Is a Finance Degree Worth Taking Out Student Loans? | Pros & Cons

Job Security

People with finance degrees find it easier to secure jobs in their fields since they're employable across many industries. Student loan debt is sometimes necessary to attain long-term employment in a financial role.

Career Advancement

An undergraduate degree in finance opens many doors. Promotions can come with good performance reviews and a solid work history, allowing employees to move from entry-level accountant or planner roles to management positions. As businesses grow, positions requiring financial expertise become more important, providing further career advancement.

Wealth Building

People with a college degree and a good salary have more income to invest. With a bachelor's degree in finance comes knowledge of wise investing, which can help to increase wealth in other ways. Having significant knowledge of finance can also benefit one's personal finances.

Degree Costs

After adjusting for inflation, the net costs of full-time, four-year degree programs at both public colleges and private institutions fell slightly in the last 10-15 years, according to the College Board. That makes the cost of a finance degree more affordable in relation to students' incomes.

Longer life

College graduates' lifespans have increased by 2.5 years, says a medical school study. A grad can expect to live a decade longer than someone with a high school diploma.

Types of Finance Degrees and Career Paths

Finance is a broad category that encompasses business and investing, data analysis, and planning skills. Career paths in private business, nonprofits, government, and education are plentiful for those with a solid background in finance. Various majors or concentrations within finance can help people with different skill sets find a range of roles in the field.

Associate of Science in Accounting

Keeping track of a company's cash flow is just one accounting function. Accounting degree programs teach students to reconcile accounts, perform audits, and prepare reports to track expenses and depreciation.

Understanding applications of business tax policies is another important aspect of an accountant's job. Depending on the size of the organization they work for, accounting grads may specialize in payroll, budgeting, or compliance aspects of business finance.

Bachelor of Science in Financial Planning

Financial planners provide time-sensitive information and projections based on economic trends, guiding clients and investors through financial decisions. Students who major in financial planning learn to interpret data, project outcomes, and prepare reports.

Graduates with financial planning degrees may work in businesses as investment planners or as wealth advisors with individual clients.

Bachelor of Business Administration in Finance

The Bachelor of Business Administration with a concentration in finance combines many aspects of running a business. It provides a broad overview of finance as applied to business functions with topics like reconciliation, auditing, and tax preparation. These concepts, along with data analysis for financial planning, allow for a degree that is broadly applicable to business functions.

Master of Business Administration with a concentration in finance

This advanced degree prepares students to make strategic financial decisions for businesses based on their knowledge of trends, economic forecasting, and a business's performance. Students who complete this master's degree manage businesses by assembling a competent team of mid-level managers who inform company decisions and accept responsibility for successes and failures.

Should Finance Majors Take Out Student Loans?

Student loans are often necessary for getting a finance degree. Statistically, Ivy League degree holders make significantly more money during their careers than state school graduates; however, the cost of attending these schools is significantly higher.

The type of college loans you get impacts future income too. Students eligible for federal loans get the best terms due to their income. Federal student loans have fixed interest rates and repayment plans that don't exceed a percentage of the borrower's earnings. Likewise, low-income applicants can get subsidized loans, in which, the government pays the interest until the student is out of school.

Students of moderate- to high-income families are less likely to get federal loans but may get parent loans or private student loans administered by banks and financial organizations. These loans have higher interest rates and stricter repayment policies, such as requiring payments while the borrower is still in school.

Federal student loans and parent loans can be paused for financial reasons, and borrowers can choose repayment options. Private lenders are not obligated to offer those terms. Loan forgiveness for public sector workers (e.g., schools or governments) is possible with parent or federal loans but rare for private student loans.

Pros and Cons of Student Loans

Student loan debt can create stress for students. However, there are both positive and negative aspects to borrowing for higher education, including adding motivation for success. Some of the pros and cons include:

• Repayment requirements: All loans require repayment when a student leaves school or reduces their class load below a certain level. The borrower must understand the rules for each loan and be proactive, discussing a potential grace period with the lender before repayment requirements kick in.
• Keeping Track: Students may accrue several loans during college. Keeping track of all student debt paperwork and consolidating them into one monthly payment can smooth the process.
• Cosigners: Students with an insufficient credit history are required to get cosigners or co-borrowers on student loans. A loan agreement is a legally binding contract, so it may be hard to find a suitable cosigner.
• One-Stop Eligibility and Payment: To determine eligibility for federal financial aid, students must complete an online application, which must be submitted yearly. You can contact a financial aid representative at your school for further assistance if needed. Once the loans and scholarships are applied to your account, you're all set for another year.
• Credit Score: Prompt repayment of student loans can improve your credit score, elevating your worthiness for auto loans or mortgages.

