|By Stewart Pelto on May 27, 2010
Borrow some quick cash to drive off the lot in a red convertible and your creditors will shake their heads slowly from side to side. After all, you are using their money to purchase luxuries. But if you take out a loan to finance your higher education, many lenders will consider this debt an “investment” in both your future and earning potential.
Student loans are considered “good debt” because a degree can increase your salary; present debt is offset later with future paychecks. It’s a straightforward process yet some are worried it’s getting out of hand. Inside Higher Ed published an article in July 2009 entitled “Disconcerting Data on Student Debt.” It raises concerns about the increasing number of students who use loans to fund their education. A great many of them could follow these tips to keep their “good debt” from going bad:
DO NOT take out more student loans than you really need. Get enough for your tuition and books but find other ways to feed and house yourself if you can – like a part-time job at the campus bookshop. Scholarships can subsidize some or all of your education and don’t need to be paid off later. Apply for the prestigious full-ride scholarships but don’t shy away from the foundations that will exchange $1,000 towards your tuition for a well-written essay that captures their values. With a bit of determination and energy, you’re sure to at least defray some of your costs.
Nevertheless, if you need a loan to get your degree, be careful and know there are no guarantees of post-graduate employment. Recent college grads are having a difficult time finding jobs and are left with a lot of free (read: unpaid) time on their hands. Make measured decisions, don’t take on too much debt, and ease your burden with scholarships and part-time jobs.
If you get a good education and then pay off your debt ON TIME EACH MONTH, you’ll end up well-educated by the university, well-paid by your employer, and well-regarded in the eyes of your creditors. Act up in class or mess around with your payments and it’ll be the dunce cap for you.