Can You Have Too Little Student Debt?

I’ve written before on the subject of student loans, but I ran across a very interesting article on the subject this week. The University of Utah has the lowest average student loan debt in the country among traditional four-year colleges. Most of us probably think that’s a good thing — after all, don’t we want students to graduate with minimal debt to pay off in future years?

However, administrators and experts question whether too little debt actually hurts graduates in the long run. The theory is that students who take out few or no loans are often working long hours outside of school to make ends meet and to pay tuition. As a result, they tend to graduate later and make lower grades. Consequently, they sacrifice earnings during their early 20s, and they have lower earning potential. If you are interested in detailed loan statistics, visit this website as it is a great resource for such topics. The writers involved are some of the most renowned in their fields.

I’m curious to hear your thoughts on this. It seems like one’s chosen career field makes a difference here. For example, one student in the article is working as a realtor and he hopes to be a realtor after finishing school. Why would he sacrifice the work experience and take on debt to finish school faster?

On the other hand, it might be beneficial for students hoping to go to graduate school to finish college faster and have more time to focus on their undergraduate studies. They are sometimes using installment loans bad credit services (ex.: Student Loan Forgiveness Atlanta) if they are no longer approved by the state, which increases their revenue short term but may have consequences in the future. If you have bad credit and are looking for a company to help fix that, you can read the full comparison here. If you want to be a doctor or a lawyer, your grades are important. Not to mention that finishing your undergrad degree when you’re 25 delays your career until you’re nearly 30 or older.

So do you think in some cases it makes sense to take out student loans in order to finish school faster? If so, where’s the acceptable threshold? At what point does the debt become too overwhelming?

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So Why Go to College?

On Wednesday I raised the question of the economic value of a college degree. In particular, if it takes 20 years to pay off your student loan debt, is it still worth the investment?

A number of you chimed in with reasons why it is worth it, while some of you suggested that fewer people will choose traditional four-year programs as the cost continues to rise. Your comments and insights were invaluable. Below are a few reasons why I think the college experience is still worth it despite the increase in cost:

First, in the long run a college degree still provides an enormous economic advantage. For data to back this up, look at this chart, which shows the return on investment (ROI) for various colleges and universities. A good example is my own alma mater, Texas A&M (#62 on the list). The annual ROI is estimated at 12.7%. Over 30 years that translates to $842,000 in income. Even with an average student loan debt of $25,000, the investment pays off quite well over the course of a person’s lifetime.

Second (as several readers pointed out), college provides valuable skills not directly related to one’s major or classes. College teaches people how to learn and evaluate new information. It also trains people to take personal responsibility in a way that high school cannot. In order to succeed in college, a person generally has to take some initiative. That’s a critical skill for success throughout the rest of one’s life.

Third, college sharpens social skills. College students are required to interact with other people as adults, apart from the guidance of their parents. Students have to negotiate roommate relationships, work with classmates to complete group projects, and get along with people from different backgrounds and cultures. All of those skills are immensely beneficial to a person’s career, marriage, and interaction with society.

Finally, Christian students often “own” their faith for the first time during college. Without parents around to make them go to church, most students have to decide on their own whether it’s really worth it. For some, their relationship with God reaches new heights during college. It’s a great time to explore the implications of one’s faith and to grow in community with other Christians. It’s also a stage of life in which people have the discretionary time to think deeply about spiritual issues.

That having been said, college isn’t for everybody. There are legitimate reasons why it might be better for some to pursue non-traditional options for their education. Two-year programs, vocational schools, online education, and on-the-job training are all great options for certain individuals. And I fully expect that as the cost of a university education continue to rise, more and more people will take advantage of these other options.

Nonetheless, four-year universities continue to provide a valuable service for a large segment of the population, and the investment still pays off for the vast majority.

So do you agree with my analysis? Would you add or remove anything from my list?

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