How Much Is Too Much to Borrow for College?

College students taking test in classroom
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With high school seniors in the thick of college applications season, parents of teens everywhere are discussing how they're going to pay for their educations. Most families cobble together a mix of savings, grants, scholarships, wages from part-time jobs, and loans.

Oh, those loans: We've all heard plenty about the student debt crisis. At this point more than $1 trillion is owed in U.S. college debt, a staggering amount, and the average student loan debt now is $29,400.

Which leads to the obvious, if too rarely asked, question: For the individual, how much is too much to take out in student loans? Craig Myers, founder of CR Myers & Associates in Southfield, Michigan, says his advice is simple: "As little as possible." Sound easier said than done? Here's some guidance.

Reducing Your Borrowing

Pat Simasko, president of Simasko Law in Mt. Clemens, Michigan, says he tells his clients to have their students apply for every scholarship and grant imaginable. "As a father of three, I know we all want our kids to go to the best college in their chosen field; however, when life takes unexpected twists and turns, the college fund is the first item parents will draw from," he says.

In addition to researching scholarship and grant opportunities, "Many kids keep their educational costs down by starting out at a community college for their first two years of basic curriculum. This way they can save their loans for later enrolling in their specialty at a university."

Simasko agrees, suggesting that parents have their kids live with them while they earn their associate's degrees, and that the students also work part-time to save money for their final two years at a university.

How Much Should You Borrow?

The general rule of thumb is that the total student debt should not be more than the borrower's anticipated annual salary the first year out of school, says Ernest Romero, founder of CoreCap Solutions in Sterling Heights, Michigan. "Future artists and musicians would be wise to borrow less than future computer programmers or engineers," says Romero. "The monthly repayment of the loan should not be more than 10 to 20 percent of their anticipated future monthly salary."

Myers agrees and suggests that parents also look at the financial growth opportunities in the profession their child intends to pursue. "Once you have an idea of their future income, you can then determine a reasonable loan amount that won't drown them when it comes time to pay it back."

However, the challenge, Simasko says, is that few freshmen in college know what they want to do when they graduate, and even if they do, they don't always know what the salary will be or if they'll be able to get a job in their chosen field. In that case, families would be wise to estimate a minimum anticipated salary after graduation and limit borrowing to a loan with a repayment schedule that would be affordable at that salary level.

Also, reminds Myers, "When a student loan is taken out, it should be used only for school tuition, not to help pay rent, go out to eat or for other extras. If the student wants those extras, they should be paid for by earned income."

Parent Loan or Student Loan?

Government student loans are preferable over private student loans because they typically carry lower interest rates, but some parents may be tempted to take out a loan in their own name so as not to burden their kids with too much debt. However, financial planners recommend having the students, rather than their parents, borrow for college.

"For most loans, it makes sense for the student to take on the loans in their name, because of the future options that may be available, including student loan forgiveness programs as well as various repayment programs that could benefit the student and not the parents," says Romero. "For example, Mrs. Smith takes on $40,000 of student debt in her name to help her son pay for his education, and now she is having a hard time making payments on the loan. However, her son is working for a qualified nonprofit that would have allowed for student loan forgiveness if only the loan had been in his name."

Romero recommends that students look into options for loan forgiveness programs when they apply for a student loan. Simasko agrees: "Everyone is so confident at the time when the student is being accepted to a huge university that when they come out of college they will be immediately making the money to cover the loan payments, but the reality of the situation and what I see firsthand in my office is that 80 percent of graduates in their first job can hardly afford basic living expenses."

Michele Lerner is a Motley Fool contributor. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check outour free report.