A recent Forbes article described student loan debt as both the best and worst debt you can have, and what they said made a lot of sense (as you’d think it would being Forbes and all).
How can student loan debt be good? Well, when it improves your financial future. Money for education is an investment, and just like in business, your financial success depends on your return on investment (or ROI).
On average, according to the US Department of Education, getting a college degree will see your initial earnings jump at least 25% compared to only earning a high school diploma.
However, when talking ROI, you need to look at how much money you’re taking out from student loans compared to an initial salary of your desired career field.
Among college graduates, engineers have the highest average starting salary with an average first year earning of $62,062, while humanities and social science has the lowest at $37,791.
It’s important to research the average starting salary of your desired career field before taking out student loans.
That’s where this question comes in…
How can student loan debt be bad? Well, when you don’t do the research and don’t think about ROI, you can be burned.
Forbes uses a great analogy – think about buying a house.
When buying a house, the collateral for the loan (mortgage), is the house. If you don’t pay your mortgage, the bank will take your house.
Well, if you don’t repay your student loans, something has to be taken as collateral, and in this situation, the government will begin to garnish your future earnings. You don’t want to become the student loan borrower who had his or her tax refunds or Social Security checks taken away, do you?
Instead, do the research and keep a simple ratio in mind – The Student Loan to Salary Ratio. Take the initial starting salary and divide by the amount you would have to borrow to pay for that degree. The higher the ratio, the better.
To avoid bad student loan debt, do your research and only take out the amount you need to pay for your college necessities – not a new car or a fancy spring break.
If you’re someone who’s currently in student loan debt and aren’t sure how you’re going to be able to pay it back, you should consider filing for bankruptcy.
By filing for bankruptcy, you can either reduce or delay your payments through a Chapter 13. By delaying your payments, you can pay off the rest of your debt to free up more of your income to pay back your student loans after the bankruptcy is complete.
You could also discharge all of your unsecured debts through a Chapter 7 bankruptcy, which will also free up more income to pay back your student loans after the bankruptcy process is complete.
And you shouldn’t feel like a bankruptcy is a bad thing. Here in the US, we don’t have to live enslaved to debt and are offered a second chance through the bankruptcy process. It’ll give you a clean slate and a fresh start to spend and save the right way.
At Darrell Castle & Associates, we not only want to help you get out of debt through a bankruptcy but also want to help you recover from it. We do so by offering you access to a great 14 week program called 7 Steps to a 720 that will teach you:
- how to rebuild your credit the right way
- why most credit scores are wrong
- which credit cards actually hurt your credit score
- how to stop lenders that report the wrong information
- how to re-establish your credit after a bankruptcy
This program is offered free to our clients.
If you have any questions or if you’re considering filing for bankruptcy, you can speak to one of our experienced Memphis bankruptcy attorneys free of charge by filling out the “Get in Touch” form below or by calling (901) 327-2100.