When Are Student Loans Worth The Debt?

My wife and I have a lot of student loans. We both spent a number of years at a private college, at times living on campus. My wife and I were both able to work full time in the summer, and part time during a portion of our schooling. Even with that hard work, however, student loans were inevitable. So here we are, almost 4 years after we left our college, and we still have a lot of student loans. I don’t regret mine for a minute, mostly because without them I never would have met my wife. It was also an incredible time in my life, where I learned and grew a lot as a person. Sadly, I am not currently “using” the degree that I purchased through 4 years of schooling, but learning how to think critically, making connections and great friendships still seem worth it to me. For a lot of people, however, they regret a lot of their schooling, and especially the debt that they racked up while going to school. So if you’re considering going to college for the first time, or going back to school, or even just a few online classes on the side, should you get student loans? Here’s a couple of things to think through before you ask the government for a loan.

Why Are You Going to School?

If you can’t answer decisively the purpose for your schooling, don’t get loans. I’m not saying don’t go to school, but if you don’t have a specific end destination in mind, then don’t get loans. I’ve met too many people who have gone through year after year of school, taking classes and paying a lot of tuition because they feel like they should be in school, not because they want to be. They have no end career in mind, and no plan for after they graduate. It’s just the next phase in life for them, and going into debt just seems part of the “thing to do”. Don’t be that person who ends up regretting their college years. If you’re wondering about a program, or want to go to college to be with some friends, or just want that college experience – great! Just pay for it with cash and not with some form of credit. Go to school part time if you have to, and work the rest. Or, just delay your schooling for a year and save up the cash for the tuition ahead of time. Not only will you be in a better financial position at the end of the school year, but because you worked so hard to earn the opportunity, you’ll be far more likely to actually learn what they’re teaching.

What Will Your Post-Schooling Income Be?

Becoming a doctor is a famous example of this. You go through about a decade of schooling before you become a doctor, so chances are really good that you’ll be racking up the student loans along the way. However, once you’re done that schooling, you’ll be starting at a fairly decent salary that will help you pay off those student loans. So do some research on the job you’ll be applying for once you have your certifications. For example, if you’re currently working at Starbucks, and after your schooling you’ll be an intermediate accountant, well, then you can consider getting some loans during the transition as it will eventually help your financial situation. If, however, after you completed your bachelor of arts in English, you’re still going to be working at Starbucks, then perhaps make sure you have the cash to pay for your classes as otherwise you’ll end up in an even worse financial position.

All of this is to say – consider long and hard before you sign any papers saying that you’re willing to go into debt. Be so sure about that decision that you’ll be willing to take on a huge burden in the future. There should be no shame in not knowing your finally goal or you final destination. Just don’t sabotage your future because you are hoping that things will just fall into place. Instead, create for yourself a history of hard work and paying in cash for the things that you want – and that includes any schooling or training you may need or want.

Written by Alan Schram

Alan Schram writes about personal finance and his encounters with it in his everyday life. Alan is recently married and is looking to save money on expenses and reduce his debts.

10 Responses to When Are Student Loans Worth The Debt?

  1. I think my loans will be worth it – I didnt’ take out loans for about half of my education, but rather I paid upfront with my money I earned from working full time. I haven’t graduated yet, but even working in the entry level jobs I’ve been able to get while being half educated has given me a couple dollars an hour more than I could expect to make otherwise. SO I think it pays off :)

  2. Gail Vaz-Oxlade has discussed this a few times in the past (www.gailvazoxlade.com/blog), the idea that we should ensure that the cost of our education is worth it.

    I’m less certain I agree with the sentiment. An education, even if unused, is still valuable.

    Nevertheless, as my kids start looking toward post secondary education, we are definitely doing so with an eye towards value of the education. Not specifically a cost calculation, but definitely from the approach that the education needs to ensure a high paying future.

    Take dentistry. A very expensive education. Fast forward to age 40 and those with a dentistry education have the choice – practice as a dentist and make a good income, or do something else. For those that didn’t go this route, they’re only choice is ‘something else’.

    I do think it matters what qualifications you’re seeking. A general arts degree with a history major is going to severely limit your options – if you can’t get a job as a history teacher then you’re education is likely to be not very cost effective and perhaps you would’ve been better off. Which really comes down to making sure that the education you pick, matters.

  3. Education is an investment. If you can predict the trend and invest “right”, then you make money. For most people, they go for a certain industry because it was hot at the moment. However, by the timem they finished the education,the industry has already cool down and saturated. They ended up never being able to enter the field they studied and wasted they time and money to study.
    If you are a parent, it is better to ask your kids to get OSAP instead of paying for their education. Not only they get more grants and low interest loan, but also the fact that they are in debt give them more responsiblity.

  4. In my case I went back to school part time after graduating with a college degree and having already been working in the corporate world for over 15 years. I felt that ‘missing’ feeling. Felt that I needed to accomplish more in life and get a University degree. Because I do it at my own pace and it’s online and does not effect my full time job at all, it’s very convenient and much easier to pay off since I have a fulltime salary. I’m not condoning this type of backwards progression but for me it worked out quite nicely. The degree is also not related to my field. It’s an Business degree and certainly won’t get me a raise or any type of promotion. It’s more for my own mind and as the author mentioned in the article, more for the ‘critical thinking’.

    For my kids, I have already saved up and contribute to an RESP for them. Once I hit the max for each child, I’ll stop contributing to the RESP since I won’t get any grant back.

  5. If you’re considering taking out student loans as well as working during school – don’t forget about the tax breaks students are eligible for!

    Students receive tax breaks for tuition, textbooks, moving expenses and loans. Which can really help when you’re living on a budget.

  6. You wrote an intelligent essay. If that’s not using your education, what is?

    I managed to graduate with a positive net worth at age 22. No $$$ from my parents. That was a lot of work.

  7. I have watched friends struggle for years to pay off student debt. I’ve always thought if you have to take a loan to pay for your education, you really should take something practical. It might not be your “dream”, but that’s life.

  8. I will be finishing my bachelor’s degree this May. I am very excited to finally graduate. In order to move from my current position at the bank, I need a degree. I truly hope I can attain the next step in my working career having my degree. I have been working full time since I was 17, which helped pay for a lot of my loans. I also received tuition reimbursement from my work. My goal is to have a new position by the end of this year. Wish me luck!

  9. Debt repayment needs to become more of a priority for all of Canadians. Whether for school, buying a home, investing in a business we WILL take on debt, however the next step is creating a plan to be rid of the debt. Use a financial advisor if you are not already, or join an online community like the ‘Get out of Debt’ Challenge, http://www.getoutofdebtchallenge.ca for more information on how to pay off debt, or where to get help with it!

  10. Great points! Re-posted your blog entry through twitter and facebook. It’s so true. I spent an arm and leg on a master’s that brought me little value for my career apart from find life long friends. I see it now too with my clients when seeking their first mortgage. Most of my client’s are not practicing what they studied.

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