‘Could a moderate amount of student loan debt encourage better choices in education?’ I have to decide between funding a 529 or raising a self-reliant child. What should I do?

Hi Money Minder,

So, get this – my coworker tells me this crazy idea about how they only paid half of their kids’ college tuition, even though they could afford to cover it all. Their thinking was that it would make their kids take their education more seriously. Pretty wild, right?

I started thinking, could having a bit of student loan debt actually be a good thing? Like, maybe it would make students think more carefully about their choices when it comes to their education. You know, like picking a major that’s practical versus one that’s just for fun, or considering going to a cheaper school instead of an expensive one. The idea is that having to pay back loans could make students make smarter decisions about their future.

I’m curious to hear what others think about this. Let me know your thoughts!

Take care,
College Conundrum Guy (USD)

Response from THE MONEY MINDER:

Hello There,

While debt is often seen negatively, there can be value in having a moderate amount of student loan debt to instill a sense of responsibility in students regarding their education choices. By only covering half of their children’s college tuition, your coworker aimed to ensure their children had a personal stake in their education. This approach could indeed prompt students to make more pragmatic decisions about their academic and financial futures.

Having students contribute towards their education costs can encourage them to carefully weigh factors such as the choice between pursuing a passion or a more employable degree, as well as considering in-state public universities versus pricier private institutions. The idea is that the responsibility of repaying loans could lead to more thoughtful decisions and a better understanding of the consequences of their choices.

Ultimately, striking a balance between shouldering some of the financial burden themselves and taking on a manageable amount of student loan debt could help students become more invested in their education and future career prospects. It can be a practical way to teach financial responsibility and decision-making skills while also allowing them to pursue their academic goals. Thank you for sharing this thought-provoking perspective!

Farewell,
THE MONEY MINDER