The Wisdom of Student Loan Debt
A Cautionary Tale

It may feel like "free money" but there are pitfalls that can haunt for decades. Be Careful.

Using the money for educational goals is the intention. But too many borrowers misuse the money for rent, restaurants clothing, and electronics. Loan money should be spent sparingly and specifically for tuition. Loan money should be used to supplement the income from a job or don't borrow.

Borrowing may be the only option for achieving educational - goals that have been studied and researched to provide living wage jobs or careers at graduation. And speaking of graduation, some students change career direction and do not get a diploma but have a debt commitment nonetheless.

So be careful signing documents whose consequences are not understood. Have a plan. Have a budget. Go ahead. Go to college. Just do not get saddled with a lifelong burden. Oh and, by the way, bankruptcy does not wipe out student debt.

So, bottom line:

Research the return on your financial investment for potential career opportunities. Explore financial opportunities besides loans such as scholarships, work-study programs and family contributions. There are different types of loans - federal and private. Study the differences. Focus on the interest rate - understand percents - is it a "fixed rate" or does it "float"? Many loans accrue interest from the moment the paperwork is signed. The interest can significantly increase the total amount owed. What are the repayment terms? Will the monthly pay back amount be manageable. How much debt is really necessary to take on relative to the expected income. Research the job market. Taking on a loan is an investment and the "return on that investment" (ROI) must be considered.