Are Student Loans Smart

Many prospective four year college students will finance college through student loans. Loans often run in the tens of thousands of dollars, and to pay them off comfortably you need to assure yourself of a manageable amount of debt plus a career that will allow you to pay that debt while maintaining a chance at a comfortable, satisfying life.

Despite what counselors may tell you, not every college education is equal. Some majors generally offer a viable path right out of college to a lucrative career. Some majors won’t give you much more professional knowledge than an average high school graduate that steps into full time work after graduation.

For example, an accounting major can count on a variety of career paths that offer at least a $30K annual wage out of the gate, since every business needs skilled accounting personnel. Financing a 4 year degree through student loans may prove a worthwhile investment, as someone earning at least $30K can afford a few hundred dollars in loan payments and still be able to afford a home, other needs and bills.

However, an art history major can count on their fingers the number of viable career paths that an art history degree directly translates to. You can teach, if there are any art history instructor openings. You can curate at a museum or run an art gallery, though such a career path requires some experience and connections. And that’s mostly about it. From there, your professional qualifications out of college stand on par with the high school grads in the job market scrapping for working class jobs that might pay $30-40K with some fortune and professional advancement.

With such dim prospects for professional work, financing a $40K-60K art history degree with student loans might not be a prudent idea. Paying the bills on the wage of a service employee or administrative assistant is hard enough without $400-600 student loan payments on the side.

The cost of the education itself is also an issue. If you’re going to a local college on student loans with tuition that barely costs $1000-2000 a term, then graduating without lucrative prospects hurts you far less than if you graduate from an expensive university like Princeton with an English degree and no teaching gigs on the horizon. From a cheap school, you may only owe $200 a month in loan payments, manageable even on a low end desk jockey’s salary. But with $500+ payments, you had better be making great money, or at least count on living with your parents for the next ten years.

Granted, the recent development of the Income-Based Repayment Plan for Federal Direct Loans can help offset expensive loans. The program allows you to make payments relative to your previous year’s wages (in cases of unusually low wages, you may owe no payments at all), and after ten years of timely payments, the unpaid remainder of the loan is forgiven.

But even with that option in mind, the recent recession has taken a big bite out of the job market, and a teeming pool of unemployed working class people from widespread revenue and budget cuts shows us that getting let alone maintaining a job with a working class wage is more difficult with employers tightening their payrolls and, in turn, expecting more credentials from new hires. And even in good times, the job hunter pool never gets smaller. When asking if you can manage to pay off your student loans, the question of your ability to get and keep a job is as important a matter to consider as ever.

Assuming debt for a college education isn’t a straight yes or no decision. The value of the debt depends on the prospects your degree will offer you, and on the cost of earning the degree.