$40,000 in student loans is considered a significant, above-average amount, roughly aligning with the typical debt for a four-year degree in the U.S. ($30,000–$40,000+). While it is near the national average for borrowers, it can be a heavy burden depending on your starting salary, often requiring 10+ years to repay.
According to recent research from the Education Data Initiative, it costs the average student $38,270 per year to attend a four-year university in the United States. Right now, the average student loan debt in the U.S. is nearly $40,000 but many students borrow much more.
Having $50,000 in student loan debt can be a tremendous financial burden. Depending on your interest rate and the types of loans you have, the payments can amount to a very large portion of your monthly budget.
Rules of thumb for determining when debt becomes excessive
If the total amount borrowed is less than the starting salary of your first year after school, experts say you should be able to repay your student debt within ten years.
Let's get into it.
The "7-year rule" for student loans generally refers to when negative marks, like defaults, are removed from your credit report (around 7 years after the first missed payment or default date for federal loans, 7.5 years for private loans), but the debt itself doesn't disappear and must be paid off; it's also a benchmark in bankruptcy proceedings where federal loans can become dischargeable after 7 years from when payments were due, though proving "undue hardship" is required and difficult.
Carrying $40,000 in credit card debt is undeniably serious, but it's not an insurmountable issue. It's important to recognize, though, that making just the minimum payments will keep you trapped for decades while costing you a hefty amount in interest.
How much do I pay back each month on student loans? You pay back 9% of your income above the repayment threshold. For example, if you earn £35,000 with a Plan 2 loan: Income above threshold: £35,000 – £30,530 = £4,470.
Your interest charges will be added to the amount you owe, causing your loan to grow over time. This can occur if you are in a deferment for an unsubsidized loan or if you have an income-based repayment (IBR) plan and your payments are not large enough to cover the monthly accruing interest.
It will take 47 months to pay off $40,000 with payments of $1,200 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
Common personal loan requirements
To qualify for a $40,000 loan, you'll typically need a credit score of 670 or higher, or a cosigner with excellent credit.
If you consistently make on-time payments, student loans can have a positive impact on your credit score. On the other hand, if you miss payments and fall behind, your actions can indicate that you're a higher risk to a company considering giving you a loan or credit card.
Student Debt in Perspective
Among those who borrow, the average debt at graduation is $27,420 — or $6,855 for each year of a four-year degree at a public university. Among all public university graduates, including those who didn't borrow, the average debt at graduation is $16,300.