How the loan payment to salary calculator works
The calculator first finds your monthly payment with the standard amortization formula, the same one used for fixed-rate loans:
Payment = P × r ÷ (1 − (1 + r)−n)
P is the balance, r is the yearly rate divided by 12, and n is the number of months. If you already know your payment, type it in and the calculator uses that instead.
It then divides the payment by your gross monthly pay (salary ÷ 12) and by your take-home pay (gross × your take-home share). It also works backward to find the salary at which the payment would be 10% of gross pay.
Two rules of thumb
- Keep payments near 10% of gross pay or less. It's a common planning guideline, not a law or a lender rule. A payment above it leaves less room for rent, savings and emergencies.
- Borrow no more than your expected first-year salary. Another common guideline, and a looser one. At 6.52% over 10 years, a balance equal to your salary means payments of about 13.6% of gross pay.
Neither rule fits everyone. A $350 payment feels different in a city with high rent than in a cheaper one. Use the numbers as a starting point.
Where to find a realistic salary
This page doesn't guess your salary. Look up pay for your planned job in the Occupational Outlook Handbook from the U.S. Bureau of Labor Statistics, and check what graduates of your program earn on the U.S. Department of Education's College Scorecard. Starting pay is usually lower than the median for a whole career.
Worked example
You'll owe $30,000 at 6.52% on a 10-year plan. The payment is $340.95 a month.
Your first job pays $50,000, or $4,167 a month before taxes. The payment is 8.2% of gross pay, under the 10% guideline.
If you take home 75% of your pay, that's $3,125 a month, and the loan takes 10.9% of it. You'd need a salary of about $40,914 for the payment to be exactly 10% of gross pay.
Common questions
What percentage of my income should go to student loans?
A common rule of thumb is 10% of gross pay or less. It's a guideline, not a requirement. What matters most is whether the payment fits next to rent, food, transportation and savings in your actual budget.
Should I use gross or take-home pay?
Look at both. Rules of thumb usually use gross pay because it's easy to compare. Take-home pay is what you actually spend from, so the share of take-home pay shows how tight things will feel.
What if my payment is too high for my salary?
You have a few options. Borrow less by applying for scholarships and grants. Choose a longer repayment term, which lowers the payment but adds interest. Federal loans also offer repayment plans based on income; see studentaid.gov for current plans.
Where does the take-home share come from?
You enter it. It depends on your state, your tax situation and deductions like health insurance or retirement savings. Your offer letter or a paycheck calculator can help you estimate it.
Does this include interest that builds up in school?
No. Enter the balance you'll owe when repayment starts. The student loan interest calculator shows how much interest an unsubsidized loan adds during school.