Forbes recently examined the financial impact of college debt, looking at both the short and long term implications of some pretty hefty student loans. Forbes draws interesting comparisons between the rapid accumulation of debt for degree programs and the mortgage craze of a few years ago.

As the article points out, a lot of students get in trouble racking up debt for degree programs that ultimately may have little impact on their income. Just as in the mortgage mess, there are some striking similarities between the availability of mortgage loans to finance overpriced homes, and student loan for degree programs of questionable value. As the article states, the parallels are uncanny and troubling:

Misguided easy-money policies that are encouraging the masses to go into debt; a self-serving establishment trading in half-truths that exaggerate the value of its product; plus a Wall Street money machine dabbling in outright fraud as it foists unaffordable debt on the most vulnerable marks.

While there are many very good degree programs, there seem to be a growing number of schools and complicit loan providers providing education and the means to pay for it with highly inflated claims of value. The most important takeaways:

• Know what you are buying when you pay tuition. The real value of getting a college education is expanding your personal horizons. If you don’t absolutely love the program of study, or at least believe it will improve your income down the road, you probably shouldn’t be spending your time or money getting a degree.
• Recognize that every college degree does not necessarily increase your earning potential. The employment market determines whether a degree will add to your personal income. For better or worse, some degrees are simply worth more than others.
• Shop around for college loans just like any other financial product. Avoid paying unnecessary loan origination fees and inflated interest rates.
• Just as you should carefully evaluate a loan offer you get in a car dealership, you need to be equally wary of financial aid officers – especially if their primary job is to sell you a degree program. Sadly, their motivations are often the same. “What would it take to get you into a degree program today?”

You can read the full article here.

(Photo Credit – marganz)