As unemployment continues to soar, many people have gone back to school or are considering going back to school to further their education. While this can greatly improve their future earning potential, research is indicating that, for the first time in U.S. history, student loan debts are currently estimated to be exceeding $1 trillion in the U.S. and are quickly moving to outpace the debt associated with credit cards and car loans. Additionally, according to the Pew Research Center, approximately 19 percent of households owe money on student-related debts, and on average, the amount of student debt owed is upwards of $25,000. This astounding shift in the changing nature of debt is causing some to question whether student loans are worth it and whether or not student loans are bad debt to have.
Although various financial experts have conflicting opinions regarding whether student debt is “good” or “bad” debt to have, some of the resounding opinions regarding what may be more or less beneficial about student loans include that:
- Federal Stafford student loans are typically good ways to fund a higher education for middle class families (or those who qualify for them). While these loans typically have competitive interest rates, they also have flexible repayment options, and the government will pay the interest on them until after a person graduates.
- Private loans with low interest rates can be another good option for funding higher education.
- Student loan debt can have a negative effect on a person’s future if large loans are taken out to pay for overpriced educations, especially if the area of study does not lend itself to securing a career that can help them eventually pay for student loans.
Other factors to consider when deciding on how much student debt is OK to take on include the following:
- Is going to community college for the first two years a viable option for reducing how much money is necessary for a student loan?
- Can the student work part-time while in school to offset the amount of student loan debt that needs to be taken out?
- Is there a state school that can offer an education that is strong and more cost-effective than a private university?
While this advice can help parents of teens or those considering re-enrolling in school may some financially sound decisions regarding whether or not they should acquire more debt in the form of student loans, many people may be facing the aftermath of their decisions regarding student loans; for those who find themselves in excessive debt and considering bankruptcy, our financial experts encourage them to learn more about their options and receive professional advice regarding how to proceed by consulting with us at their earliest convenience.