Is there really a differentiation between good debt and bad debt? Is all debt bad? Dave Ramsey has often come under fire for advocating a debt free life in his book, “The Total Money Makeover” and on his nationally syndicated radio show.
While being debt free is a very admirable and lofty goal that we should all try to obtain, it may not always be completely possible. I have taken out loans to buy a house or buy cars. It would have been nice to not have to make those payments and invest instead of course.
Going Into Debt
What about taking on debt for student loans to go back to college? Are graduate school student loans better than loans for an undergraduate degree when going into debt?
While taking out a loan for college expenses is often viewed as good debt instead of bad, it may not be as cut and dry as we may want ourselves to believe. Here are some considerations that you should make before taking out a student loan.
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Your Major Plays A Factor
One of the best things that you can do is start with the end in mind when you go to college. What interests you? What kind of career do you want to have after you get your degree? Believe it or not, it costs money to change your major in college.
Many times credits that you have earned will not count towards your new chosen path which can delay your graduation several semesters if you are not careful.Start with your career in mind when you first get on campus and avoid extra classes and extra expenses when you change your mind.
College Price Trap Can Hurt
Is it worth it to go to an expensive college? Does the amount of student loan debt that you may have to incur to earn that degree from a prestigious university? Or, will you be just as successful with a degree from a state school?
Like choosing the right major, picking the right school for the money can help you avoid saddling yourself with needless debt as you begin your career and post-college life. There may be other ways that you can fund college without taking a lot of loans. The US Department of Education can point you in the right direction when you are preparing to fund your education after high school.
Are college loans good debt when going into debt? Maybe it is if you take on the student loans in a responsible manner. It should come down to what equates to a business decision. Getting a great education is an investment in yourself and your future earning, but there is a cap to the amount of return that you may receive in most cases. Can you get a good rate of return on your investment? Is it worth the amount of student loan debt that you may incur?
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Do you have a money question that you would like to ask? Email me your money, investing, retirement, savings, or other question to Questions[at]MoneyQandA.com.
Thank you all so much for all of the questions! Please keep them coming!
What about you? Does it make sense going into debt for grad school?