How to Manage Your Money When You Don't Have Any by Wecks Erik

Author:Wecks, Erik [Wecks, Erik]
Format: mobi, epub
Publisher: Erik Wecks
Published: 2012-03-07T16:00:00+00:00

Student loans

American dependency on debt starts early. In fact some of the very earliest decisions we make as young 18-year-old adults lead to massive amounts of debt which haunt many of us for decades. The decision to go to college can do more financial damage than any other decision a young person makes. Don't get me wrong, I think that college is a good thing if done properly. I just believe a Bachelors degree which comes at a price tag of $40,000 or $50,000 in student loan debt is not always a good value.

The issues here are complex, and I am hesitant to try to set out principles which may or may not work in a given circumstance, but I am confident enough to say that student loans need to provide a clear return on the investment, because they will likely be the second largest debt a person gets in their life. On top of that, the federal government in its wisdom has declared, in most circumstances, a borrower cannot remove student loan debt with a bankruptcy, which means the student will have to pay it off no matter what their financial situation after they take the debt. Taken together, these facts show young adults need to start asking serious questions about the value of their student loan debt before they accept it.

In a job market where wages are stagnant at best and more likely sinking, is it really worth it to go deeply in debt for a degree that doesn't offer a clear path to higher wages on the other side? With the rising cost of tuition and the rising amounts of debt taken per student it is certainly time to have such a conversation. College teaches many valuable things which are not on the diploma. However, does a more expensive private college provide such a vastly greater number of these developmental experiences to justify the cost when compared to a significantly cheaper state school? Perhaps, but maybe not.

Again I don't think there is any easy answer here. That isn't the point. Rather, like in all our financial thinking, the question of the relative value of one type of college education and degree over another has not often been asked. A friend of my wife decided she was not going to borrow in order to get her teaching degree. It took her more years to complete then her colleagues, and she used a local state school to pay for her degree, so the degree has no prestige associated with it. Frankly, it left her lower on the totem pole when the downturn came. In the union-controlled, seniority-driven world of the teaching profession, she has struggled to keep a job as a middle school math teacher. However, she doesn't have any debt, and unlike many others of her cohort who do have debt, she doesn't have student loan payments to consider while looking for work. This is allowing her to get by while others flounder. Once again debt, even "good" debt, always adds risks to any situation and less risk is almost always the better way to go.

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