How much should you spend on a College Degree?

If you are a senior in high school, you are in pursuit of your dreams of going to college, earning a degree, starting a career, and living a life of financial independence.

So, how much should you spend on your college degree? Welcome to Personal Finance!

This is one of the first major personal finance decisions you will be making among many others in your life.

Yes, I actually said it, the first major personal finance decision!





  • Should I go to college?
  • You need to focus on your studies and maintain a good GPA in college. The last thing you want to do is graduate with a lousy GPA and not be able to find a good job. I have interviewed candidates with lousy GPA’s who did poorly in interviews – they didn’t know the basics of their major, and other candidates got the job. In the end, in a majority of cases, this leads to under employment after completing a four year degree.
  • To understand the calculations made on this page, you need to understand the time value of money.


How much will you make?

I truly respect all professions. However, all professions do not pay equally well. College education is an investment.

You are investing in yourself. Regardless of who is paying for college, this is the first question you need to ask yourself – how much will I make?

If you are going to start out making $35,o00 to $40,000 per year when you graduate, does it make sense to spend ~$200,000 over a four year period?

Absolutely not! I didn’t say don’t go to college. I just said that spending $200,000 doesn’t make sense.

There are several online resources available to research average salaries for the field of study you are pursuing. Take the time to determine what salary you can expect when you graduate. 

Quick Reference:

Bachelor’s Degrees with highest starting salaries

Bachelor’s Degrees with lowest starting salaries

I provided the links above as a quick reference. Salary must not be the only motivation to pursue a field of study. You will spend more than 50% of your life at work. Work is a calling, you need to be happy and good at what you do!


How much your college debt will cost you?

Let us say you walk out of college with $100,000 in debt and land a job where you earn $40,000 per year.

If the loan interest rate is 6%, you will be paying $1100 per month over a 10 year period to pay off your college debt.

If your annual salary is $40,o00 per year, you will be paying 33.33% of your gross income to pay off your student debt.

In essence, you will be living like a student until you pay off your debt.

You can do this monthly payment calculation easily in Excel: “=PMT(interest rate/12, 12 * 10, 100000)”.

  • Interest rate is divided by 12 to calculate monthly interest rate
  • Period is in months – so 10 years x 12 months = 120 pay periods
  • Present Value of debt (PV) = $100,000


Use this analysis to determine how much debt you want to get into and what is your plan to pay off your college debt. Ideally, you want to spend the least amount of money as possible to get a good quality education and walk out of college with near zero debt. 

If you need to borrow money to go to college, here are my recommendations:

  • Your should be fully aware of how long it would take for you to pay off your college debt.
  • Your monthly debt repayment amount must not be more than 10% of your gross income.


Let us just say that you want to pay off your college debt within 3 years of graduation. For this scenario, let us determine what is the maximum level of debt you could undertake:

  • 10% of your gross monthly income = ($40,000 /12) * 0.1 = $333.33 = PMT (your monthly payment)
  • Monthly Interest Rate = 0.06/12
  • Period 12 * 3 = 36
  • With this information, you can type the following into an Excel cell: = “PV(0.06/12, 12*3,-333.33)”. You will get an answer of $10,956.90. That is the maximum debt you can have when you graduate so that you can pay it off within 3 years.


What I have shown above is an example. You can play with the variables in Excel and determine the estimates for your situation.

This is a good stopping point to pause and think. My intent is to inform you and not to scare you.

Going to college is probably one of the best things to in life. Do it wisely!



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