advice-advise-advisor-7096 (1)Are you afraid of taking on tens of thousands in student loan debt? You shouldn’t be. While having debt isn’t good (because you owe someone), it can be used for good like getting more education or starting a business. Let’s look at Jane, a high school senior who is trying to decide what to do after graduation.

She is working retail and likes the money it brings her. After graduation, she would have to start

working full time making $8.50 an hour, which translates to $17,680 a year. That may seem like a lot for a young adult coming out of high school, but after taxes (assuming an 8% tax rate) she only has $16,265.60 left over for the year (or $1,355.46 a month).

Jane could also go to college in-state, which on average in the US costs $9,970 a year. She decides she can only work a part-time job (20 hours a week for $8.50 an hour) while in school so she will make $8,132.80 a year or $677 a month after taxes. She will spend on average $39,880 on tuition over four years, and let’s assume she takes a $10,000 loan during college. As a business major on average, she will make $58,000 a year after graduating.

Let’s assume Jane will work until she is 60 years old, which equates to 38 years of working. If she went to college, she would have $49,880 in debt (at 7% interest, which is the average interest rate for student loans) and make $53,360 after taxes per year. If she spent 80% of her money, she would have $10,672 per year to pay down her debt. It would take her 5.8 years to pay off her debt at this rate.

After 6 years, she will have paid off her college debt and will be making $40,320 (before taxes) more a year after going to college as opposed to working retail. That is an extra $1,290,240 over 32 years (38 working years minus her 6 years of paying off debt times her extra earnings of $40,320 which equals $1,290,240). Hence over time, a college degree could pay off if your expected income post-graduation increases enough.