The average amount of student debt is $39,351. Oftentimes, the amount is even more. It can be hard to start your life when the weight of debt is dragging you down from the very beginning.
College seems like the only way to get in the door, no matter your career path. But is a college degree worth the debt? We’ll break down the factors that will help you understand if there is value in college for you.
Cost of a college education
The cost of college has increased by 361% over the last forty years, with tuition just over $25,000. So, the landscape has definitely changed from one generation to the next. As such, it might be worth considering a variety of factors before taking on college debt.
Things to consider before paying for college
You should view college degrees as an investment. As with any investment, there are risks involved. We’ve broken down some of the major questions you should consider before taking on the academic risk of college tuition and student loans.
Is your major valuable?
If you think about college as an investment, then you need to consider the potential payoff. Look into your major and at the career path of people with the same major as you. For starters, what are the salary projections? And would it be worth the student loan debt?
These questions are challenging because they require you to evaluate future risks without knowing what the future holds. There are plenty of jobs that are non-existent due to technology or other societal changes, so do your best to evaluate the risks here.
Could you afford college without loans?
Student loans are not the only way to finance college. It may seem like an easy choice at the moment, but pursuing other ways to fund tuition will lead to a financial head start when you graduate.
Many states offer grants and scholarships to attend in-state schools. You can also save money by attending community college for the first two years. Then, transfer to a traditional university.
You can also work through college and get a side hustle to save money at college. If you have ever considered the military, the GI Bill often covers many forms of college and trade schools.
The key here is to understand that you have options. There are many different ways to make it work financially. When you graduate from college without debt, you can start to build wealth faster.
How many years will it take to pay off your loans?
Once you have an idea of your career path, then you can get a sense of how much money you will make. You can develop a budget, and from there, you should get a sense of how long it should take to pay off the loans. You can find a student loan calculator here. Be sure that you are comfortable with this length of time before committing to student loans.
Only take out loans you can afford to pay
Are loans, grants, and scholarships not an option? Only take out loans that you can afford to pay. A college degree is only worth the debt if you can manage to pay off the loans. Look for alternative ways to pay for your degree. Another option is to go to school slowly and pay as you go.
Plenty of high-income opportunities waiting for you
It’s not all negative. Student loans can be worth it if you graduate college with the right job. If you snag the right job with a high salary, then the debt will be in the past.
Comparing academic risk vs financial risk
Some jobs require a degree and can help open doors in your career that may be closed to someone without one. However, you may be stuck paying for your degree if you can’t get a job. You should weigh the financial and academic risks and decide if the degree is worth the risk. Here are a few things to consider before getting a loan.
Borrow the minimum
We know college can be tough, and it might feel nice in the moment to have a little more money. But borrow the minimum on your loan. You’ll want to graduate with the least amount of debt possible because this will minimize your financial risk later. MoneyLion can help you manage your money better in college.
Accomplish more with student loans
There are certain career paths that can pay off when you graduate. These are industries like healthcare, tech, and business. The financial risk may be in your favor for a student loan. So consider your options when you are weighing your academic risk vs financial risk.
Talk to an academic advisor
Academic advisors know the ins and outs of the financial aid game. Why not use this resource? They can coach you through the academic and financial risks. They also know when grants, scholarships, and other financial programs come about. Academic advisors can also calm your worries and reassure you that you’re on the right track.
Graduate with debt
You will graduate with debt if you take out a student loan, and that has to be acknowledged. Consider the academic and financial risks before you pursue a loan for your education.
Will late student loans payments impact my credit score?
Yes. Late student loan payments do affect your credit score. Once your repayment period begins, make on-time payments. Otherwise, federal loans will report late payments after 90 days, and private loans begin reporting late payments after 30 days.
Is your student loan debt a good ROI?
While there are many advantages of getting a college degree, the amount of debt you could accrue is a crucial consideration. If you can’t pay your bills or student loans, more debt can put your credit score into the gutter and risk your financial safety. Make sure the career you step into has a high ROI– and it’s a job you‘ll enjoy!
