Why Are Student Loans Acceptable?

student loans

I’m sure you have heard that there is a difference between “good debt” and “bad debt.” Bad debt is usually associated with credit cards, car loans, and other debts that aren’t secured by something that is growing in value. However, the term “good debt” is often given to such debt as mortgages and student loan debt. I can understand how a mortgage could be considered a less-risky type of debt in the fact that your house will (hopefully) rise in value while you are paying it off. Also, you can’t buy a percentage of a house at a time and pay as you go — you either pay cash or get a mortgage for a portion of it. I am continually perplexed however, that student loans are considered “good debt.”

There are many reasons people give for student loan debt being acceptable, however I personally think it is “bad debt.” I would consider any debt in which the payments are taking over your budget and keeping you in bondage, to be “bad debt.” Even if you have a mortgage, but the payments are higher than you can afford and are straining your budget, I would consider that “bad debt.” That thought aside, there are a few reasons why I would challenge the societal norm that says that student loans are a part of life and are an acceptable type of debt for most people to carry.

Student loans are not inevitable

I know that college prices are rising and that school is expensive — there is no denying that. Many people assume that students should attend college right out of high school and should take out student loans to do so if they can not afford it. This, however, is not the only option.

When purchasing any larger item, people always have a choice to go into debt for it, or wait and save up for the purchase. Education is no different. But the beauty of education is that you can go at your own pace. You don’t have to save up a large chunk of money to pay for 4 years of school at once. Students can work through college and pay for their schooling as they go in order to avoid student loan debt. It may take an extra year or two, but a few extra years aren’t going to hurt that much. Graduating two years later without any student loans will put you a lot further ahead than graduating with 10 years worth of student loans.

Our society doesn’t like to delay gratification and thus the student loans pile up in our nation. It seems that today’s mantra is “get an education” which equates to “get into debt” — a horrible message to send the youth of our nation into the world with. Student loan debt isn’t inevitable — there are ways to get aid and pay for schooling as you go through it. Unfortunately many students aren’t willing to do what it takes to pay for college as they go, or they simply don’t realize the huge financial benefit of doing so.

Student loan debt may not pay for itself

The premise behind borrowing so much money for your education is that you will end up with a job that pays more (and sooner) than if you don’t get a degree or wait a bit longer to get your degree. Unfortunately, this isn’t always the case. Many students decide on their major when they are 18 or 19 years old, when they really don’t know what they want to do with their lives. 4 years later many students have a degree in something they are no longer interested in and are stuck working in that field because they have to pay back their student loans. If many students were to wait to go to college until they knew for sure what they wanted to do in their career, their education money would go a lot further and they would be a lot happier.

Even if a student knows exactly what they want to major in, there is no guarantee that they will get a high paying job right out of college. If their desired career even happens to promise a high salary, students still have to work their way up in their career to begin making a decent amount of money. This often leaves educated students with degrees stuck making average salaries, but having to pay extremely large student loan payments in the early years of their financial lives. These students lose the power of compounding interest in their retirement accounts because their loan payments often make it impossible to even contribute to a retirement plan.

Student loan debt is simply that: debt

Even though student loans are used to pay for education, they are still debt. The bottom line is that it is still money borrowed to purchase something that you can’t afford at that moment. Whether or not it is an investment, if you have to take out a loan, it’s beyond what you can afford. Add to that the fact that many young people who take out student loans aren’t financially aware at that age and they don’t understand the repercussions of such a high amount of debt. This is why students will often take out more student loan debt to pay for lodging, food, books, and anything else they can get their student loans to pay for. This is also the reason why many loan/debt websites, such as loans-advisor.com, put strong emphasis in teaching students how to plan their repayment for the loans. When you are 19 and in college, the last thing on your mind is the fact that you actually have to pay these loans back. I honestly wish that more students understood the full reality of this truth.

