The Right Amount to Borrow

Investing in your  education by borrowing loans can be a sound investment, when it helps you get a degree and positively impacts your quality of life, and earning potential, for decades! However, to get the most out of the investment, you want to make sure you only borrow what you need.


Student loans help you pay for your education, but they are also very real financial obligations. This means you will have to pay them back over time, whether or not you finish school. Only take out what you will need.

Figure out what you need—What is the net price of your attendance?

Estimate your total cost of attendance at each college you’re considering. This should include tuition, fees, housing, food, transportation, and other personal expenses.
Then, add up the (gift aid) grants, scholarships, and tuition waivers or discounts offered at each institution you’re considering attending. Reduce your original cost estimate by the amount of non-loan aid to create your budget for each school.  This will let you know how much you would need to borrow. (Learn more about creating a budget here.)

Figure out what you can afford to repay in the future

Find current salaries and job prospects for your intended career. Your monthly student loan payments should not exceed 8 – 10% of your monthly salary.  Keep in mind that starting salaries can be quite a bit lower than mid-career earnings and plan accordingly.

For help researching prospective salaries, check out the Alaska Career Information System at www.akcis.org.

To help estimate what your payments will be after graduation, use an online calculator. These are available at:

  • Finaid.org/calculators
  • Mappingyourfuture.org
  • Studentloans.gov


For example, if you expect to earn $30,000 per year, plan on no more than about $200 in monthly student loan payments, for ten years. This would mean borrowing about $18,000 in total. If you expect to earn more, you can consider borrowing more.

Note: This can get more complicated if you have different types of loans that may have different interest rates or repayment options, but it’s a good place to start. (Learn more about repayment here.)


Look at what school/program you can afford to attend.  Does your budget have gaps? If so, evaluate:

  • The many options to keep college costs low (learn more here).
  • Other institutions
  • Other majors/career choices of interest

Putting it all together

Remember – borrow smart. Only take out what you can reasonably expect to pay back. Education loans can be a smart investment in your future, but make sure you demonstrate good financial sense when you borrow.