We’ve covered before on the blog how debt can limit your options in life, even if it is statistically “worth it.” While taking out loans to get a college degree in a specific trade may seem to be “worth it” for getting a specific job, the resulting debt drives candidates on the job market to focus on higher-paying jobs that they otherwise wouldn’t apply for and won’t enjoy as much as lower-paying jobs:
In other words, the lower your wage requirements, the more flexibility you have early on to explore and test and find work you love. Keep that in mind with each step. Ask whether your present decisions are limiting your future options in a way you might regret.
The New York Times explained this week how this can debt also restricts us from being entrepreneurs. Even if we think we want to go into debt to get a degree and then pursue our entrepreneurial idea, or our dream of working at a unique startup, the fact-of-the-matter is that fewer and fewer graduates with debt are willing to do this.
The NYT piece notes:
What are the roads not taken because students must take out loans for college? A collection of studies shows that the burden of student debt may well cause people to make different decisions than they would otherwise — affecting not just individual lives but also the entire economy.
For one thing, it appears that people with student loans are less likely to start businesses of their own. A new study has found that areas with higher relative growth in student debt show lower growth in the formation of small businesses (in this case, firms with one to four employees).
Even more, debt affects the likelihood of becoming a homeowner at an earlier stage in life, even for those who don’t wish to become entrepreneurs:
Student loan debt also appears to be affecting homeownership trends. According to research by the Federal Reserve Bank of New York, fewer 30-year-olds in general have bought homes since the recession, but the decline has been steeper for people with a history of student loan debt and has continued even as the housing market has recovered.
This doesn’t mean that taking out loans can’t have a useful value depending on what your dreams and desires are. If you want to have a very specific job in a very specific trade and the only way of achieving that is to take out loans, then that’s the best route for you. But the problem isn’t that we have persons who should be going into debt taking out loans; rather, we have a culture that views college debt as a universally good investment, when in reality, it varies from person-to-person.
If you want to be an entrepreneur, or even an intrapreneur in an innovative company, or a homeowner, or somebody with career freedom, then be careful not to fall into the social debt-acceptance culture.