The Ethics of Over-borrowing: Is It Okay to Take on More Student Loans Than You Can Pay?
April 30, 2014

Over-borrowing can be looked at two ways. First, it’s over-borrowing if you take out more in loans than you need. If you borrow the maximum each semester simply because you can, to give you a financial buffer or to have spending money, you are taking more than you need and it could come back to bite you later. Second, it’s over-borrowing if you take out more in loans than you can reasonably hope to repay – even if it’s what you need to get through school. Are either of these situations ethical and is one (or both) of these your current circumstance?

Student debt protest

Are you over-borrowing on student loans?
Image source: Roger Blackwell via Flickr Creative Commons

If you are in either scenario and still in school, it’s not too late to correct your course (no pun intended) and avoid dire financial consequences in your future. Most college cores require at least one course in ethics of some sort – whether it’s a philosophy course, business ethics or another offering – but does anyone ponder how this relates to the debt you’re incurring to sit in that class? Have you considered whether you’re making the right choice by taking out student loans you may not be able to repay?

Know How Much You Owe

One of the most common mistakes is not knowing how much you owe at every step of the way and what that debt will mean to you after graduation. We have heard from grads that until that first loan statement showed up post-graduation, they had no clue how deep in debt they were. If this is how you’re operating, you may not be aware that you’re in ethically questionable waters. Sign up now for’s free student loan tool as soon as you take out your first loan (or right now if you’re already borrowing) so you can see exactly how much debt you’re in and how much this represents in future monthly payments.

Know How Much You Can Afford

The basic rule of thumb is that you shouldn’t ever borrow more than your first year’s anticipated salary in your chosen career – with some exceptions like law and medical careers that have lower first year salaries, then greatly higher ones in subsequent years. On, you can check by profession and region to see what your likely wages will be so you can keep your debt below this threshold. But even given this recommended limit, minimizing your debt is the most sound approach. Living cheaply, working part time during school and working full time over summers so you can pay your own way as much as possible is the soundest approach to not over-borrowing. Of course, you shouldn’t select your major solely based on future income, but if you’re torn, going for a career that can support you makes sense.

Know When You Can’t Afford to Borrow

You may think it’s okay to borrow as much as you want because you’re pursuing what you feel is a noble calling or because you believe education for its own sake (despite the cost) is more important than any debt you’re accruing. This is naïve and destructive to yourself and the student loan system. First, you will eventually have to face the music and deal with your debt, so if you have over-borrowed and your career (no matter how noble) won’t allow you to support your debt, your life is going to be difficult. Second, over-borrowing and abuse of the system drives negative outcomes for future students.

Know When to Stop Borrowing

Some students are in so deep now they may have the attitude that a little more debt won’t matter, so they continue to borrow to finish their degree. Obviously you’re better off finishing up your degree than not, so it makes sense to press on, but that doesn’t mean you need to keep mining debt. Force yourself to take on more hours to finish faster, work more and slash your costs any way you can. Every dollar you don’t borrow now saves you two dollars in the long run. The point is, it’s never too late to borrow less. And when you do get a student loan disbursement, if there is any refund after your costs are paid, don’t pocket it; insted, give it back to lower your debt.

Responsible borrowing begins with your first debt – which is usually your first student loan or credit card. Making wise choices while in college is a good financial habit that will benefit you later in life and a cavalier attitude toward debt conversely puts you on a road to lifelong financial struggle. In addition to signing up for our free student loan tool to track your debt, be sure to read our blog often for tips on minimizing your debt and paying it off as quickly as possible.