How do I know if I have too much student debt?

Too Much of a Good Thing

Try to only borrow what you absolutely have to.
Try to only borrow what you absolutely have to.

With a four-year degree running up to $200,000 these days, it's no wonder why two-thirds of all college students seek some sort of financial assistance [source: Weiss].

The level of assistance varies. Some only borrow a few thousand. Others take out loans for much, much more. In 2008, 25 percent of graduates finished school with more than $30,000 to repay, and one in 10 owed more than $44,000 [source: FinAid]. (Graduate students typically finish school even deeper in the red, with up to $120,000 to pay back [source: FinAid].) How dire those debt straits really are depends on what happens after graduation. With a high-paying job, repayment can be a breeze. Engineers or investment bankers may find they have no problem at all paying off their student loans. Teachers, social workers and philosophers, on the other hand, may be in trouble.

Repayment typically begins within six months after graduation, most often in monthly installments. It'll only cost $12 a month to borrow $1,000 -- but most students borrow more than that. For a $23,000 loan, the most allowed in federal student aid, the monthly payment is in the area of $275 a month for 10 years, assuming 8 percent interest (the rate as of 2009) [source: Weston]. That can get a little heavy if someone is graduating without a job lined up or is only looking at a starting salary of $26,000, which is typical for students graduating with a psychology degree [source: Weston]. Two-thousand a month doesn't stretch that far after taxes, housing, food, electricity and the cell phone bill. If that psychology major took out private loans on top of the federal aid, the situation is even bleaker. Fifty-thousand dollars in student loans works out to more than $600 a month [source: CCIS].

For graduates who simply can't pay, deferments are a possibility. But that may just be putting off the inevitable (plus accrued interest, if that's in the loan terms). Total cancellation of the debt is also a possibility, albeit a distant one. In both cases, it's necessary to prove true financial hardship, and that's not always an easy standard to achieve. Defaulting is another option -- an extremely undesirable one that can affect credit rating and result in garnished wages and confiscated tax refunds.

As a result, many graduates find themselves in the awkward position of having to put off other financial goals in the interest of getting out of debt. A 2006 survey of more than 1,500 graduates under age 35 revealed that nearly half put off buying a home, and more than a quarter delayed starting a family, due to student debt [source: Chaker]. Saving for retirement typically gets pushed back at least 10 years, the average time it takes to pay of student loans under good financial circumstances [source: Weston].

In the end, it pays to play it safe from the very beginning by calculating a manageable loan amount before applying for help.