If you google “managing student loan debt,” you will get a lot of search results relative to the consolidation, minimization, or forgiveness of loan payments. If you are worrying about how to make your loan payments, it is too late to start managing student loan debt.

There are three elements to managing student loan debt. The first one is to avoid the debt entirely. (There many ways to reduce the cost of a traditional four-year degree, e.g. community college, joining the military, commuting etc. Many students don’t find these alternatives attractive. Instead they blindly plunge ahead committing themselves to loan payments sometime in the unforeseeable future. Inevitably the “unforeseeable future” arrives and so do the bills.) The second component is having a good recordkeeping system accounting for every future loan payment. And, lastly, it is necessary to have a protocol for managing the amount of debt.

There are three common protocols:

“What Me Worry?”

There are no statistics, just anecdotal evidence. After separation from college the student begins receiving bills for the student loans incurred. It is common in many student loan stories for the student to remark, “I had no idea.” or “How could I owe so much?” or “I should have paid more attention to the details.” It is obvious that they have taken out loans without any regard for the amount of the future payments.

“Self-styled Expert Opinion”

It not unusual to hear financial planners blithely exclaim, “It is entirely reasonable to take out student loans to the sum of your expected future salary.” For example an incipient high school teacher might take out loans totaling $30,000. This “wisdom” misses the mark on two counts: arithmetic and risk. Following this advice can result in loans that reach fifteen percent or more of a graduate’s monthly salary. Not an easy bar to meet. Secondly the advice completely ignores risk. What if the student drops out of college? What if the engineering student with a projected salary of $60,000 graduates as a math teacher making $30,000? What if the targeted job evaporates?

“The Rule of Eight”

The recommended protocol is “The Rule of Eight.” Loan payments should be no more than eight percent of the student’s projected starting salary. Using the future school teacher as an example, the $30,000 annual salary translates to $2,500 monthly. Eight percent of $2,500 equals a $200 monthly loan payment. Depending on the exact interest rate and the terms of the loan approximately $17,000 is plenty of student loan debt for this prospective teacher. (Use a good student loan calculator to do your detailed analysis.)