Student Loans: A Stupid Liability or a Smart Investment?

For many students, deciding on the university that they attend is often one of the biggest, more important decisions that they can make for their future selves and careers.

It not only affects the level of education you’ll receive and the career prospects that might come with your educational background, but also another crucial factor that a lot of people overlook, and regret not thinking about more clearly later on.

That is, the amount of student debt you’d need to take on to be able to attend said university.

You see, going to university, and the right one, can either make or break your career.

And for those who do regret going to university, it’s often because they find themselves drowning in too much student debt, with a job that doesn’t pay enough for them to keep up.

That’s why in this article, I’ll be helping you uncover the truth as to whether or not student debts are worth it, which will ultimately affect the university you end up going to.

Ready?

Why Should You Take Out Student Loans and Debts?

Now, to start things off; there are lots and lots of reasons why you would benefit from taking out student loans/debts.

Access to Higher Education

This should come as a no brainer, but higher education is often pretty expensive depending on where you are in the world, and most reputable universities are going to cost you anywhere between $7,500 a year (such as in Australia and New Zealand) to over $50,000 in some cases for the top universities in the world, such as your Ivy League schools.

Most families don’t have this much cash lying around to be able to fund their children’s studies, and therefore students would need to take out these student loans in order to be able to afford to attend these universities.

Student loans bridge the gap between household income and the high tuition fees, creating access to a higher education that would’ve otherwise been financially out of reach.

An Investment Into Your Future

Since it is generally believed and expected that a university degree should lead to more job and career prospects that usually come with higher earning capacity, you can look at taking out student loans as an investment in your future self, as you’ll likely be able to do more with a degree than you otherwise would be able to.

That is, if you play your cards right of course.

It’s spending your debts and money, in return for a chance to make a better professional career for yourself later on.

Read more:

Developing a Strong Credit History Early

A lesser known fact is that student loans can actually be utilized to develop a strong history and credit score early on in life, as long as you’re able to keep on top of your debts and cover everything.

Establishing a solid credit history is crucial for future financial endeavors, especially if you’re the aspirational and ambitious type that’s got your eyes set on investments like property/real estate.

Student loans give you a chance to develop your credit score early on, but equally pose the risk of damaging it if you’re not sensible with your money.

Why SHOULDN’T You Take Out Student Loans and Debts?

While student loans are a great way to reduce the disparity and create more educational access for more students from all around the world, they also come with some pretty significant drawbacks and risks that can be detrimental to your financial wellbeing if you don’t play it smart.

Accumulation of Debt

For many graduates, the burden of student loan debt can be significant (we’re talking tens, if not hundreds of thousands of dollars), which can affect their lifestyle choices and financial freedom for years to come.

Sometimes, this can last almost the entirety of a person’s career if the loans are high enough, and income isn’t able to match that.

I mean, we’ve all seen the horror stories on Dave Ramsay’s show, haven’t we?

Hundreds of thousands of US dollars in debt, earning something like $50,000 a year.

Doesn’t sound fun to me at all.

Loans Can Lead to the Accrual of Interest

It is crucial for borrowers to understand the nuances of interest rates and their implications in order to make informed financial decisions.

Student loans, while often interest-free, can sometimes start to build up interest over time after you graduate.

This can add additional financial burdens on top of your regular loan repayments, further draining your finances as a young professional.

Financial Milestones Could be Delayed

Graduating with student loans may delay major financial milestones such as buying a house, getting married, starting a family or beginning to save money for retirement.

Debts need to be paid off first, and depending on how long this takes, financial goals might need to be pushed back.

Job Prospects Aren’t Guaranteed

As with anything in life, a university degree does not guaranteed that you’ll be more successful.

It’s up to you to play your cards right in order to make this investment worthwhile, and that means doing the most with your time in university to secure yourself a high paying job out of college or university.

You’d be surprised how many people find themselves stuck under a mountain of debt, with a job that doesn’t pay a huge amount more than minimum wage, struggling to make ends meet.

The job market is becoming more and more competitive, and it seems as though less and less graduates are finding good rates of return on their study fees each year.

Making a Decision: To Take Out Student Loans or Not?

There are a few different things you need to think about when it comes to deciding on the amount of student loans you want to take out.

Think About What Career Paths You Want to Go Down

Remember, the point of going to college or university is to make more money than you’d otherwise be able to.

Don’t pick a study discipline that doesn’t let you earn enough money to pay back your debts.

Always do your own research and due diligence before choosing what to study, as this really is one of the biggest decisions you can make for your financial career in the future.

Consider Alternative Funding Options

It’s a good idea to get as much financial aid outside of student loans as possible.

So, take a look at and do your research on alternative funding options such as scholarships, grants, part-time work, student allowances, and work-study programs.

There are lots of other options available, and you should always apply for everything you can, because anything can make a difference.

Learn more:

Set a Realistic Budget

Please, unless you’re a really high performer and genuinely think you have good prospects ahead of you, please don’t go crazy and spend too much money on student loans.

Don’t go into the hundreds of thousands, or anything crazy like that, unless you’re going into a really high paying career like investment banking, medicine, big law, software engineering, or anything along those lines.

Make sure you genuinely have a plan to be able to pay your debts back, otherwise don’t get yourself into all that in the first place.

Closing Thoughts

Student loans can be both a blessing, and a huge financial burden depending on how well you’re able to utilize your time in university to make a good return on your investment.

They can either bridge the gap and create access to education that would’ve otherwise been out of reach, or lead to a lifetime of debt that can be ridiculously hard to dig yourself out of.

Therefore, you need to be prepared to choose your study disciplines widely, and make the most of your time in university to maximize your rewards, whilst minimizing risks.

I hope this article has been helpful, and that you’ve been able to learn something from it.

All the best with your studies!

If you’d like to learn more about excelling as a student beyond simply your academics and making the most of your time in university, check out the rest of Medium publication; Grad Excel!