Are Student Loans Really Worth the Debt?

The following guest post is from Ryan of You can read more about Ryan, and his websites, at the end of this post.

Trivia question: Which type of debt is more prevalent in America – student loans or credit cards? If you said credit card debt, then you might be in for a surprise. A recent study showed Americans have more student loan debt than credit card debt (Americans owe $826.5 billion in revolving credit, most of which is credit card debt, and $829.785 billion in private and federal student loans).

There could be several reasons for student loans overtaking credit card debt. For example, many Americans are becoming more financially aware and are spending less and repaying their credit cards more quickly. Credit card companies are also tightening their purse strings and not approving as many cards as they did a few years ago. It’s also easy to point at the rising cost of college as the culprit.

Regardless of the reason, this new trend is alarming. Student loan debt is crippling the cash flow of a number of Americans and it should be avoided if at all possible.

Are student loans necessary? Before taking out tens of thousands (or even hundreds of thousands!) in student loan debt, ask yourself a few key questions to determine if the student loans are worth the cost, and if you have any alternatives.

Do you need to go to college? A college degree not only doesn’t guarantee a job, but it also doesn’t guarantee a high paying job. Before you go to college because “it’s expected of you,” or “that’s what the cool kids do,” you should take a few minutes and try to determine your career goals, what is required to achieve those goals, whether or not you need a college degree, and if it is worth the expense. Many times college isn’t the answer and taking student loans while you try to determine your career goals is a recipe for disaster.

Does your degree justify a high priced college experience? Do you know how much your college degree is worth? Take a few minutes to examine your prospective degree and how much you might earn when you enter the job force. You can most likely justify student loan debt if you are completing courses toward one of the highest paying college degrees. But can you justify thousands of dollars in student loan debt if you are working toward one of the lowest paying college degrees? Maybe, but you should temper your expectations.

For example, some entry level positions pay in the low $30,000 range and don’t go up much from there. These are noble professions, such as teachers, social workers, and similar professions. But they probably don’t justify financing $30,000 a year for tuition from a private university. Make sure you will be able to repay your student loans when choosing your degree and your school.

Alternatives to student loans. Take a look at all your options before taking out student loans. You may be able to attend a lower priced university, or even take your entry level classes at a community college and transfer to a four year college after you complete your basics. This saves both time and money. Consider living at home during part or all of your schooling to save money, or consider applying for a RA position to get free room and board. Some schools charge a flat rate per semester, regardless of how many course hours you take. If that is the case, load up on hours. You’ll finish more quickly and spend less money. Apply for scholarships and grants. Cash in savings bonds. Work part time or apply for a work study program. Tutor other students. You can join ROTC or the military and then use Tuition Assistance or the GI Bill to pay for college. You could also find a job that offers tuition assistance and go to night school.

There are literally hundreds of ways you can save money on tuition to avoid taking out massive student loans. And in this day and age, that looks like a more attractive option than mortgaging your future for tens and thousands of dollars in student loans.

About the author. Ryan Guina blogs about personal finance, money management, and military money topics at Cash Money Life and The Military Wallet.


  1. I think there are few things in the world worth going into debt for and education is one of them. One should be practical, explore all their options and weigh the pros and cons before making a decision, but overall, education is worth it.

  2. That’s to say if a degree from one of the top schools (for example Ivy Leagues) provide any advantage at all since the students pay hundreds thousands of dollars for a 4-year education. I have looked at the tuition bill at an Ivy League before, there are too many zeroes. Some students, after acquiring debts for a bachelor degree, go on to acquire more debts for a master or a doctorate degree hoping after a few years working they can be able to pay off that debt. Debt is popular now a day. It seems everything associates to our livelihood or death somehow connected to debts : birth, school, house, wedding, car, and death. It’s quite depressing and sad. It seems we can never be prepared for any major event in life.

  3. I wish I’d been encouraged when I was in high school to consider alternatives to 4-year college but the attitude really was that it was what everybody did. It’s a shame more Americans don’t look into a “gap year” (or more) between high school and college. Some time spent working, traveling, interning or volunteering before committing to the time and cost of a college education could go a long way toward helping students focus on what they really want to get out of their education.

  4. This is an incredibly personal calculation that can’t be summed up in dollars alone. The big questions are 1) how much debt and 2) for what kind of education.

