How much student loan debt can I afford?

It's up to you to put limits on how much debt you're willing to incur. Obviously, the less borrowing you have to do, the better. Do not take on so much debt that repayment becomes a burden you cannot carry:

• If you're a student, your payments shouldn't exceed 8% to 10% of your expected monthly gross income once you graduate. To view expected salaries by career click here.
• If you're a parent, all your debts -- including mortgage payments, credit cards, car loans and education loans -- shouldn't eat up more than 35% of your gross pay.
• Once you start borrowing, keep track of your debt. It's easy to get confused about how much you owe, particularly if you borrow from a number of different lenders. You can view all your loans at www.nslds.ed.gov/nslds_SA/.

How can you figure out how much your loans will cost when the interest rate is often variable? You'll be pretty safe if you figure on a rate of around 8%. Federal Subsidized Stafford loans are scheduled to drop to 3.4% by 2011, but Federal Unsubsidized Stafford loans will remain at 6.8%. Click here to compute an estimate of your monthly loan payment and annual salary required to manage the payment.

Yes, your salary should go up over time, which should in theory make your payments more manageable. But your financial obligations also will multiply. Chances are you'll be buying a home someday, finding that special someone, and perhaps having kids. You'll need cars, furniture, and retirement savings. Too large of a student debt could interfere with your long term dreams and goals.

Source: MSN Money, Liz Pulliam Weston

Student loan borrowers whose gross annual incomes fall below these guidelines should investigate flexible repayment options. Monthly payment amount assumes that the current interest rate of 8.19% remains constant throughout the repayment period of 10 years of equal monthly installments. Actual interest rates are variable and adjusted annually on July 1 based on the 91-day Treasury bill rate.