It seems that today everyone is in such a hurry to get things done and over with, and this is especially the case with school. Who says that you have to complete a bachelor’s degree in 4 years? Why can’t it be 6? And why are so many students encouraged to have the “college experience?” I can guarantee that the fun of living on a college campus and finishing in only 4 years will not make up for a tremendous amount of debt in your adult life. I just wish I could see more people actually fund their own college tuition and not go into debt over it. I also wish that student loan debt wasn’t so “acceptable” and honestly that it wasn’t so easy to get. Whatever happened to go old fashioned “pay as you can afford it?”

(Image courtesy of a.mina)

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23 Responses to Why Are Student Loans Acceptable?

  1. in australia we have commonwealth funded loans for university study, and it is a lower interest rate. it is taken out of your pay when you earn over a certain amount a year (around $35000), AFTER you finish your degree.

    so excuse me if i think study loans are a good thing, especially if my government is helping me with them!

  2. pjmama says:

    Um. Have you attempted to work and pay for school? I did the first year I went, until tuition increased, as it does every single year.

    You also failed to mention that the demand for college grads in the job market is rising… thus making a degree a more necessary thing. Not only that, but there IS tremendous pressure– not only coming from our peers, but our parents, and the public school systems– to go to college. And what teenager in their right mind saves like that for college? Even if they were that responsible, what part time highschool job makes you $10k? Which, by the way, only pays one year of my tuition.

    Also, I think comparing a college education to a bigscreen or a fancy car, as “instant gratification” would imply is a little insulting.

    I’ve been in college 5 years now, I’m 22, and excuse me if I want to graduate so I can start my life… sheesh. Oh yeah, and I still have all that debt. Even if I graduate in 2 years.

    I hate that I have student loans and such massive debt, but really I think this article is a bit inappropriate. Perhaps you should be griping that the cost of education is so high instead :/

  3. GrimReality says:

    “I would consider any debt in which the payments are taking over your budget and keeping you in bondage, to be

  4. gina says:

    Everyone has choices and it’s possible to get through college without any debt. It takes some sacrifices and hard work, but it can be done. I had no scholarships or help from my parents. I went to junior college for 2 years instead of straight into a 4 year program and then graduated 1.5 years at the major college. Anyone who says they have to graduate with debt simply doesn’t want to admit that they had other choices that they decided not to pursue. That’s fine, but then they shouldn’t complain about their debt.

  5. Hilary says:

    I agree with pjmama. This line I found especially insulting:

    I can guarantee that the fun of living on a college campus and finishing in only 4 years will not make up for a tremendous amount of debt in your adult life.

    Is it possible for your to accept that people spend their money differently? How can you possibly guarentee something like that? The cost of college is very high, yes, but don’t act like it isn’t worth it for everyone just because it wasn’t worth it for you. This is my biggest gripe about this blog – bashing paying premium for college. What is more worthy of your money than an education?

    By the way, the trend (set by Harvard and trickling down to other schools) is that they are eliminating student loans entirely from their financial aid packages. So, there is hope on the horizon, at least for the elite schools with big endowments.

  6. branded says:

    Where you go to college has very little to do with your success in life. If it did, the highest paid people would all have graduated from the best schools. A degree from a brand named school is no different than buying brand named clothes. Yes, it is better than the average piece of clothing, but is it really worth the premium price?

  7. Scott says:

    Yes, you have options, but many times well priced loans are the best option available.

    Considering that while you’re in school you are not financially independent, taking some loans is fiscally responsible if you’re in a degree program that will increase your earning capacity.

    If you advocate working for a year to pay for a year of school it will take you 8 years because you’ll have to alternate years to earn enough to pay for tuition/room/board.

    Use the programs that are out there wisely. Choose your university wisely. Remember, a great state school will give you nearly the same earning potential as most private schools.

    Finally, choose your major wisely. Don’t spend 4-5 years and a ton of money on something that won’t pay the bills. Understand the job market of the field you are starting to pursue.

  8. Mike says:

    >> so excuse me if i think study loans
    >> are a good thing, especially if my
    >> government is helping me with them!

    Its not your government that helping you, it’s your tax paying neighbors. I suppose its also your future self helping you, assuming you will pay taxes.

