Student Loan Psychology
Posted by T.W. Hanson - Feb 4th, 2008 at 19:02
Our generation has been dubbed “Generation Debt”. This characterization comes predominantly from the financial hole many of us find ourselves in right after college. Public and private universities and colleges are expensive, and many of us exit these institutions with thousands, tens of thousands and even hundreds of thousands of dollars of debt.
The financial benefits of a college education typically far outweigh the costs. Take comfort in knowing that being 22 with student loans and an undergraduate diploma is usually better than being 22 without a degree. According to one study, over the average working life, high school graduates earn an average of $1.2 million, associate degree holders earn $1.6 million and bachelor degree holders earn $2.1 million.
When you see student loan dollars siphoned out of your paycheck for your college education, remember that this is often a good sign.
Try to avoid my biggest mistake of not budgeting for the cash outflows. When picking out my New York apartment after undergrad, I had heard that approximately 1/3 of your income should go to rent. Rules of thumb like this do not account for student loans. I unfortunately took the 1/3 advice, and my first 12 months in the city were difficult. I was in more debt after twelve months of work than before I arrived.
College is valuable for many people. If you like me are facing the debt associated with a degree, budget for it, keep making the monthly payments, and keep the prudent investment in perspective.
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Great perspective. A college degree is easily the best investment you’ll make in your life. As a fringe bonus, repaying your college debt helps build a healthy credit score that will help when you’re ready to take on even more debt for a house.
Comment by tad — February 4, 2008 #
[…] Hanson discovered this in his first year out of college, working in an industry that paid well but required high personal […]
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