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How Much Student Debt Is Reasonable?

Asbjorn Osland
January 1, 2017
SKU:
EDU-004852
Region: 
North America
Topic: 
Strategy & General Management, Accounting & Finance
Length: 
3 pages
Keywords: 
Debt, student debt, career planning, Education, Higher Education, opportunity cost
Student Price: 
$4.00

Sarah had a variety of options for college. She could save money by attending a community college close to home for the first two years and then transferring and commuting to San José State University (SJSU). Returning to the University of California, Santa Barbara (UCSB) was her other choice, though she would probably accumulate debt of around $65,000. She wanted the college experience of living on campus away from home at a good school like UCSB. She planned on majoring in environmental studies; environmental jobs could pay around $68,910. The rule of thumb used for debt limits was that debt should not exceed the first year’s income. This critical incident deals with making a choice regarding student debt. For college students, questions such as the following should be considered: 1. How much debt is reasonable? 2. If education is prolonged by working, what is the opportunity cost? 3. How much could parents realistically provide? 4. How frugal can you be at school? The decision involves Sarah’s immediate choice between the low-cost option or returning to UCSB.