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Managing Expectations: The Relationship Between Student Loan Debt and Salary

In one of our previous articles – “Questions to Ask Before Making a Financial Investment in Your Health Sciences Education” - we mentioned that numerous studies confirm the long-term financial benefits of obtaining a degree and the positive return you are likely to see on your investment in a health sciences education.   We also discussed questions you should consider asking to help you gain confidence in your ability to finance your health sciences degree.

We will now look at some specific numbers to help you better understand the actual relationship between the amount you borrow and the salary level you may need to effectively manage your student loans when you graduate-regardless of your degree.

Guidelines for Responsible Borrowing:

There are two general “rules of thumb” when it comes to how much you can afford to borrow and repay comfortably:

  1. Your total amount borrowed for your entire degree program should not exceed your expected starting salary.
  2. Your monthly payments should not exceed 8% of your gross income.

However, these guidelines are just that-guidelines-and they are based upon assumptions regarding which repayment plan the borrower is using. 

For example, consider a student in a three-year Master of Physician Assistant Studies (MPAS) program who borrows the maximum Stafford Loan amount of $20,500 per year, at 6.8%, for a total of $61,500 (with no additional borrowing).  Under the first guideline, her starting salary would need to be at least $61,500 to make comfortable payments on her student loans.  However, when you factor in the second guideline, she would have to be in a 25-year Extended Repayment plan for those payments to be 8% of her gross income.  Her starting salary would need to be $106,161 in order to meet the 8% guideline if she were repaying under a 10-year Standard repayment plan!

Repayment Plans to Meet Your Salary Expectations:

There are a number of different federal loan repayment plans , including not only the Standard 10-year and Extended 25-year plans mentioned above, but also the still relatively new Income-Based Repayment (IBR) plan, which allows eligible borrowers to repay with a percentage of their income.  However, IBR was designed to help responsible borrowers struggling to make their student loan payments due to employment challenges, as well as those who accumulated higher debt than they had initially planned.  IBR was never designed to assist those who borrow beyond their actual need.

With regard to the MPAS student in our example, while recent statistics suggest she may well earn more than $61,500 as a physician assistant after she graduates, there are repayment plans- such as Extended and IBR- that can help her, as a responsible borrower, effectively manage her student loans while she is getting started, with perhaps a chance to accelerate payments once she gets settled into her career.

Next Steps

So now that you’ve seen some actual numbers, here are the next steps to take:

  1. Find out the average student loan debt for indebted graduates of the school you are planning to attend.
  2. With the possible exception of degree programs requiring residencies after graduation (where the salaries are somewhat standard), talk with someone at your school (career counseling office, student affairs, alumni office) regarding the employment record of alumni and what they are seeing in terms of your potential employment possibilities and subsequent salary.
  3. Calculate estimated repayment numbers at least once a year while in school and compare the monthly payments of different repayment plans with the latest information on salaries for your degree. Then see how they compare with the guidelines above. 


As you think about a career in the health sciences, it is only natural to consider not only how much you may have to borrow to finance your education, but what kind of salary you will have as a health science professional and whether or not that salary will be enough effectively handle your loan payments after you graduate.  Understanding both the guidelines for responsible borrowing as well the various repayment options available to you should help you know what to expect when your loans come due.  

Paul S. Garrard, American Dental Education Association Financial Aid Consultant and a 31-year veteran of student financial aid and higher education, wrote this article.

Copyright 2012 American Dental Education Association