Good debt, bad debt, student debt

Not all debt is bad debt, particularly if it allows for greater earnings power over time, writes Fawn Johnson to kick off National Journal‘s debate on student loans.

Borrowing money to go to college is not like paying for Corvette with a credit card. A Corvette only decreases in value. A college degree all but ensures stable employment. And student loan debt is not like short-term credit-card debt; it is structured to be paid back in reasonable slices over the long term. Obama released new guidelines last week reinforcing that fact, making sure that students know that they can cap their monthly payments to 10 percent of their incomes.

It’s not true that “a college degree all but ensures stable employment,”  I write.

Whether graduates can pay off student loans without pain — or seeking a special deal from the government — depends on the degree (accounting or Me Studies?) and the college’s reputation.

For years, students were told that college would pay off, whether they were going to a high-priced, third-tier private college for six years of beer and pizza or earning an associate degree in radiologic technology at a low-cost community college. It’s not so. Some college debt is bad debt.

Students need to be aware of their odds of completing a degree — how many C students earn a bachelor’s? — the starting pay in their chosen field and the low-cost paths to their goals.

Debt-laden students who’ve chosen the priciest college options don’t get much sympathy from Rick Hess. “Advocates use cherry-picked lending figures to demand stuff, and craven pols eagerly express sympathy by ladling up the goodies—and borrowing to pay for ‘em. And nobody blows the whistle on any of this, because doing so is to assure that one will be labeled heartless, mean-spirited, an enemy of higher education, and, for good measure, an elitist.”

POSTED BY Joanne Jacobs ON June 13, 2012

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