Student loans

September 9, 2010

This is an excerpt from an article in Yahoo Finance by Manisha Thakor.

“Don’t forget to ask “How high is too high for higher EDUCATION?” It used to be good debt was defined as mortgage and student loan debt… and bad debt was everything else. Not any more. We’ve now learned that too much of a good thing can indeed be bad. Rough rule of thumb, don’t take on more in total education debt than you think you are going to earn on average annually during your first 10 years after graduating (from college or grad school). In plain English, if you think you’ll make $50,000 a year, don’t take out more than $50,000 in loans. The logic behind this is that if it takes you more than 10 years of paying 10% of your income a year in student loan repayments, it’s going to be tough to meet your other financial obligations.”

It is obviously written in the USA but seems to me to be very applicable to New Zealand. I’d be really interested in what you think. Do you think it is a good universal rule? If you’re interested in the whole article here is the link http://financiallyfit.yahoo.com/finance/article-110224-6192-1-what-consumes-50-percent-of-your-earnings

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