by Brett E. Kennedy, Managing Director
Another presidential candidate has shared a policy proposal that would forgive all student loan debt in the United States. A different candidate had put forward a proposal to forgive student loan debt within certain income parameters. These proposals made me think about the question of whether it is a good idea to borrow money for college.
From my perspective, the answer is it depends. The reality is that for students and families that don’t have savings or assets student loans can represent a great way to locate funds to use for education at competitive interest rates. Parents can even borrow money to use for the higher education of their students albeit at higher interest rates than in the student loan programs.
As a student loan borrower myself, the challenge with student loans is not the whole notion of borrowing but instead with borrowing too much. Unfortunately, there is not an easy metric to determine what is too much. To every family that I work with, I ask the question what do you feel comfortable borrowing. The loan limits on dependent student borrowing at the undergraduate level keep these amounts in check. Where families get into real trouble is with PLUS or Parent Loan borrowing or with private or alternative loans. Again, the terms are not predatory but you have to manage carefully the amounts you are borrowing.
So borrowing for college is not inherently a bad idea but students and families need to be careful on how much they borrow.