  9. Alexandria says:

    We have no school debt (neither did our parents) and we have well paying professional jobs. We all paid our own tuition, and room and board, working through school.

    That being said, and I think you agree, debt in moderation is okay. When I got out of school I was making an additional $20k/year with my degree (plus with going from part-time work to full-time work) and so was my spouse. We saved the difference for a down payment on a home.

    Anyway, I think it would have been reasonable for us to take on $20k debt each, or something we could have repaid within the year. Maybe even if we could have repaid it in a couple of years. OR a small debt with a reasonable payment for a while, I have no beef with.

    But I never understood why people who took on large amounts of debt, maybe more needed for certain types of careers, didn’t just buckle down and pay it off then.

    If you can’t do that, then it’s probably too much. The point is to make more money. Or the point better be great personal satisfaction, because you will likely be miserable with a large debt hanging over your head for the rest of your LIFE.

    Just because it is an education doesn’t mean it is worth the six figure price tag. I notice common sense FLY out the window with most people, when it comes to education.

    If you didn’t consider debt an option, you’d find another way. Believe me.

    I am sure many take offense to my view point. But I know WAY too many people who paid six figures for crap degrees and are at home living with mommy and daddy while they get their REAL degrees at community college/State. I know most of them wish someone had slapped them upside the head when they were running up “useless” debt.

    Everyone in my family, in comparison, paid a few thousand cash for professional degrees that lead to six figure jobs. We LOVE our jobs.

    A college education is certainly something people need to think through more.

  10. The reality is that the best jobs require degrees, but students need to obtain those degrees at the lowest cost possible. There is no evidence that degrees that cost more lead to better payoffs!

  11. Scott says:


    I weighed the pros/cons of working while in school to attempt to pay on the go, but just couldn’t come up with enough positives to go that route.

    Your education is not just your day job where you can work the night shift and make tons of money. At least in my degree program it was way more valuable to work a part time research gig to improve the resume to help get that first internship/job. While it paid peanuts, it was enough for a little spending money.

    While this job was not a part of my formal curriculum it was as much of a part of my overall University experience as anything else. If you want to make the most of your degree, make the most of your time at school.

    I’m happy to have a small month payment for quite a while (1.6% fixed rate) as the interest is peanuts. Also, that interest is tax deductible, which lowers the effective rate even further.

    What I’m trying to say is that you can’t just measure this by the money it will cost you in terms of interest. It’s an opportunity cost, what did you give up in order to pay for school by working?

  12. @ mike:

    the loan is paid back in full by the person who takes out the loan. so technically peoples taxes are only being LOANED to uni students.

    would you rather your taxes being LOANED to someone finishing a university degree, or would you rather it gets GIVEN to someone who doesn’t have a job? (on the dole).

    also i wanted to comment on the article again, there are a lot of uni students who don’t stay on campus. when i go to uni i won’t be, i will be renting, or possibly paying off a mortgage, and i will have to feed myself, pay bills and fill the car up with petrol.

  13. Lisa says:

    I also worked to pay for college and expenses. Both during the school years and in summers. I worked 20+ hours with 15-20 credits each semester. My parents paid 1/2 and I paid 1/2. I could have done an internship but it would have been on top of my paid job so I didn’t. Employers want to see initiative, independence, motivation and responsibility. That said I think one of the reasons that college prices have escalated out of control is because of financing. Financing makes everything more expensive. If something is financed sellers will make it more expensive seducing you with a monthly payment. If your family cannot afford to pay for 1/2 out of pocket and you paying 1/2 from a job than you should go to community college and then transfer to a 4 year university. Your diploma only identifies your 4 year university not the community college. Also alot of money is out there for assistance and high school/college kids refuse to apply. I am sure no one on this board is one of those but I hear about it all the time at work and from friends. Or the parents complain because their HS graduate doesn’t want to go to the 100% scholarship paid college and wants the 20,000-40,000 a year out of pocket school. I would never have considered or been allowed to consider burdening my parents or myself with that kind of debt. Only MD’s took on massive school loans.

