College: Is It Worth the Debt?
Financial Expert Jean Chatzky: Good Debt vs. Bad Debt
Financial expert Jean Chatzky says there is good debt and bad debt, and educational debt is the good kind. "Good debt is the debt that gets you someplace," she says. "It's the home that you live in as long as you can afford it, it's the car that gets you back and forth to work—not your second or third car—and it's your education."
It's even more important to have an education during a recession, Chatzky says. "If you have that college degree, you're four times less likely to be unemployed," she says.
How can you prevent student loans from amounting to a lifetime of debt? Chatzky says to always choose federal loans over private loans. "A lot of people make that mistake," she says. Nearly two-thirds of undergraduate students who borrowed private student loans did so before exhausting all their safer, more affordable federal loan options, according to a 2007–2008 report from the Project on Student Debt.
It's easy to become overwhelmed when debt reaches the double digits, so Chatzky says it's essential to figure out what your monthly payment will be. Ask yourself: "Will you be able, having that much debt, to get an apartment? Will you be able to make your car payments? Will you be able to have an adult life?"
If monthly payments will be tough to make, think carefully about the cost of your chosen school and take less expensive options into consideration.
There are a lot of things Alan Collinge wishes he had known before he took out a private student loan to attend the University of Southern California. After missing a single payment, Colligne's original $38,000 loan was pelted with fees and charges. Within 14 months, his debt ballooned to $80,000.
Collinge's 3,000-plus member website, StudentLoanJustice.org, acts as a host for stories like his, many from people who have defaulted on their student loans and are struggling to pay them back.
Through his website and book The Student Loan Scam, Collinge hopes to pressure Congress to restore standard consumer protection on student loans. "There is no bankruptcy protection, no statutes of limitations, and there is a very predatory collection system waiting to pounce when you default," he says.
After all he's seen, Collinge's advice is to stay away from student loans altogether. "My first piece of advice is don't borrow. Period," he says. "I think it's a difficult goal to reach, but I think it's a very wise goal to set for oneself."
If student loans are a must—like they were for the 67 percent of students who graduated with debt last year—Collinge says to be shrewd. "Invest a real, significant amount of time to do any sort of cost-benefit analysis they feel is necessary with their parents, counselors or whoever else," he says." The time that they spend now could save them literally a lifetime of financial woe."
Adding an extra year of college can quickly botch a budget, but sticking to a four-year plan can be tough for students who have no idea what career path to choose.
To discover your passion before heading off to college, career expert Marcus Buckingham says he uses the same principles for adolescents that he prescribes to adults: pay attention to your activities and be precise.
Take a memo pad around with you for a week. Capture the activities that make you feel strong and the ones that leave you feeling weak. Notice what you're drawn to reading in magazines or the paper, which moments you find yourself looking forward to, the events where time flies by. Do this practice for at least two weeks in different circumstances.
Once you have a list of activities, drill down and get specific about each of them. Does it matter when you do it? Who you are with? What are the details that are important to capture about these activities?
Pick your top three strengths, and then start your research. What roles would allow you to use these strengths? What ways can you contribute these to the world? How can you serve while engaging that which makes you feel full and alive?
Always keep your attention trained on the specifics of which actual activities give you the biggest kick. These precise activities are raw material for building your passion. Passion is useless without precision.
Despite how it might be presented, Buckingham says passion is not found way up in the sky, in far-flung dreams and hopes. "It can be elusive to some, perhaps because they're waiting for a lightening bolt to strike and to have the answer written out in the clouds or in their tea leaves," he says. "Passion is far more practical. Passion lives at ground level, in your day-to-day activities. Look for it, claim it and figure out how to channel it to contribute your best. This is the surest way to career fulfillment."
Do you think a college degree is worth taking on debt? Share your story and leave your comments below.