Not Rich Yet | Managing higher incomes



How much tuition can you afford?

One big question that many people wrestle with is how much tuition and school loans they can afford to take on.

So I did a quick analysis to understand what a maximum reasonable amount of school loan a student could take on and still make ends meet.


My analysis calculates the maximum affordable tuition or total school costs given a post-graduation income and makes the following assumptions:

  • That all tuition and school costs are financed via loans
  • That schools loans run for 10 years at a 6% interest rate
  • That the student will be single and pay taxes in NY
  • That post-graduation the student will spend a minimum of either $1500 or 40% of his or her gross income on living expenses including food, mortgage, rent or car payments etc
  • That of the excess income – that what is left after taxes and living expenses – up to 75% can be used to pay-off school loans, the remainder is a safety buffer and for retirement savings


Given those assumptions, the total affordable tuition or school loans amount roughly equals the post-graduate income.

That means if you think you will make an annual gross income of $60k after graduating from college, you can afford to take out school loans of up to $64k.  Similarly, a salary of $100k would support school loans of about $106k, and an income of $150k loans worth $160k.

If your income would be below $35k per annum, your affordable school loans drop quickly, e.g.  for an income of $30k you could only afford loans worth $11k.

This same math roughly holds true for both undergrad and grad programs.

What do you think? Share this with someone who is thinking about going to college or grad school!

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