Look, I get it. At this point, everyone on the planet who owns a TV, a smartphone, a computer, or has even glanced at a newspaper is aware of the student loan crisis in America. Choosing to either go into debt for the first time, going into debt after having paid off an initial balance, or adding to existing debt can feel like a particularly scary prospect with news stories declaring that student debt has reached a record high.
However, in all of this, it’s important to remember why loans exist: whether it’s a car loan, a home loan, or a student loan, you take out a loan because you are making an investment. With a car or a home, it’s pretty clear what the investment is, but student loans can feel a little more nebulous. I would say that when you take out a loan to pay for graduate school, it is an investment in you and your career. The advantage of that? Unlike a car or a house, once you make that investment, it can’t really be taken away or damaged. Just think: your car could be in an accident the day you leave the dealership, or your house could be flooded the day after you sign, but once you have your graduate degree, it never goes away or lessens in value.
With that being said, the best way to make sure that this is a worthwhile investment is to ask yourself the same questions that you would ask when making any other major investment. Questions like…
What does the return on investment look like? I started to address this above, but I think one major benefit to student loan debt versus other debts is that the value of your investment doesn’t depreciate (like a car) and cannot be damaged (like a house). Regardless, there are other questions that you can ask during your search to ensure that the return on investment is high. What are the job titles of recent graduates like? What percentage of students are employed within six months of graduation?
What is this investment in, and how much is that worth to me? Okay, I know I said above that it’s an investment in you and your career, but to get even more granular, you should consider the entire package of graduate school, even the things that can’t be easily quantified. How much is it worth to you to make connections with faculty, your fellow students, and alumni? Are those connections that you could make otherwise? How much is it worth to you to have access to a dedicated career center for the rest of your professional life? How much is it worth to take some time to pursue a career that you’re deeply passionate in? Considering these things can help you remember the value of the investment you’re making.
What are the terms of the loan? This is a big one, and I really can’t overstate it enough. I will admit that when I went to graduate school, I did not think enough about the actual terms of my loan: I took out the maximum amount and didn’t even consider paying it off while in graduate school. If I could go back, that’s something that I absolutely, 100% would have done differently: take any loan counseling you get through your school seriously, and make sure you understand all the details of your loan including the origination fee, the interest fee, when it begins to accrue interest, and when you have to begin repayment. Plug those numbers into a student loan calculator to see how your situation will change depending on how much you borrow.
I totally get it: student loans are scary (I have them myself!). But at least in the case of federal student loans, student loans aren’t the worst investment you can make, since they come with competitive fixed interest rates and plenty of repayment options. It is a deeply personal decision, however, so take some time and carefully consider how to minimize your debt and to ensure you have a reasonable plan to pay it off.