How High Can Your Student Loan Debt Go?

It’s not unrealistic for a student starting college this fall to end up with more than $100,000 in student loan debt by the time they’ve earned a bachelor’s degree. The average annual tuition and fees at a private, four-year college is $32,410, according to the College Board, and that doesn’t include money to pay for course materials or living expenses. Even at an in-state, four-year public school, the average tuition and fees are at $9,410. Unless you’re raking in a bunch of scholarships or have significant savings, extending your education beyond high school is going to put you tens of thousands of dollars in debt.

For some people, that’s only the beginning. Graduate school, medical school, law school — advanced degrees can double your pile of debt (or worse). When you add interest — and, if you’re not careful, late fees — to the mix, your student loan balance could quickly grow. We’ve written before about people with more than a quarter of a million dollars — even half a million dollars — in student loan debt. Is there a limit to how bad it can get?

Not really. There’s no set limit at which your balance will just stop accruing interest or will no longer be subject to fees. At the same time, student loan debt isn’t exactly limitless.

“[I] wouldn’t say balance would grow forever because if [you’re] not making payments, that would result in default,” said Richard Castellano, Sallie Mae’s vice president of corporate communications, in an email. If you default on your student loans, that balance would be subject to debt collection activity, and you may have the option to settle the debt for less than you owe.

How to Tackle Big Student Loan Debt

If you have federal student loans, you may be able to enter an income-driven repayment plan, apply for public-service student loan forgiveness or rehabilitate your defaulted student loans. Under federal income-driven repayment plans, any remaining balance at the end of your repayment period can be forgiven. So, even if your balance grows while you’re making an income-driven payment, try to not get discouraged: It won’t hang over your head forever.

“Looking into loan consolidation, income-based, and income-contingent repayment plans, is often as far as one needs to go,” Michael Bovee, a founder of the Consumer Recovery Network, wrote in an email to Credit.com.

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Preventing a Big Balance Is Easier Than Repaying One

There are borrowing limits in place to help consumers avoid a situation where they feel their education debts are growing with no sign of stopping. Dependent students are limited to borrowing $31,000 in federal loans for an undergraduate degree (with no more than $23,000 in subsidized loans, meaning the Education Department pays the interest while you’re in school). Independent students are limited to $57,500 for an undergraduate degree (same limit on subsidized loans), and graduate and professional students are limited to $138,500 of federal loans (only $65,500 can be subsidized). That $138,500 includes any unpaid balances from undergrad.

Private lenders and schools themselves also set limits.

“Private lenders like Sallie Mae assess the stability, ability, and willingness to repay before making a lending decision,” Castellano said. “Also, while undergraduate federal loans have limits, those borrowing federal PLUS loans and grad PLUS loans can borrow up to the school’s cost of attendance.”

When you receive a financial aid award letter that also lists loans, it’s important to remember that you don’t have to borrow the full amount you’re offered — it’s up to you to determine how much you need. Avoiding over-borrowing can help you keep things in control after you graduate.

Given that interest is the key reason a student loan balance grows, that’s another place to look when you’re trying to save on student loan debt. While the government doesn’t offer student loan refinancing programs, you could consider refinancing your debt with a private lender at a lower interest rate, though refinancing federal student loans means you lose the benefits and programs that come with those loans.

When it comes to keeping your student loan debt in check, there’s a lot to consider: interest rates, length of repayment, negotiating student loan repayment into an employment benefits package, applying for loan forgiveness and, of course, borrowing an appropriate amount in the first place. It’s not easy, but it’s important, because repaying your student loans on time can help you build and preserve good credit, as well as open the doors to other financial goals, like buying a home. To understand how your student loans and other debts affect your credit, you can get two free credit scores, updated every 30 days, on Credit.com.

Image: Ammentorp Photography