According to the latest statistics from the Federal Reserve and the publisher of FinAid.org, the total amount of money Americans have borrowed on government and private student loans at $830 billion has surpassed the total American consumer balance on credit cards, only $827 billion.
As the Wall Street Journal mentions when sharing this information, this is partly due to a decrease in credit card debt in addition to an increase in student loans.
I recently read a preview of Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents. The author, Zac Bissonnette, is a student at the University of Massachusetts and an entrepreneur, and his book takes a look at a number of common assumptions about college education, and the financing thereof, and explains how student loans are unnecessary in almost all cases.
Zac will be a guest on an upcoming episode of the Consumerism Commentary Podcast, and we’ll discuss how to graduate college without debt and how to choose a college.
Student loan debt is usually considered “good debt.” Since you are borrowing to pay for a college education and degree that will increase your earning potential over the course of your life by much more than the cost of that degree, it’s often considered a good investment. A small tax benefit helps to make student loans more attractive.
When there are opportunities to save money on an education by attending a state school rather than a private school, or even attend community college for two years before completing a degree somewhere else, and when the name of the school on the degree is not important (which may or may not be the case), a student loan looks like less of a deal.
In addition, student loans will stick with you even after declaring bankruptcy. The government can garnish social security payments and tax refunds if you default on student loan payments.
Are student loans “good debt?”
Updated May 5, 2014 and originally published August 11, 2010.