Student Loans: “Good Debt” or “Bad Debt”
Is there truly such a thing as “good debt”? While looking around the PF blogger community, there are some who think of debt in terms of “good debt” vs “bad debt”. One type of debt that seems to be debatable is student loans.
According to a recent article on Time Magazine’s website, student debt has increased over 300% in just ten years, (2003-2013) while the average American’s debt has risen just 43%. While I think 43% is bad enough, 300% just for student debt is outrageous!
The article goes on to say that many, many graduates are so burdened by student debt that they are forced to move back in with their parents after graduation and even post-pone other life events, like marriage, home and car ownership.
This news is eye-opening and scary, but what’s worse is how the rate of student loan delinquencies has risen. Delinquency has nearly doubled in the last decade, and the rate used for determining delinquency does not take into account the number of students who sought out payment deferments. Time estimated that with deferments and forbearances included, the delinquency rate would double yet again!
So, do we really think student loans are a “good debt”? I know I certainly don’t differentiate between my student loans and my consumer debt. It’s all debt and it all has to be paid off. I was lucky, I only had one year’s worth of student loan debt when I graduated college, I can’t imagine being one of those students struggling to find a job with a student loan balance much, much higher than mine. Kudos to those of you who have been there and done that!
The real question is, how can we break this cycle? I’ve talked before about how I don’t plan on having kids, but if for some wacky reason I do become a mom, I know I will be working to put money away for my kids. I will also be encouraging those close to me to put money away for their kids’ for future education expenses.
Now, I’m no saving expert, but I think I would look into all the options before choosing how to save. Maybe you should consider saving in a traditional savings account rather than an education/college specific account. You can’t see what the future holds and while a traditional savings account may not pay as much interest, there is a lot more flexibility in case your children or future children decide not to go to college. I think the traditional savings account is the route I would go if it were me because you never know what the future will hold*.
Do you think student loans are good or bad debt? Will you be saving for your children or future children’s education expenses?
*Disclaimer: I am not a Personal Finance expert. I am merely stating my opinion. You have every right to disagree. I encourage you to seek out professional assistance before doing any investing.
Photo courtesy of: DonkeyHotey
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