I read a lot about personal finance. Ever since taking a class as a high school student about personal finance, I’ve been one of those weirdos who actually enjoys budgeting. When you don’t have a lot of money it’s a challenge; when you do, it’s even more of a challenge. (More on this in a later post.)

The best personal finance writer in existence is Liz Pulliam Weston, hands down. You don’t have to agree with me, but I’ve read her work for years now and I think that she has a wonderful ability to balance deep analysis of complex problems with compassion for fallible human nature. But her real talent lies in her ability to do both of those things and still pick readers up by the collar and give them a swat in the behind to get moving – in articles of two pages or less.

She’s a genius.

Anyone – students, parents, would-be grad students – thinking about student loans should first read Liz’s article, “How Much College Debt is Too Much?”. I wish I had before making my college selection,¬† especially since I didn’t have a very good sense of what it was going to cost me to attend that “experiential” school.

Had I known I would wind up $31,000 in debt, I might have reconsidered.

As Liz shows, going into serious debt for college degrees that don’t pay well make life pretty difficult long after that last keg-stand.

At 8%, each $1,000 you borrow will cost you about $12 a month to repay, assuming a 10-year loan. If you’re a student and you borrow the maximum allowed under current federal student loan programs […] your monthly payments will be around $276.

That payment level should be manageable if you’re making at least $33,000, which means you’d better be an accounting or business major. Starting salaries in those fields range from about $36,000 for business administration types to $43,000 for management-information-systems graduates.

Liberal arts grads, on the other hand, generally have to settle for salaries under $30,000 to start.

Beginning pay for psychology majors is about $26,000, while English majors are getting about $28,000. At those pay levels, you’re better off borrowing no more than about $18,000 over your college career. [emphasis mine]

Did ya get that? Tech jobs pay. Business administration and accounting pay less well. Forget psychology; even English grads do better. And I had $31,000 in student debt and was very lucky to find a job paying exactly that starting salary. In the most expensive city in the country. Was I an idiot or what?

Don’t be like me.

If you’re looking at attending one of the most expensive colleges in the country, you are going to need either a substantial trust fund or a financial aid package offering something close to a free ride to pay for it. Before you sign on the dotted line, ask yourself this: am I willing to spend the next twenty years paying for four years of self-discovery?

What if you want to go to grad school? What if you want to buy a home? Even if those ambitions aren’t on your radar yet, how about having the flexibility to quit your job and travel? What if you can’t find a job or get laid off?

Come hell or high water, those student loans must be repaid.

Education is a product that schools compete to sell to you. Rather than approaching school with some arty notion of experiences and developing self, think about choosing a college in terms of buying a car. You want the very best model you can afford, one that will last you a long time. One that won’t cost you a fortune in repairs. One that looks nice is preferable, of course, but you want a car that’s going to get you places. Which means that you really shouldn’t be shopping for a Porsche when a Honda best fits your budget.

If a college really wants you, it will provide its services at no or at reasonable cost to you. If it’s the other way around, you’d better make the experience so good¬† that the sacrifices you’ll have to make for the rest of your life seem still seem worth it in twenty years.

Having BTDT, I would not recommend that path. There are many experiences in life. Why limit yourself to a life of debt slavery when there’s so much more to experience?

This isn’t to say that you shouldn’t take out loans ever. My point is that if you are looking at an associate’s or bachelor’s degree, you shouldn’t be taking on $30,000 or $50,000 in debt. When student debt is used judiciously, it dramatically increases your standard of living. When abused, it becomes an anchor preventing you from living a full life.

Student loans are often called good debt, but no debt is good if it consigns you to debt slavery. I see a lot of students who gamble heavily on the value of their degrees. If you’re going to gamble, know your chances of winning and bet accordingly.