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Carrington College Blog

Examining good and bad debt for college students

January 2, 2014

Learning the difference between good and bad debt is an important part of a college education.One of the keys to paying for college, and your lifestyle during college, is to avoid taking on bad debt.

It is very likely that you will have to accrue some amount of debt while in school. However, in order to maximize the long-term advantages of your degree, whether it comes in medical billing and coding, pharmacy technology or any other discipline, you’ll want to make sure that the money you end up owing has a low interest rate and was used productively at the time.1

What is bad debt?

Bad debt comes in many forms. It can be the product of credit card spending, a high-interest loan, money spent on big-ticket, non-essential items, or even simple overspending on a range of items from clothes to rent to beer.

Credit card debt is probably the worst of all those examples.2 College students, often in a financial pinch, can fall prey to unscrupulous lenders who are looking to take advantage of that situation. While a credit card can help you get through the rocky fiscal environment that many college students face, it is important to do a lot of research before you decide to get one.

What is good debt?

For college students, good debt would usually be described as federal student loans, or money you are able to borrow from family or friends to help pay for your education.3

Those kinds of loans almost always come with lower interest rates, or, in the case of friends and family, maybe no interest at all. It is also more likely to be money you are borrowing to pay for tuition, room and board and other essential expenses.

Because you’re spending that borrowed money on more worthwhile goods and services, it can be considered as much an investment as anything else. The funds you dedicate to the items that are necessary to get you through school will ultimately pay off in the long run. They will likely help you find a more lucrative job and develop important intellectual and social skills that will serve you as you go through life.

How to avoid or limit debt during college

One of the best ways to limit or avoid debt altogether during college is to rely as much as possible on grants, scholarships, financial aid and government or private programs that are intended to help students in need.

A starting point for finding that kind of aid is government websites like and private portals like Also look into programs that may be available in your state or county.

1 “Budgeting 101 for College Students,”
2 Equal Justice Works, “Student Credit Card use Could Cause Problems Later,” U.S. News & World Report, May 11, 2011.
3 Roos, David, “Good Debt vs. Bad Debt,”

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