Student Loans

When college students dig the hole of student loans, where is the dirt? Is the degree they are getting a solid asset that could easily fill in the hole that debt creates? The answer is kind of. Less than half of people who get a degree work in the field they studied for. I have a degree in Bible and another degree in Worship Arts. I have just started using these degrees, but for the past decade, I have been in the insurance industry. I fit the category of half of the population that went into debt for a degree that we’re not directly using. 

Should you go to college or not? That is the great debate. Is college useful anymore and if so, is the degree and the income that it promises worth going into debt? It’s time to allow wisdom to guide our path as we think about whether or not this debt is backed by an asset or is unsecured. 

What degree are you contemplating? It is possible to get a degree in Bagpiping. This ancient instrument is extremely cool and I’m sure there are many parades that would love to have you march with your droning pipes. But is it worth $120,000 of student loans? If you dug a $120,000 hole, how long would it take to fill that back in based on your bagpiping expertise? What are the opportunities for someone who has this sort of degree? What is the likelihood of a consistent paycheck? And if there is a consistent paycheck, how long would it be before you made enough money to pay off your $120,000 loan? If I had to guess, quite a while. This would be a very risky. This loan wouldn’t be very secure. If I am using wisdom and I really wanted to major in bagpiping, I would try to get as many scholarships as possible and would be extremely hesitant to get any loan at all as this loan would be scarily close to a fully unsecured loan. 

What if you’re contemplating a law degree and after applying, got into Harvard? Harvard Law graduates who get jobs at law firms, can make just over $200,000 on average their first year out of school. From there, their salaries only go up, and potentially, over $1,000,000 a year depending on their career trajectory and field of practice. What if you needed to take out $120,000 of student loans in order to get this degree? Would you think that it is a different consideration than the same amount of debt for a bagpiping degree? Absolutely! Why? Because that specific education actually has a rather predictable return on investment. Is a Harvard Law degree a 100% secure asset? No. It is not a house. It isn’t something that can be sold at one time to fill in the hole of debt. However, does it provide a more secure path towards filling in the hole? Absolutely. The dirt might not be right beside the hole, but there’s a dump truck full of dirt on its way that will be here in a year or two. 

Again, I’m not telling you that student loans are either good or bad, but I am saying that all student loans are not created equal because the education they are purchasing is not created equal. A college degree isn’t a prerequisite for success. A college degree can certainly be helpful, but if it requires you to dig a hole deeper than you’ll be able to reasonably fill in, it is not worth going into debt. 

Many people are shocked that I don’t include paying off student loans as a step on the Fuel Gauge. I want to be clear. I do not know the level of student loan debt that you have. I do not know the level of interest you are paying on those loans. The reason I don’t include paying off student loans is because for the vast majority of people, that would be a massive target and one that is going to take time. When you took out student loans, hopefully you did so with the understanding that your income would benefit from the degree and allow you to pay back the loan over time. Fantastic. If you are paying back the loan and your degree has increased your income, then keep it up and continue to make payments, knowing that you planned for it to take a bit of time. If you’re not drowning in student debt, then keep making progress and keep working your Fuel Gauge at the same time. 

Student loans are not one size fits all. Student loans should be considered carefully and obtained only if you are able to justify their predictable return on investment. Paying cash for college is always best, so even if you can’t pay cash for all of it, work hard and get as many scholarships as you can. Lowering your debt burden will free you up to run after the beautiful life God has for you. If you have student loans and are making your payments, there is no need to freak out. However, after you have completed all 8 steps on your Fuel Gauge, you should begin to look at making extra payments to lower your debt load and free you up towards your financial goals!

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Zach Santmier is the owner of Trumble Agency, Inc. and the author of the personal financial course, Increase. He focuses on helping families escape paycheck to paycheck living so they can freely pursue their ideal future.