Are student loans really good debt?
Posted on September 24, 2010 by Kelly Griffie, One of Thousands of Money and Finance Coaches on Noomii.
Default rates on student loans are rising. How can you invest in yourself without bankrupting your financial future?
Oftentimes I hear people say, “student loans are good debt”, but honestly, I struggle with that concept. If recent grads are struggling to pay back this good debt, then how good could it be?
Don’t misunderstand, I’m not pointing a finger at anyone. I came out of undergrad with just over $10,000 in student loan debt (we won’t even discuss the credit card debt, well, not today anyway). The week after graduation I landed a job at a small college as an Admissions Counselor. The pay was $17,000 per year or you could say my student loan debt was equal to 58% of my new salary. Yikes!
Picture this. You’re 34 years old, you are now serious and ready for college. Besides, that degree will open up doors for you, right? Maybe. You have chosen a for profit school because of the convenience. It’s more expensive, a lot more expensive than a traditional school, but as a working adult, you need to be able to take classes online at your convenience. Convenience could be important, but at what cost? According to CNNMoney.com, students at for profit schools account for 43% of all defaulters. How’s that convenience factor looking now? Add to that the fact that federal student loans cannot typically be discharged in bankruptcy. This means, when you signed for that student loan it was till death do you part, literally.
So now say you get the beloved sheepskin and you are ready to go into your new field. With the student loan debt, can you afford to take an entry or mid level position at lower compensation than you are currently earning in your established career? For many of us, the answer is no. Many people believe that student loans are good debt because you are investing in yourself. I agree that investing in yourself is a very good thing. But it is important to invest wisely.
Here are a few steps to making the best investment in yourself, that won’t leave you on skid row with your student loan payment book:
1. Know what you want to do next. Be very certain that what you want to do requires the degree you are pursuing. You don’t want to spend 5 years going to school part time only to find out that there is a corporate training program that allows you to break into that field.
2. Consider a community college. Starting at a community college is very economical and in the end, you could end up with an Associates Degree and a Bachelors Degree. Besides, the Associates could provide great encouragement to continue.
3. Ask about credit for life experience. Some schools may offer credit for life experience. This is an excellent way to jump start your college career and save some cash.
4. Think Scholarships. Students leave millions of dollars on the table every year, just by not seeking and applying for scholarships. If you are breathing, there is a scholarship out there for you. Check sites like Fastweb.com to find them.
5. Save for it. Saving for college, seems so far off, especially when you’re ready to go NOW! But remember, you waited this long and all (at least, most) of the colleges you considered attending years ago are still around. Save money and pay as you go. It may take a little longer, but you won’t feel burdened by outrageous student loan debt.