    You can add up estimate how much more in future earnings a degree will bring, and compare that to the cost of the debt. But education brings more than just earnings, including expanded horizons, friendships and prestige. (Unless you go to U. of Phoenix.)

  5. Jason, thanks for giving me the opportunity to share an article with your readers.

    Jenna, I agree, education is one of the few times it can be worth taking out debt (buying a house is another good example if you know you will live in the home for a long time). But Big Spender brings up a great point – how much debt, for which type of education. Hundreds of thousands of dollars of debt for a degree that will never pay for itself just doesn’t make sense.

  6. I went into debt for an expensive BA that I’ve never used (I immediately got a second, inexpensive BS in nursing and now work as a nurse). I’m still paying it off and will finish shortly before my ten year reunion, but I don’t regret it for a second. I gained many, many intangibles/incalculables, as people have mentioned above, during my first four years at college.

    There’s no reason to go to a high-priced college if you really don’t want to, and many of your suggestions should be adopted as a matter of course (work-study jobs, scholarships). But I get irritated with parents who won’t “let” their kids take out student loans in order to go to a four-year college or the college of their choice. Life is not solely about money, and student loans are a great way to let kids pay for a large part of their educations even though they haven’t had the opportunity to save up for it in advance. In short, they’re a gift. In this country the best colleges are not reserved just for the children of the wealthy.

    If for nothing else than the interest rates, student loan debt and credit card debt don’t make a good comparison. Anyone who finds their student loan debt “crippling” is either spending too much in other areas of life or got a poorly-financed, credit-card-style loan.

  7. When I look to hire someone, I look to see if they have a degree in a related subject. I’m not too concerned with the school it is from. I would certainly look at lower cost school options first before going deep in debt in student loans to go to the bigger name schools.

  8. I agree that the type of degree matters, but also equally important is the “extra” stuff that degree needs. For example, my wife is $40,000 in debt for a 4yr nursing degree, but because of her commitments to various student organizations, she cannot work more than 10-15 hrs a week. She payed her way through junior college and is in debt, heavily, for the remaining 3 years of her degree. She would not be able to get that good nursing job if all she did was work low end jobs to pay for school.

    I am in an even more difficult situation. I am a pre-med student, and besides needing to maintain a 3.5-4.0, I am “required” to volunteer. It displays altruism. I enjoy volunteering, but when the bills come, I need loans. Even now, in my last “easy” year in college and working as a full time plus EMT (60-80 hrs/week), I still only make enough for my wife and I to live frugally, keep interest at bay, and buy books and such. I don’t even want to talk about medical school.

    The reality is that as a nurse and a doctor, our combined income will be somewhere in the 300,000 range, so if that means graduating with nearly that in debt, it is a worthwhile choice. The problem, especially in pursuit of such expense degrees, is that I can never choose to be a social worker or teacher. I am tied to my job, just like all the other programs mentioned would do.

    • I hope your wife is able to find a job after nursing school (it sounds like she’s still in it, right?). They aren’t easy to come by in most areas of the country right now. I’m impressed that she’s able to work at all during nursing school. There were very few people in my class who could.

      • They must be in the wrong area of the country. Every BS RN I know in the west who wants to be employed is employed. Maybe the key is to move to where the jobs are.

        • Janette, it is EXTREMELY hard to find a job in the west when one is newly graduated from nursing school. I read in the Sacramento Bee that 97% of new graduates in Sacramento were unable to find work in the area last year. San Francisco, Portland, and Seattle are about that bad, LA and San Diego almost that bad, and even people in the smaller towns are having trouble.

          • Wow- maybe I should have qualified with “non coastal” west. My nieces just graduated last year in Idaho and had multiple offers. My sister in law has been out forever and returned full time to Phoenix. I have friends in Colorado who are looking for nurses for their hospitals. The key seemed to be the BS for all of them.

  9. Student loans are going crazy rampant in the U.S. these days. I work at a university and some student just go to school in order to get the Federal aid to live off of. They have no intentions of paying the money back, but just need the extra money to live. The incentive is that they will get a better degree to get a better job, and make more money. Well turns out their works skills matter a lot more than their degree these days. Like you said it does not guarantee you a job. My wife and I are trying to get rid of our student loans as quickly as possible, because we do not want them to hinder our financial future. Thanks for the great article.

