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 lambdachialpha