How Much Debt Is Too Much?

Joel96
Fri, 25 Oct 2013 16:45:44 +0000

I’m currently in the midst of the college application process, and I was wondering what everyone’s take on student loans, debt, etc. was. From talking with counselors, teachers, classmates, and parents, there seems to be two main schools of thought:

Cheap School and No Debt: Go to an public instate school and graduate with a degree and little or no debt. In the short run it’s definitely the more financially sound option.

Quality School and Higher Earnings: Go to a more expensive, out of state and/or private school and take on debt in process, but graduate with a more valuable degree which will translate to higher earnings in the long run.

It’s difficult to assess which option would be the most practical. Looking at it from an economic perspective (which is fun, since it’s what I want to major in), it can actually be more expensive to go to a cheaper school as the long-run cost of attendance can become enormous when you factor in lost income over the course of a career. For example, it may be more expensive to pay for an Ivy League education than for an instate public school, but your average Yale alumni is going to make a lot more money over the course of their working lives than your average graduate of say Ohio State.

But you could make the same economic argument in the opposite direction, as in the long-run the burden of student debt can balloon in the form of interest payments, damage to your credit rating, and lost peace of mind. Also, you can’t ignore outside factors. While a generic Yale graduate has better job prospects than a generic Ohio State graduate, there is no guarantee he or she will be able to find a high-paying job quickly.

I was wondering if anyone had an opinion on this. There’s not going to be one definitive answer, but it would be a good idea to discuss the question and see if there’s any kind of consensus. When does the cost of going to a great school outweigh the benefits of having a degree from that school? Or, alternatively, when are the benefits of attending a cheaper school outweighed by the long-term costs of not going to a better college?