When Is It Worth It to Take Out Student Loans?

Any college graduate swimming in debt will tell you – if you can avoid taking out student loans, do it. Unfortunately, the reality is never quite so simple.

Student loans are a crucial part of the college process for many reasons – some better than others. While some students use their loans as a stepping stone to a brighter future, others sign away their financial future when they sign on the dotted line.

Like any large financial decision, taking out loans can be a benefit or a hindrance. Curious which camp you or your child may fall into? Read on to find out.

When It's Worth It

  • To finish your degree. If you lose parental support or fail to get a scholarship renewed, it may be worth your while to take out loans instead of delaying your school work. Taking time off school to earn that money may seem like a better idea, but many people don't return after doing so. It may be harder to get back in the swing of things – especially if your friends have already finished their studies.

  • To study abroad. Living abroad is one of the few experiences that you only have access to in college. After graduation, you'll only be able to take a couple weeks or so of vacation, preventing you from fully immersing yourself in another culture. It may be worth it to borrow a few thousand dollars to spend a summer or semester abroad. The cost may be even smaller if you can find an affordable program and apply for scholarships.

  • To network more. Some schools have programs designed to help their students find internships and jobs after graduation. Their alumni are connected to the industry, their professors know what employers are looking for and their graduates have high placement rates in their field. Spending more money to have a better chance of landing a job may be worth it in the long run.

  • To move away from home. Part of the college experience is learning how to live alone without help from your parents. While it's not advisable to take out tens of thousands in loans to live far from home, it may be beneficial to take out some loans in order to have the full college experience. That doesn't mean partying four days a week and barely making it to class. It means paying your own bills, fixing your own problems and learning how to be self-sufficient.

When It's Not Worth It

  • To go to a private school. According to the College Board, private universities cost $20,000 more per year than in-state public schools and $8,500 more than out-of-state public schools. That can mean a total difference of $34,000 to $80,000 when you account for all four years of school – not worth it just to get a similar degree.

  • To get a low-paying degree. Not every degree is worth the same. Getting a bachelor's degree in fine arts is not the same as getting a degree in civil engineering. To determine how much in student loans you should take out, look up the average starting salary for the career you want. If you stay under that benchmark, you'll have less trouble paying back your loans.

  • To pay for living expenses. Student loans can be used for a variety of reasons beyond tuition. Many students use it to pay for room and board and other necessities. Try working a part time job instead of relying on loans to pay for your groceries and utility bills. It may seem unnecessary when you have money available, but it's better to minimize how much you borrow.

Overall, taking out student loans isn't necessarily a bad thing, as long as you are using the money wisely and have a plan in place to pay back the loans as quickly as possible.

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