How Federal Student Loan Repayment Works

It's important to consider the process for repaying loans. Repayment plan options include a fixed monthly amount or a variable amount linked to your income; some loans may include a penalty for early repayment.

The default standard repayment plan is a 10-year fixed amount. Income-driven repayment (IDR), when available, is flexible based on how much you make, as well as the number of dependents you have. If you don't finish paying off an IDR-linked loan after a certain period, the remaining amount may be forgiven, however, this depends on the current federal policies in place.

Speak with a financial advisor to find out if you're eligible for the federal loan SAVE plan for the lowest monthly payments and limited interest.

Accruing interest

Interest is essentially the fee incurred for using a loan. It is calculated based on the total amount borrowed and added to the amount of the loan in increments.

The federal subsidized student loan is the only type of loan that does not add interest during a student's college career. All other loans grow daily through added interest; students end up paying more than they originally borrowed with this added amount.

How To Reduce Student Loan Debt and Make College More Affordable

Budgeting and financial planning help keep student loan debt within a reasonable threshold. Some students work and support themselves through college; others focus entirely on school and take the maximum course load allowed so they graduate quickly and start careers.

Both pathways benefit from making college more affordable. Here are some ways to spend less and reduce potential college debt.

Submit the FAFSA for Financial Aid Eligibility

The Free Application for Federal Student Aid (FAFSA) is an online form that determines eligibility for tuition assistance. Most higher education programs require a FAFSA to determine each student's financial options. Students and their parents or guardians complete the FAFSA once a year to determine which grants and loans they can get.

Apply for Scholarships

Students with above-average GPAs may find academic scholarships on the U.S. Department of Education's Federal Student Aid website. High school guidance counselors and college financial aid advisors can identify academic, athletic, and school- or program-specific scholarships. Outside organizations and companies may also provide scholarships for that particular industry.

Look Into Transfer Credits, CLEP, and AP Credits

Taking undergrad prerequisite classes at a community college or attending a state school for the first two years can save a lot of money. Ensure the college or university accepts these transfer credits by contacting the school directly.

Testing programs can also reduce the overall cost since they can reduce the number of prerequisites or other courses you need to graduate. This can be completed through the College Level Examination Program (CLEP) and Advanced Placement (AP). If successful, both allow students to earn college credit and quickly move into higher-level classes.

FAQs About Finance Degrees for College Students

Choosing a college major can be difficult; however, students can change their majors before entering their junior year and still graduate within four years. If you still have questions about majoring in finance, continue reading below to find some answers to these common questions.

Is Finance a Good Major?

Finance is a good major for students who thrive in detail-oriented tasks and enjoy turning reams of data and figures into stories. Finance degrees teach critical thinking, financial planning, and analysis of trends. Finance students learn to produce reports that clearly show trends and opportunities for critical decision-making.

What Does a Finance Degree Teach You?

A finance degree teaches ways of thinking about numbers and processes that can be applied to business data. Students learn specific functions of jobs in finance, including making economic projections, predicting consumer behavior, and balancing accounts.

Those whose finance careers advance can become money managers or traders — they may even take on business leadership roles.

Is Finance a Difficult Major?

Whether finance is considered ''challenging'' depends on the student's comfort level with advanced mathematics, statistics, and data aggregation. If you're concerned about whether a finance major is appropriate for you, contact an academic advisor to learn more about the curriculum. Most undergraduate finance programs post these course requirements on their websites as well.

Many schools provide aid with tutoring or other accommodation services to make successful completion possible.

Learn More: Is a Finance Degree Hard?

Pursue College Education Today

Exploring all of the career options made possible by a degree in finance can open a new path in life. Speak with academic and financial aid advisors to learn more about these programs and their costs. Browse through resources on Learn.org to find the right career path.