  10. I really think that a college degree is vital these days. I just have a hard time with the notion that it’s optional. I realize that this might offend some folks, and I understand that some kids need to mature before getting a college degree, while some kids might not be able to handle academics beyond high school. But most probably can.

    The optional idea, to me, is paying a massive sum of money just because a school is private. At some level, a serious financial analysis needs to be done to choose the right school that makes sense. Now, it’s clearly not just a financial decision, as college is also about personal growth and is a bridge to the working world (or grad school). But it’s vital to do your homework regarding which school to attend, factoring in costs/benefits.

  11. Articles like this one are sending the wrong message to an entire group of people. I know one family that has begun to DISCOURAGE their children from college because it is “too expensive”. My thought it that most people who read this have a degree and also know that degreed people are far more employed than non-degreed people.
    That being said- the two highest paid people in my extended family have never stepped in a university- but have unique talents. The next two $$ graduated in liberal arts with no debt. Most of the rest of us are degreed and make a middle income.
    The bottom two income earners (ages 59 and 25) have no university experience- and are frequently unemployed.
    Antidotal – but the chart above seems to agree with my family.

  12. Although I’m usually against debt, if the student understands the following a student loan would be ok:
    1) If they are really going to have a career in what they are majoring in.
    2) If they have investigated if their major is going to be a viable job in the future.
    3) If they understand if they will earn 3 times per year than what their major cost them to attain.
    4) If they have investigated all other avenues such as working to pay for school, scholarships and other grants.

    Education is important by it’s more important to put that education into action and I’ve seen a lot of graduates think that its all in the bag with their degree but they are shocked when they can’t find a job with that degree.

  13. I am extremely happy to see this post. For many, many years I have been saddened by what I see as a societal expectation that kids who come from “good” homes must go to a 4 year liberal arts school and obtain a Bachelor’s degree. I see so many parents putting undo stress on themselves and their kids to obtain that almighty degree, to the tune of $100,000 in life long debt. Of course education is worth investing in. But you hit the nail on the head – what type of education, and where?

    I myself obtained a BA, and everyone in my sphere of influence has either a BA / BS. The VAST majority of us are not working in the fields in which we majored, but have rather invested additional time and money along the way to gain knowledge and experience in fields that actually pay. 🙂 We chose the wrong majors, plain and simple, and the universities were more than happy to take our money.

    What you are talking about is a simple Return on Investment analysis, which every single high school student and his/her parents need to do. There are very few 4 year degrees out there that actually pay well. The top paying college degrees in the article you linked to are all in engineering. Not everyone has what it takes to become an engineer. Knowing yourself is vital before setting foot in a college. In many instances a 2 year Associates Degree from a community college will give you employable skills that enable you to find gainful employment much faster, and recoup your investment faster, than many of the higher priced but lower paying BA/BS degrees.

    It is a discussion that needs to take place, and I am happy to see articles such as this one starting the discussion. I know that my friends and I have been discussing it for some time in regards to our children’s future education.

  14. Great article, I totally agree. I graduated from college with a BA and no debt. I went to the local state university, lived at home and commuted daily, and worked 35 hours a week to pay for my expenses with some help from my parents. I took a full course load each semester and graduated on time. I had no idea what I wanted to do with my life but my dad insisted I get a degree so I did. It has helped me I am sure to get jobs and be well paid, even though I am not working in a field related to my degree.

    By the same token though, I don’t think everyone should go to college, some people are clearly more suited to the trades and should be encouraged to pursue technical training as a plumber, chef, mechanic, etc. I think too much emphasis is placed in the US on college degrees for everyone. It should be no shame to go into a manual trade, many of them are quite well paid and certainly no less worthy of respect than a white collar job.

  15. Ryan, these are great pieces of advice. I am so glad I was born in Greece and attended free public college. Then, for my PhD and postdoctoral education I went to the US were I was paid. Almost all my friends at Washington University were carrying a hefty student loan and seemed they would be burdened with this for many years. How true indeed that many times, if we know what we want to achieve, college education may not be necessary.

  16. My son just started college at the university of Rotterdam (Netherlands). He commutes, it’s just 45 minutes from door to door. If he continues to live at home, he won’t need student loans. We saved enough to pay for his tuition and insurance. But the peer pressure…. one of his friends also lives at home but has a maximum loan already, advised by his parents. They tell him he will earn enough later in life.