  14. jganem says:


  15. orchid says:

    I have student loans and I make three times as much as my high school class mates that did not go to college or who went into a (non-medical) two year degree program. I was able to get an excellent job in which I get a 401k match of 8% for my 5% contribution. My student loan interest is only 3%. I think my loans are worth it because I invested the student loans well by choosing a major and career path that made it worthwhile. I think student loan debt is good if you plan well and get a decent ROE. Debt is not inherently bad; you have to look at it relative to your personal situation. A $5k credit card balance is “bad debt” to a person who only makes $30k per year, but it means less to someone who makes $130k per year. Education loans are really a good option for people who choose programs that make enough money to pay the debt or for people who get a degree so they can do something they really love and value. Taking out loans is likely not a good choice for those who won’t be able to pay back their loans or for those who don’t place high value on education itself.

  16. Jrprofess says:

    The article is very unbalanced. As one of the posters noted, delaying a completion of a college degree can also delay items such as retirement savings, 401k matches, and differentiated earnings from those who do not yet have, or will not have a degree. Over a “working life” those with a 4-year degree earn a third more than those who stopped out of college, and more than twice the salary of a high school graduate. By taking on reasonable debt, at an economical rate, and accelerating your entry into the work force by a couple of years you can put yourself ahead of the game “savings” wise given your opportunity to contribute that much earlier to the retirement benefits noted above. Getting an earlier and higher paying start on compound interest is a compelling reason to take on “reasonable” student loan debt.

  17. Pingback: On Student Loans (again) « Stacking Pennies

  18. brittanyredman says:

    omg, wtf? have you even been to college? the demand for a college education is RISING! there are no jobs out there for ppl with just a high school diploma or GED!
    yes, there is debt in student loans, but you cant go off on it just because students want to further their education. because its like this;

    1) you dont go to college, you get a nowhere job, you live paycheck to paycheck and you are STILL piling up debt because you dont get a good paycheck.


    2) you go to college, you start a career no matter how you pay for it, and you still have debt but a better way to pay it off and after that debt is paid off, guess what?! YOU GET TO USE YOUR MONEY!! not this paycheck to paycheck business.

    i think i would rather go with 2, thankyou.

    get a life.

  19. whitestripe says:

    you don’t HAVE to go to college. for instance, you can get a trade.
    there are OTHER things you can do besides going to college. it’s not the be all and end all of making money. it should be a choice of whether you WANT to study, and what you WANT to do, not just because it’s the ONLY way to make money. some people are so ignorant.

  20. Grim Reality says:

    Lets face it. Unless you want to be classified as an unskilled worker, you need some kind of training. Some kind of post Public school, education.

    For most of the working class, and middle class, that means student loans.

    The idea behind the original Higher education act, was to provide low cost (Non profit) loans to students who performed well enough to be able to attend a proper college.

    But that got twisted out of shape. Too many private predatory schools got their hands into the cookie Jar along with greedy banksters like SMC. And now we have not one but 2 generations facing a life time of debt collors because the item paid for was worthless to begin with (and congess knew this), and the montly payments are half the persons take home pay with only pennies if any of it, going to paying off the prinicpal.

    Student loans are a scam – and the victims are the students.

    If companies want you to go to school, they will pay for it.

    I sugget to any new student – If you cannot pay cash for it, don’t get a loan for it. Instead, wait till you can. Avoid the “quick fix” lure of student loans. They are not what they seem.

  21. ThePlag09 says:

    How exactly are we supposed to “pay as we go”? shall we get full time jobs during the day making us anywhere from minimum wage to, if your lucky, low teens an hour and then go to class at night leaving us only time to sleep? When do we find time to study? It sucks to be thousands of dollars in debt but thats life. In the end that six figure career will be more than enough to pay off your student loans.

  22. Larry says:

    A Bachelor’s degree is the new high school diploma. It’s hard to find a good-paying job without one.

    When will the United States wake up and realize that their “free public education” does little more than prepare people for jobs with paper hats.

  23. Philip Parsons says:

    I suppose one of the ways why student loans are considered good debt is that sometimes you can pay it off when you are earning a reasonable amount

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