A recent segment of CBS Morning News featured a young woman who’d racked up $61,000 in student loan debt in her quest for a career in the arts. At the time the segment aired, she’d paid off about $27,000 of that debt. That should be good news, right?
Not in this case.
The very, very bad news, according to the broadcast, is that her debt had ballooned to $66,000 because her payments had been too small to cover the interest. The woman said she had not read the fine print on her student loans.
The kicker: She is not working in the arts in her dream job as a museum curator. After five years of working various part-time arts positions, at the time of the broadcast she was thirty-two years old and working for a tech startup.
Unfortunately, her story is not that unusual in the United States. The same CBS news segment reported that on average, Americans graduate college with about $28,000 in debt. So, before we even set foot into the workforce, many of us are already facing an uphill battle.
But it doesn’t have to be this way. It’s all about the choices we make. Before you accept a financial aid package that includes large loans, consider several critical factors.
- What does your dream profession pay?
- Is the competition for jobs in your dream industry extremely tough? Does your industry boast many jobs, or are they in short supply?
- Can you work while in college to reduce the amount of loans you would need to take out?
- What is the prognosis for making significant payment progress on your loans in the first five years after college?
- Would you have to take out high- or low-interest loans?
- Are you OK with the notion that you may have to delay for a decade or more other dreams, such as a home, nice car, travel, perhaps children, in order to pay off your student loans?
There are more factors to consider, of course, but here we will deconstruct the questions just posed.
Factor 1. If your dream profession pays well from the get-go with a trajectory of much higher pay as the years go on—and it requires an advanced degree that typically costs a pretty penny to attain (medical school, for instance)—then go for the degree. In this case, those high loans you take out may be the best investment you could ever make. But if you’re looking at a profession that typically doesn’t pay much and may offer downright low wages or few opportunities, don’t take out back-breaking loans that will put you in a payment rut for untold years to come.
Factor 2. If competition in your dream industry is extremely tough and your dream job is in short supply, seriously consider whether it’s worth paying high student loans. Consider your current financial state (will you be able to handle those loans if your dream job doesn’t work out—do you have a strong backup career plan?).
Factor 3. Working while in college can reduce your reliance on loans. But the big question is whether working will negatively impact your studies. You may have a lower loan bill when you get out of school, but will you look as attractive to your dream industry with lower grades or fewer internships, if any, because you were so busy working?
Factor 4. Maybe the pay in your chosen industry isn’t the best in the first couple of years, but opportunities for strong advancement and serious pay raises generally kick in within five to seven years. And if this is an industry with plenty of jobs on offer, this raises the chances that you could be making good money down the road. Take these factors into account when considering taking out hefty student loans.
Factor 5. If the loans on offer are high interest, as in the CBS Morning News example, think more than twice before accepting them. Try to snag a low- or lower-interest loan, and if you can’t, reconsider whether you really need to go to the school that is offering the loan(s). Many good schools may cost less, offer a more competitive financial aid package, and can still get you on your way to your dream career.
Factor 6. If putting off personal life dreams for years and, in some cases, a decade or more because of high student loan payments makes you want to dissolve in tears, don’t take out the loans.
In closing, there can be many ways to get the education you need to have a shot at your dream career. First, be realistic about the opportunities and pay offered by your dream industry and gauge how the price tag on the schooling you seek can put you ahead or behind. Make a wise decision based on now and the future. It’s good to have a dream, but you need to be clear headed and realistic about potential opportunities.
It’s all part of careering.