How much college debt is too much? Here's your answer

With college loan debt, gauging how much is too much is often a matter of location. If you're in a city where you can't find a decent-paying job -- or the cost of living is high -- the amount of debt can be crushing.

While I'm always going to weigh in against taking on any college debt, for certain degrees and colleges, loans may be worth it. Degrees that lead to good-paying occupations over time usually make sense.

Yet today's economy can be unforgiving. You can move to a glamour city like San Francisco or New York, get a promising job and still be hobbled not only by student loans but also by the cost of living in those places. Economically, it's a double whammy.

As a rule of thumb, if you can't cover your basic bills where you're living -- rent, food, insurance, etc. -- while also paying off loans, you're going to struggle. I could give you a percentage of how much debt is probably too much, but you have to pay special attention to the other side of the equation, which is local cost of living.

Some states and cities are better than others when it comes to the dual financial burden of college loans and paying everyday bills. According to a recent study by WalletHub, where you move could help you in paying off your debt -- and save some money to boot.

It's probably no surprise that coastal cities are incredibly expensive places to live. You can typically save much more money living and working in the Midwest or the South than bootstrapping it in Los Angeles or Manhattan.

"Despite the evidence that income potential rises and chances of joblessness decline with more schooling," the WalletHub study found, "many graduates entering the labor market are learning the hard way that a college degree can't guarantee financial security. Post-college success depends on numerous factors, including where a graduate chooses to put down roots."

In picking a post-graduate city to start your career, look for reasonable costs of living and a robust local economy. You want to be in place that's creating jobs and experiencing economic growth.

Making this choice may land you in some atypical locales. The WalletHub study identified Utah, Wyoming, North Dakota, Nevada and Virginia as the states with low student debt-to-income ratios -- the percentage of loans relative to how much graduates were earning.

WalletHub looked at nine different variables such as unemployment and average student debt to come up with its list. Like a lot of studies, it's not a perfect way of picking a place to live. I would suspect that North Dakota doesn't come up on too many glamour location surveys, although the people there are great.

You need to do some more homework to identify a viable place to relocate. Look at the local entrepreneurial community. Are there a lot of startups? How are they being supported? Are local colleges sponsoring business incubators to support job creation? These things are hard to measure, but they're critical in making the "soft" decisions on what makes a city vibrant.

Look beyond the numbers. Utah, for example, particularly in the greater Salt Lake City Area, has a robust tech community, but it has a cost of living that's a fraction of Silicon Valley and the East Coast.

Yet don't discount the fact that the most promising areas for decent jobs may be expensive, but worth the move because of the powerful combination of job creation, government support, great colleges and a growing economy. These places just may have more to offer.

That's why Maryland, Massachusetts and New York came out on top in the WalletHub survey for "grant and work opportunities."

Then again, one of the best ways to pick the best location is to notlook at a map and throw a dart. Take a fundamental financial approach: Run some numbers on how much your monthly loan repayments will be before you even get into debt.

Using a calculator, you can not only see how much your repayments will be, you can also determine how much of a salary you'll need to pay off that loan, including what you'll pay in interest over the life of the loan. This is the real meat of your decision.

Ultimately, you may choose not to get into debt in the first place, which is always a prudent move. That's something you'll have to decide senior year in high school before you commit to a college.

Here's the good news: In most places, you have the option of attending community college for two years. That way, you can live at home, work and save more than $20,000 on room and board. And most big cities have their own system of commuter colleges at bargain prices -- and no dorms.

I know it's a bummer to think that you'll be at home for two to four years, but the alternative is that you may have to come home after you graduate, especially if you're sitting on a lot of debt, meager employment prospects and can't afford the city of your dreams.

  • John Wasik

    John Wasik is the author of The Debt-Free Degree and 15 other books. He writes and speaks regularly on personal finance issues throughout North America.