Student Loans: What to Know Before You Borrow

Doing a simple cost-benefit analysis of your future prospects can help you decide how much student loan debt you can afford to repay—without struggling to make ends meet.

Mother and teen daughter looking at information on a laptop screen

by NEA Member Benefits

Have children who are applying to college? Thinking of going back to school for an advanced degree? Either way, before you make any decisions, you’ll want to carefully consider how you’ll cover your education costs.

If you don’t have enough in savings or scholarships, there are many ways to finance an education, including credit cards or home equity lines of credit. Student loans, however, are the most common: According to the Federal Reserve, 94% of students who borrow use this type of financing.

Today’s college borrowers graduate with an average debt of $28,500, with monthly payments of between $200 and $300, according to The College Board. What’s more, 14% owe $60,000 or more, resulting in even higher monthly payments. This kind of debt load can compromise your, or your child’s, ability to buy a house, save for retirement, or pay for everyday living and emergency expenses.

And if you’re toying with the idea of taking out loans to finance a master’s degree, you need to crunch the numbers to see whether you’ll get a return on that investment. For example, NEA’s most recent Rankings & Estimates report shows average classroom teacher salaries actually declining by 4% over the past decade, after accounting for inflation.

Given the lasting ramifications of taking on student loan debt, it’s important to get it right from the get-go. In general, the two most important factors to consider are 1) how much you need to borrow and 2) your income prospects after graduating. Still, those factors alone won’t tell the whole story. Other variables may not seem important, but they could play a key role in your decision.

Here are five questions to ask before committing to sizable debts, for your child or yourself.

1. What are my salary prospects?

It’s important to know how much young students might make in a chosen profession, even before they decide where to go to school or how much money to borrow. Nobody can predict precisely where they’ll work or their exact salary, but there are plenty of online salary tools (such as this tool from that provide a general idea, based on national salary data. 

Some experts suggest students borrow no more than their projected first-year salary. The idea is that will make it easier to pay off those loans within about 10 years. For example, the average training salary for a civil engineer is $55,700, according to Graduates in that field should be able to manage more debt than, say, an elementary education major, who can anticipate earning about $35,600 during the first year of teaching.

Is your child unsure of what career to pursue? Keep a debt cap in mind to prevent overborrowing. For example, you could restrict student debt to the total limit allowed for federal student loans ($31,000 for dependent undergraduate students).

2. What will my cash flow look like with student loan payments?

Once you know how much you need or want to borrow, plug those numbers into a student debt calculator (like this one from College Ave Student Loans) to get an idea of what the monthly payments might be. Conventional wisdom suggests that graduates should ideally put roughly 10% of their take-home pay toward paying off debt. Example: If a recent graduate earns $36,000 per year, she would spend no more than $360 per month paying off student loans.

If you’re not sure how much that will leave for rent, fun, food and so on, you can use online budgeting tools (such as this one on to get a better sense of how loans will fit into your student’s lifestyle.

3. Would an advanced degree be worth the student loan debt incurred?

Understanding how much you can borrow to finance a graduate degree involves a slightly different analysis. Thankfully, there are many generous grants and fellowships for educators, particularly in states that suffer teacher shortages. That said, the cost of graduate school may not be worth it if you can’t use it to grow your career prospects and income, either through a new job or a raise.

Your needs and finances are unique, but you can try an online tool, such as this graduate school calculator, to get a sense of what your overall cash flow might look like, depending on how long you expect to stay in school, your income while you’re in school, student loan assumptions and so on.

In general, you want to determine whether or not graduate school will grow your income enough to cover additional monthly payments on student loans.

4. Will I be eligible for loan forgiveness or income-driven repayment plans?

The good news for educators is that great financial aid options and loan forgiveness programs are available in most states. However, it’s not an easy or intuitive system to navigate. Finding the right financing or program requires a certain amount of legwork.

And if you already have student loans and you’re planning to back to school to get an advanced degree, it may be helpful to determine if you qualify for any forgiveness or repayment programs before you take on more debt.

To simplify the process, NEA Member Benefits, in conjunction with Savi, launched the NEA Student Debt Navigator tool. Here’s how it works: Plug in your student loan, family and income information, and the tool shows you which programs you qualify for and how much you will save. There’s no cost for NEA members to use the interactive tool to find out this information. If you want to e-file your paperwork or talk to a student loan expert, you can pay a member-discounted fee of $29.95 to sign up for the Savi Essential service.

There are several forgiveness programs that teachers may be eligible for. Under the federal Public Service Loan Forgiveness program, borrowers who work in the public sector (which could include educators) may qualify for loan forgiveness after they’ve made 120 on-time, full, monthly payments toward a federal direct loan. Also, teachers in a Title 1 school can eliminate $5,000 or even up to $17,500 of their student loans through the Teacher Loan Forgiveness program, depending on individual eligibility.

Typically borrowers will first apply for an income-driven repayment plan to lower their monthly payments and maximize their potential forgiveness. There are several income-driven repayment plans that can take much of the stress out of paying off federal student loans. The Department of Education offers a number of different income-based repayment, which includes:

  • Pay as You Earn (PAYE) repayment
  • Revised Pay as You Earn repayment plan (REPAYE)
  • Income-Based Repayment (IBR)
  • Income-Contingent Repayment plan (ICR)

The plans have different rules and will differ for each individual depending on family size or household income, but the basic idea is to ease the monthly burden of debt repayment and to make sure you have a plan that’s manageable. If your income is low enough and your family is large enough, you may not have to make any monthly payments on your loans at all.

Check out the NEA Student Debt Navigator to see all of your options.

5. How will I pay education expenses that aren’t covered by traditional funding sources?

If you’re not covered by scholarships, grants or federal loans, you can check out several NEA student loan programs: one for undergraduate students, one for grad students and one for parents. All programs offer discounted rates to NEA members and can cover up to 100% of school-certified costs. It’s easy to apply, and you can choose the repayment option that works best for you.

The bottom line: Make a plan you can live with

In the end, debt is always a personal decision. Before you commit, make sure you’re borrowing a sum you can realistically repay. Ideally, student loans should be a tool you use to enhance your future opportunities. They shouldn’t dictate the economic terms of your child’s or your life by sinking you so deeply into debt that you have significant difficulty digging yourself back out.

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