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College: Still a Good Investment

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Want to make $650,000? Go to college.

The headlines seem to be full of stories about recent grads struggling with crushing student loan debt and working low paying jobs to make ends meet with no prospects and no relief in sight. It used to be that everyone was given the advice to go to college (for something, anything) - but is it still a good idea, especially if it means the student is saddled with debt?

College students do carry education loan debt - but it's not as bad as sensational headlines would have us think. The New York Federal Reserve Bank reported that fewer than 1 in 30 students have debt loads above $100,000 and economists still affirm that borrowing for college is a good investment. Even though the market is tight right now, college grads still earn more ($650,000 in a lifetime), are more likely to have health insurance, retirement savings and longer lives.

Congress passed regulations to protect student borrowers from themselves - they've capped loan amounts so that no one leaves college with a debt burden disproportionate to earning potential. However, young people can still get themselves in trouble by borrowing from private lenders - who now have the same bankruptcy protection that federal loans have. So - private lenders may be tempted to extend too much credit, borrowers are then likely to struggle with repayment but have no way to escape the debt.

The average college loan is right on par with the average new car loan - around $27,000. Student loans can be spread over decades, making the payments very manageable, and making borrowing for college a good bet. In fact, new options are income-contingent and payments are capped at 10% of discretionary income and the balance forgiven after 25 years.

Of course, borrowers need to consider the earning potential of their chosen fields. Artists and archaeologists probably should keep their loans to a minimum. Engineers and nurses are clear to borrow more since the employment outlook is good.

If you're thinking about student loans, give us a call or check out our online information to get started with a low-interest education loan.
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