AARP Hearing Center
That's it! It's time for a change. You've plateaued in midcareer, your work life seems unbearable or you're just plain bored. Should you go back to college for additional training — and take out student loans — in the hope of improving your circumstances? Financial advisers and workplace experts agree that adding debt for a career boost can be risky, and one that you'd be wise to ponder carefully.
Debt versus long-term financial health
With sound financial planning, people can pay off student debt while meeting other financial goals. “Student debt is very prevalent but not burdensome in most cases,” says Scott Hammel, a certified financial planner at Apeiron Planning Partners in Dallas.
For some, however, student debt can cause more problems than it solves. Belle Osvath, a certified financial planner with VLP Financial Advisors in Vienna, Virginia, sees student debt as a much bigger issue with some of her clients — so much so that she sought additional training to become a certified student loan professional (CSLP) in order to provide counsel about the federal payment options. “It's shocking how complex the plans are,” she says.
What's more, Osvath says the amount that some people take on can be startling — and may affect their ability to build wealth and plan for a secure retirement. It's a bigger problem now with the pandemic, especially if someone was underemployed before it hit a year ago. “I had a client who had over $400,000 in debt from undergraduate school, an MBA and law school,” she says. A typical rule of thumb is that your total debt payments — student loans, mortgage or rent, and credit cards — shouldn't be more than 36 percent of your gross income. Another rule of thumb: If your total student debt is less than your total income, you should be able to repay it within 10 years.
Roger Young, a senior financial planner at T. Rowe Price in Baltimore, recommends that, whenever possible, people limit their borrowing to federal student loans, which allow them to borrow what will be, in most cases, a manageable amount. “The federal program also allows for income-based repayment, deferment and forbearance options if things don't go as planned.”
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