Student loans: friend or foe?


More than 70 percent of students who graduated with a bachelor’s degree left college with student loans, and that number is not expected to decline anytime soon. In fact, the biggest debts lie in the hands of 45 to 74 year olds, not more recent grads. Now parents and grandparents are taking out lines of credit in their own names, such as the Parent PLUS Loan.

It’s almost as if student loan debt has become something students—and now their parents!—expect to receive along with their diplomas. But, is borrowing money for your education a good or a bad thing? It probably depends on who you ask.

A graduate student who borrowed $100,000 for a law degree, but cannot find a position, is probably questioning his/her decision to take out student loans. But, a nurse who recently graduated from a community college with less than $20,000 in debt is probably pretty pleased with how things seem to be turning out.

But really, it’s all a matter of perspective … and choices. Under the right circumstances, student loans can definitely be your friend, but if you borrow blindly, they can also be your foe. Here are a few things to keep in mind if you don’t want to graduate with student loan regret.

Consider cheaper alternatives

Whatever degree path you are considering, make sure you research your college options. Many community colleges now offer bachelor degree programs, as well as transfer programs with local four-year colleges, which could save you quite a bit of money. Look into schools that will give you credit for AP and IB classes or those that have accelerated degree programs. Less time in school could mean less money spent.

Borrow only what you need

You may be offered student loans (federal and private) that cover up to the total Cost of Attendance (COA), but that doesn’t necessarily mean you should take all that money. Draft a budget and only borrow what you need to cover your educational expenses.

If you think you’ll need some spending cash for entertainment and other non-essential items (like pizza!), you may want to consider looking for a part-time job instead of adding to your student loan debt.

Pay the interest while you’re in school

A good way to keep your student loan debt in check is to make interest payments while you are still in school. Just paying off $25 a month (or more) may not seem like much, but it can really pay off over time.

Know Your ROE (MyROE™)

One of the best ways to keep your student loans in check is to know your ROE—that’s Return on Education. This is basically when you estimate how much you’ll make the first year after you graduate from college. 

To ensure you get the best ROE™, never borrow more than your first year’s anticipated salary. For example, a petroleum engineering major (bachelor’s degree) may expect a starting salary around $94,600, so that would mean borrowing no more than that while you are in school.

Most college students will need to take out a student loan at some point to help fund their education. But, if you make smart decisions and keep your borrowing to a minimum, you—and your parents!—should make it to graduation without a case of buyer’s remorse.