Is $40,000 a Lot in Student Loans? What It Really Means for Your Future

Is $40,000 a lot in student loans? It depends on where you live, what you studied, and where you’re headed after graduation. For some, it’s manageable. For others, it’s a weight that shapes every financial decision for years. There’s no one-size-fits-all answer, but there are clear benchmarks, real-world outcomes, and practical ways to know where you stand.

How $40,000 Compares to the Average

In the U.S., the average student loan debt for the class of 2024 was around $37,000. That means $40,000 is just above average-nothing extreme, but not light either. In Australia, where tuition is often subsidized and income-contingent loans are the norm, $40,000 would be considered high. Most Australian students graduate with under $25,000 in HELP debt, and many pay little or nothing upfront.

So if you’re in the U.S., $40,000 puts you in the top 30% of borrowers. If you’re in Canada, it’s about average. In the UK, it’s on the higher end-most graduates owe between £25,000 and £40,000 (roughly $30,000-$50,000 USD). The context matters because repayment systems vary wildly.

What $40,000 in Student Loans Actually Costs

Let’s say you borrowed $40,000 at a fixed interest rate of 5% and plan to repay it over 10 years. Your monthly payment would be about $424. That’s not a small number. It’s more than your phone bill, your Netflix subscription, or even your gym membership combined. It’s a real, recurring cost that eats into your take-home pay.

Over the life of the loan, you’ll pay nearly $11,000 in interest alone. That’s like paying for another semester of school-just in fees. If you extend the term to 20 years to lower the monthly payment to $265, you’ll end up paying over $21,000 in interest. That’s more than half the original loan amount.

And if your income doesn’t grow as expected? That $424 becomes harder to cover after rent, groceries, insurance, and transportation. A 2023 Federal Reserve study found that nearly 40% of borrowers under 30 struggled to make their student loan payments on time-even those with full-time jobs.

Does Your Degree Pay Back the Cost?

Not all degrees are created equal when it comes to repayment. A $40,000 debt is easier to swallow if you’re entering a field with strong starting salaries. For example:

• Engineering graduates: average starting salary of $70,000+
• Nursing graduates: $60,000-$75,000
• Computer science: $75,000+
• Education: $45,000-$55,000
• Arts and humanities: $38,000-$48,000

If you’re making $50,000 a year and owe $40,000, your debt-to-income ratio is 80%. Lenders consider anything over 40% risky. That means buying a car, saving for a home, or even starting a business becomes harder. If you’re making $38,000, that ratio jumps to over 100%. That’s not sustainable.

One 2024 study from the Brookings Institution showed that borrowers with degrees in low-paying fields were three times more likely to default than those in high-earning fields-even when they borrowed the same amount.

What Happens If You Can’t Pay?

Student loans don’t disappear. They don’t vanish after seven years like credit card debt. They follow you. Miss payments, and your credit score drops. Default, and your wages can be garnished, your tax refunds seized, and your eligibility for future federal aid lost.

Income-driven repayment plans exist in the U.S. and Australia. In the U.S., plans like PAYE or REPAYE cap your payments at 10-20% of your discretionary income. In Australia, HELP debt only kicks in when your income hits $51,550 (2025 threshold). Then you pay 1% of your income-no interest, no penalties. That’s a safety net.

But here’s the catch: these plans extend your repayment term. You might pay longer, and you might pay more in total. They’re not forgiveness-they’re breathing room. And forgiveness after 20-25 years? It’s rare, and you’ll likely owe taxes on the forgiven amount.

Is $40,000 Worth It? The Real Questions to Ask

Instead of asking if $40,000 is a lot, ask yourself these questions:

1. Will this degree get me a job that pays enough to cover my monthly payments and still live?
2. Can I reduce this amount by working part-time during school, applying for scholarships, or starting at a community college?
3. Am I borrowing for a degree I actually want-or one my parents or society pushed me into?
4. What’s my backup plan if the job market changes?

One person we spoke to-Sarah, 26, from Ohio-borrowed $42,000 for a liberal arts degree. She now works as a freelance writer, making $40,000 a year. She’s on an income-driven plan. Her monthly payment is $180. She’s not drowning, but she’s not thriving either. She can’t save for a down payment. She’s delayed having kids. She didn’t expect that.

Another person-Marcus, 24, from Texas-borrowed $38,000 for a computer science degree. He landed a job paying $85,000. He’s paying $500 a month and plans to pay it off in five years. He’s saving for a house. The difference isn’t the amount-it’s the outcome.

What You Can Do Now

If you already have $40,000 in debt:

• Know your interest rate and repayment terms. Don’t assume it’s all the same.
• Use a student loan calculator to see how different payment plans affect your total cost.
• Look into refinancing if you have good credit-but only if you’re not on an income-driven plan in the U.S. (you’ll lose protections).
• Make extra payments when you can. Even $50 extra a month cuts years off your loan and saves thousands.
• Track your income growth. If your salary jumps, increase your payments. Don’t just spend the raise.

If you’re still in school:

• Apply for every scholarship and grant you qualify for. Don’t wait.
• Work a part-time job-even 10 hours a week can cut your borrowing by $5,000 a year.
• Choose your major with eyes open. Talk to alumni. Check job boards. Don’t pick a field because it’s "easy" or "safe." Pick one that pays.
• Consider starting at a community college for the first two years. Save $15,000-$25,000 easily.

Final Thought: It’s Not Just About the Number

$40,000 isn’t magic. It’s not the line between "too much" and "okay." It’s a number that means something different for every person. For someone with a high-paying job and no other debt, it’s a blip. For someone with a low-paying job and medical bills, it’s a crisis.

The real question isn’t whether $40,000 is a lot. It’s whether you have a plan to make it work for you-and not against you.

Next Steps: What to Do Today

Take five minutes right now:

1. Log into your loan servicer’s website. Write down your balance, interest rate, and monthly payment.
2. Search for your expected salary in your field using the U.S. Bureau of Labor Statistics or your country’s labor department site.
3. Use a free student loan calculator (like the one from the Department of Education) to see how long it’ll take to pay off and how much interest you’ll pay.
4. If your payment feels overwhelming, contact your servicer. Ask about income-driven options or deferment.

You don’t need to fix everything today. But you need to know where you stand. Because the longer you wait, the more that $40,000 grows-in your mind, in your stress, and in your future options.