Q: I am a 28-year-old woman with a decent job that pays $50,000 a year. I have some debt: $6,000 in personal loans and $2,300 on credit cards. I desperately want to get a master's degree in counseling. It would allow me to open a private practice, which would pay better than my current job. But I'm afraid to take on more loans. I could do a part-time program and continue to work, but even then I will assume $30,000 in debt. You always say educational loans are "good" debt, but given the economy and my existing financial obligations, would going for this degree be a mistake?
A: Yes, student loans are "good" debt, but only if they're manageable and necessary for your career goals. So first I would interview at least three respected people in your field for advice on the value of an advanced degree and the length of time it will take to recoup your school costs.
If you decide an advanced degree would pay off, try to wipe out current debts before you take on student loans. Also, pay all your ongoing bills on time so you can qualify for a Federal Graduate PLUS loan. There's no credit score requirement for these loans, but your credit will be checked to make sure you aren't chronically behind on payments. With a PLUS, you can borrow up to the full cost of school (minus any aid) at a fixed interest rate of 7.9 or 8.5 percent. Federal fixed-rate loans are preferable to private loans, which can have a risky variable interest rate. Then take things slowly; by returning to school part-time, you can earn income to support yourself and tuck away some money to repay your loans later.