Are Student Loans Worth It? What Borrowers Should Know

Student loan debt should stay at or below a graduate's expected first-year salary, financial planners say, since going higher makes monthly payments unmanageable on a typical entry-level paycheck. That single rule of thumb is reshaping how families weigh a dream school against its price tag.

The question came into sharp focus recently when a parent posted in Reddit's StudentLoans forum, asking what to tell a child determined to borrow heavily for a top choice school. It's a familiar bind. Average student loan debt for a typical borrower now runs as high as $42,673, and the emotional toll is real: in one survey, 78.7% of respondents said their loans caused them anxiety, and one in 16 reported suicidal thoughts tied to the debt. Among borrowers earning under $50,000 or out of work, that figure climbed to one in eight.

At a Glance

• Total student debt should not exceed a graduate's projected first year salary.
• Federal loans carry fixed rates and offer income driven repayment options private loans usually lack.
• Undergraduate federal loans for 2025 26 carry a 6.39% rate, versus 3.39% to 17.99% for private loans.
• Community college transfers and financial aid appeals can meaningfully cut borrowing.
• A gap year, through programs like AmeriCorps or working at home, can delay debt and build savings.

How Much Student Loan Debt Is Too Much

The math is straightforward once you know the salary a degree typically leads to. An engineering graduate earning roughly $78,000 in a first job can reasonably carry up to $78,000 in loans. A communications graduate averaging $60,000 would struggle with $80,000 in debt, since monthly payments would exceed the 8% to 10% of gross income considered manageable for a new grad. The gap between major and expected income, not the sticker price of the school, is what determines whether debt becomes a burden.

Federal Loans Versus Private Loans for Student Debt

For the 2025 26 school year, federal undergraduate loans carry a 6.39% interest rate, graduate loans sit at 7.94%, and parent or grad PLUS loans run 8.94%. Private loans range far more widely, from 3.39% up to 17.99%, and their rates can be fixed or variable depending on the lender.

Federal loans generally win out because of that rate stability and because borrowers can shift into an income driven repayment plan if their earnings drop. Private loans carry more risk for families specifically because more than 90% require a co-signer, and it's usually a parent who ends up covering the bill when a graduate falls behind.

Cutting the Cost Before Borrowing a Dime

Starting at a community college for two years before transferring to a four year school can cut total costs roughly in half, with the same diploma waiting at the end. Families can also push back on a financial aid offer: if another school extended a better package, the dream school may match it, though the window to ask is usually short.

A gap year is another option worth weighing. AmeriCorps, for instance, pays a living stipend plus a separate award that can go toward tuition later. Some students instead take a job and stay home for a year, saving money and using the time to settle on a major before enrolling with a clearer head and a smaller loan need.

Weighing a Dream School Against a Decade of Payments

The tension in that Reddit thread isn't really about one specific college. It's about whether a family treats sticker price as fixed or negotiable, and whether a teenager's first choice school is worth a debt load that could shadow their finances well into their thirties.