Managing Finances

The Effects of Student Loan Debt on Career Choices

Guest Post provided by Cher Zevala

There is no denying that earning a college degree is a key factor in one’s career prospects. According to a recent study by CareerBuilder, many employers — more than 60 percent — are increasing education 

college graduation requirements for applicants. While it used to be possible to land a job with only a high school diploma, more than 40 percent of employers are now requiring at least a bachelor’s degree for those same positions. And if you want to advance even further in your career, there is a good chance that a master’s degree or higher is also in your future.

Most employers argue that requiring more education is a response to the ever-increasing complexity of entry-level jobs, and the need for employees who have a solid base of skills from day one. And of course, the job market is still tighter and more competitive than ever before, meaning that employers have a deeper talent pool to choose from, and are more likely to choose a better educated applicant. Yet all that education comes at a price — and it’s a price that’s having a profound effect on student career choices.

The State of Student Loan Debt

Today, the average college student graduates with nearly $30,000 in student loan debt. For some fields, including medicine and law, getting that coveted degree can come with debt that reaches well into six figures.

While carrying student loan debt certainly reduces the amount of one’s disposable income, it also has a major impact on overall financial health in the long term. For example:

  • Student loans affect retirement savings. Carrying student loan debt limits the amount of money that new grads can put into 401(k)’s and other retirement savings plans. The overall effect can be hundreds of thousands of dollars in interest lost.
  • Student loans delay homeownership. About 41 percent of those with student debt have delayed home ownership because of their loan payments — and nearly 30 percent of recent grads still live at home.
  • Student loans affect credit. Borrowing tens of thousands of dollars for education can impact your credit score, especially if you miss payments or default.

While these are all important considerations for borrowers, student loans can also affect another major aspect of life: Your career choices.

What Debt Does to Your Career

Many students enter college with a career path in mind. Just as many have no idea what they want to do. Given the cost of college, though, it’s becoming increasingly important for students to choose majors that will lead them into jobs that will pay them enough to overcome their debts. For many students, this means balancing passion and interests against the practicalities of both the availability of jobs and the salary potential.

Beyond redirecting students into more marketable majors so they can land a job after graduation, student loans can have other effects on one’s career, such as:

  • Stifling entrepreneurial spirit. New businesses are a key to the American economy, but high student loan balances are holding people back from taking the risk. About a quarter of new grads who say they would like to start a business are waiting due to student loans.
  • Delaying advancement. Despite employers requiring more advanced degrees, many recent grads are reluctant to go back to school and take on more debt, thus keeping them from advancing in their careers.
  • Limiting opportunities. Student loan debt can keep you from looking for opportunities in other cities because of living expenses, or even force you to take a job that you hate just because you need to pay bills.

Other Options

While getting a degree can be expensive, there are other options beyond taking out student loans. Grants and scholarships are always a viable option, of course, but with some creativity and willingness to be diploma and college graduation capflexible, it’s possible to graduate without debt.

For instance, those who have served in the armed forces generally qualify for military tuition assistance, which can cover up to 100 percent of tuition costs. Military service will also help develop additional marketable skills and create more opportunities.

If that isn’t an option, consider your local community college. A growing number of students are fulfilling their general education requirements at a community college, and then transferring to a four-year school to finish their degrees. This approach can save thousands of dollars, and allow students to explore different career options in a comparatively inexpensive environment. And speaking of career options, the federal government offers several loan forgiveness programs for those who work in specific public service fields, including teaching. Getting a relevant degree and taking a job in this arena can amount to significant savings.

There’s no doubt that earning a college degree is important. It’s also expensive. However, getting an education doesn’t have to affect your finances for the next decade — or few decades. Make smart decisions, be creative, and consider all your options, and you won’t be drowning in debt.

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