Navigating the World of Student Loans
Dear Carrie: I'm collegebound and beginning to look at financing options. Given the sometimes alarming headlines about student-debt levels, should I be worried about overextending myself? -- A Reader
Dear Reader: The headlines are indeed alarming:
-- "The Student Loan Debt Crisis Is About to Get Worse" (Bloomberg).
-- "Student Loan Debt Statistics in 2018: A $1.5 Trillion Crisis" (Forbes).
-- "The Student Debt Problem Is Worse Than We Imagined" (The New York Times).
However, student debt doesn't have to be overwhelming. In fact, when used responsibly, it can lead to a more secure future.
That's because debt often fits into one of two categories: bad or good.
Borrowing at a high interest rate to buy a depreciating asset -- like using credit cards to pay for clothing or other consumer goods -- is the kind of bad debt that can undermine your financial stability.
Borrowing at a reasonable rate to buy an asset with the potential to appreciate, on the other hand -- like securing a mortgage to purchase a first home -- is the kind of good debt that can actually pave the way for a better future.
So which camp does student debt fit into? Potentially either, depending on the amount of debt, the terms of the debt and your ability to pay it back. Let's take a look at how you can manage student debt so it works in your favor.