment in Boston along with providing for food, clothing and saving for a new car.

Luckily for my friend, his student loan payments are still manageable with adjustments to his budget, but for many recent grads, they are not so lucky. It is all too common today to find recent grads unable to afford their monthly student loan payments even after receiving a job in their intended field. For those unable to land a job in the first six months, these students find themselves in an even tougher situation.

I bring this up as it is one of the most exciting months of the year for high school seniors. For those applying early action, acceptance letters start to roll in and students are rewarded for their time spent throughout the fall on essays and applications. As you and your child begin to evaluate the financial aid packages that often come soon after the acceptance letters, it will be important to evaluate the cost of each school with your child’s decision. Having this discussion with your child now can avoid the regret when faced with these difficult scenarios after graduation.

The student debt crisis is one of great magnitude, and with the current total student loan debt nationwide at $1.56 trillion[1], it is a topic that should be addressed before any child makes their college decision. For parents of high school seniors, one of the most frightening statistics is that student loan debt for borrowers age 60 and older has increased by 1,256%, over the last 13 years, from $6.3 billion in 2004 to $85.4 billion in 2017[2].

This shows that parents these days are taking responsibility for more of their children’s student loans than ever before, and for an increasing number, putting their own retirement at risk.

To avoid large debts for both student and parent, one of the key rules of thumb for the college borrowing process is that no student should borrow more than their expected first year starting salary out of college[3]. This is based on the repayment of approximately 10% of the student’s income throughout a 10 year loan payback period.

 Borrowing more than this can spell trouble for a postgrad who is also trying to balance saving for a car or house while making student loan payments. Not to mention that falling behind on payments will have a large impact on a young adult’s credit score, especially with a short credit history.

For high school parents at this stage in mid-January, it will be key to look at what your child will need to borrow to attend different schools and evaluate what those payments will look like after graduation. Once planned, you will have a better idea of how to keep the college dream for your child while keeping loan payments at a manageable level after graduation.

The college loan process is complex. If you have any questions, feel free to reach out. We are here to help!


All the best,


Andrew Holmes




Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.


[1] “U.S. Student Loan Debt Statistics for 2019.” Student Loan Hero,

[2] Song, Justin. “Average Student Loan Debt in America: 2019 Facts & Figures.” ValuePenguin, ValuePenguin, 17 Sept. 2019,

[3] Farrington, Robert, and Stephen. “What To Do If You Have More Student Loan Debt Than You Make?” The College Investor, 23 May 2019,


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