$1.8 trillion. That’s what the college debt clock says. And it keeps ticking. America’s World War II generation was frugal. They had lived through the Great Depression and had made do with less. Then they conserved for the war effort. After the war, they took advantage of the GI Bill to go to college. They paid off their mortgages as fast as they could and lived without luxuries. The Baby Boomers came along and enjoyed the fruits of relative peace and prosperity.  Their parents could pay for their college — and were proud of it.  Gen Xers struggled a bit more to pay for college. Then millennials faced a real struggle, and they’re the ones racking up the debt today. The tail end of the Boomers went to college in the eighties. In 1980, the average cost for tuition, room and board, and fees was $9438. Tuition has been rising 8 percent regularly over the past several years. That means it doubles every nine years. But then, more young adults have been going to college, pushing up demand. That trend is starting to reverse, however, as demand for college is not totally inelastic.

My Debt Load

I went to Middlebury College in the 1980s. I came out about $15,000 in debt and became a public school teacher. Big mistake, people said. And indeed I had exceeded my borrowing capacity. A simple but helpful rule of thumb you’ll find in Forbes Advisor is that your expected first-year salary should be 1.5 times larger than your loan balance. A student expected to start off making $60,000 should not have loans exceeding $40,000. Take your expected first-year salary and divide it by 1.5. My first-year salary was $14,000. So my borrowing capacity was $9333. Your student loan monthly payments should not exceed 12 percent of your take-home pay. See a student loan calculator to estimate your payments and visit Salary.com or Glassdoor to get a sense of the earning potential in your field of study.  I joined the National Guard early in my teaching career, and my student loans were forgiven. The military is not for everyone, but perhaps some sort of national service should be offered for young people wanting to erase their loans. That’s a subject for another post. There are some other loan forgiveness programs you should check out.

Preventing You from Saving for Retirement

The public school teacher gig won’t work today for what some students casually borrow.  College costs have gone up way faster than wages and salaries. College debt is crowding out retirement savings.  And it has to be repaid. Generally speaking, college debt cannot be dismissed by bankruptcy. Even though some members of Congress are pushing for more, President Biden has shown a willingness to have $10,000 of debt forgiven per borrower, but that hasn’t happened yet. It’s doubtful he can do it by executive order. And frankly, loan forgiveness will just encourage more borrowing. I myself didn’t save as much for retirement as I should have. Not because of my debt, but because I just didn’t have the discipline when I was younger. Yet I had a generous pension awaiting me. However, the private and public pension squeezes being contemplated today make saving for retirement all the much more important. Does that mean you can’t go to a really top-notch school unless you pursue a lucrative career?  Not necessarily. Don’t go by the sticker price. Check out the Net Price Calculator. Each school has one, and it’s easy to find online. From there you’ll have a decent idea of what you might have to borrow.

Which Kind of Loan Should I Get?

Our advice is to try to stick to federal subsidized loans and avoid private loans, if you can. The rates are better (and fixed), and the interest doesn’t accumulate until you graduate, as long as you remain enrolled. If you do take out a private loan, try to choose a  co-signer with a solid credit rating. That will mean a lower interest rate. And though you may be tempted by a lower initial variable rate, a fixed rate may make more sense. Rates are at historic lows, and they may go up substantially in the future. Be careful about accruing graduate school debt, which carries higher interest rates. Some professions require advanced degrees, but they’re not particularly lucrative. Don’t be afraid to borrow. Just be cautious.