  17. I will not discourage my kids from going to college but they both know they will be attending community college first for two years.

    Also trade schools (carpentry, refrigeration, plumbing, electrician) are also good options instead of college. They cost much less and will provide a steady income for life (either through self employment or working for a company.)

    Also I was reading about how you can test through certain college courses and if you pass you get the college credit. These cost much less than actually taking course. This is defanitly worth looking into.

    I think college experience is valuable, however how you finance it is more important.

    I have two friends who have already defualted on student loans (we are in our 30’s, they could not find jobs in that area. Both are working in fields that do not require degrees at all.) Another friend lives off her student loans while in school, so she will have even more debt and she is going to be a social worker. They pay for that will never cover her loans.

    Another thing is if you do have loans, after college even if you get a good paying job continue to live very frugally, put off kids, and pay off your loans before you have kids. If you stay in same small small housing, etc. it can be done.

    I have an Associates in Education. I worked while in school. I have no debt from school or from getting AA. I have never actually used my degree for a job, as I now have two kids I am homeschooling. But I sure fall back on teaching ideas I learned in school while homeschooling.

    One day I hope to go back to school and work as I can pay for classes.

    Thanks for reminding us to think outside the box regarding college. Don’t just sign on the dotted line for debt so quickly!

  18. The stats on student loan debt surpassing credit card debt don’t surprise me. I’m 25 and when I was in school I saw a lot of people using student loans to buy expensive computers, furniture, TVs, and to pay for vacations.

    It’s easy for a student to go buy an expensive computer because they feel like they need it. Then they don’t get a bill. When some friends want to go on spring break, why not add it to the tab?

    I would bet a large percentage of new student loan debt is unnecessary.

  19. One other thing I thought of in favor of pursuing a trade education instead of a college education: trades such as plumbing, electrical, car repair, etc. can never be outsourced and are more secure and plentiful than many high tech jobs. The Chinese can’t repair your fridge, because they are in China – we will always have jobs for tradespeople.

  20. Student loans can be a trap. A typical community college may require between $1500-$3000 a year for tuition and books. However when you apply for FAFSA and loans you will be offered far more then you need to pay for college. Many 18-22 year olds cannot resist taking the maximum loans and using the money to live well while they go to college. If you do this then student loans are a trap and you will sabotage your economic life. It is rare for students to graduate with HUGE debt who in fact spent all that borrowed money for tuition and books alone. Most have gone for the max and use it to move out of their family home so they can party or to be able to afford a new car or whatever. Loans can be a trap.

  21. Based on some comments here, I think there is a misconception of what types of programs are offered at community colleges. In addition to the stereotypical “blue collar” types of fields, my local community college offers Associates Degrees in the following programs (plus many, many more). At $48 a credit hour, all of these degrees with more than pay for themselves within a year of completing that 2 year degree. And I wouldn’t call any of them blue collar.

    Architectural technology
    Business administration
    Business information systems
    Business marketing
    Computer engineering
    Computer programming
    Criminal justice
    Cyber security
    Dental hygiene
    Digital Design
    Financial planning
    Health information management
    Mechanical engineering
    Nutritional management
    Occupational therapy
    Pharmacy technician
    Programming, web development
    Radiologic technology
    Real Estate
    Social work
    Surgical technology
    Tax practitioner

  22. The fact that student loans have exceed credit card debt speaks to a macroeconomic phenomenon: Globalized education. In my two masters degrees (comp sci and EE), 90% of the students were foreigners. Obviously, if there are millions upon millions of young people around the world begging to get into a U.S. college … and then get one of those H-1B free passes to a green card, the DEMAND rises dramatically. I haven’t noticed much change in capacity at Universities (Supply). In any engineering / computing field, you basically MUST have a Masters nowadays – due to the foreign competition. And even then, most Americans are getting pushed out of the field by greedy HR, and the inherent bias of foreigners helping people of their own country get jobs. This is another phenomenon of the Global Economy: One-way advantage. There is zero advantage for Americans (unless your in HR) – just try to get an EE job in China etc. Thus, there is constant pressure on the borders – whose only opening is the H-1B and Universities.