student loan debt

Student loan debt is some of the most common debt out there. It’s no surprise given that the average cost of tuition for a four-year undergraduate education, in-state mind you, is around $25,000 a year. That amount of money is more than most people have in extra, unallocated annual income.

As of June 2018, Forbes reported that total US student debt was $1.52 trillion and that 44.2 million people owed debt.

That’s a lot of debt and a lot of people with student loan debt. It’s so commonplace and not uncommon for people to pay off their student loan debt well into their 30s and 40s.

Not all Debt is Created Equal

As far as debt goes, student loan debt is definitely not the worst kind of debt out there. But while it’s not the same as a payday loan taken out at 300% interest, it’s still debt.

I’m not here to say student loans are either good or bad debt. Because I can’t. It’s not that black and white. The good or bad classification is more about the intention behind the debt, the reason you took out and the amount you took out.

When Student Loans are Good Debt

Getting a degree has the potential to help you get ahead in life. Studies show that having a bachelor’s degree will put most people on a path to higher pay, so student loans can be considered an investment in your future. And some people no matter what school they choose or what degree they pursue will need some form of financial assistance to get their degree. So if you have to take out student loans in order to get your degree, that is ok.

There are plenty of people who earn college credits while still in high school, work jobs throughout college, or pick a local university instead of an out-of-state school in order to lower the amount they have to borrow. Maybe they do everything right in terms of taking on as little debt as possible but still need student loans to cover some of their expenses. For those people, then yes, student loans can be considered good debt. They are truly an investment in the future.

When Student Loans Debt Turns Bad

Student loan debt becomes a problem when people borrow more than they need. If you use student loans to provide yourself a more lavish than necessary lifestyle, then you’ve taken out too much. If your student loans are helping you afford things like regular manicures or weekly dinners out with friends, you’re subsidizing a lifestyle now that you’ll pay back later – with interest.

You need to seriously consider the type of profession you’re going into, what the pay realistically looks like and how a student loan payment would fit into – or in some cases cripple – your future income. Because if you’re taking out more in loans than you need to live now, resulting in more in loans that you’ll have to repay later, that’s not good debt that you’re accumulating. Knowing the possible interest rates and payment plan you’ll face will provide a much-needed reality check on how much you should take out.


If you’re in college or have college on the horizon, check out our post on Ways to Save on College Expenses. Plan now and have less debt later.