There's a reason college students are willing to rack up mountains of debt to finance an education. The national average annual salary for a college graduate with a bachelor's degree is $57,026, compared to just $34,197 for someone with only a high school diploma. But while that college degree might open the door to a host of money-making opportunities, if you need to borrow a boatload of cash to obtain it, you could wind up suffering the consequences for many years to come.

In a 2016 PricewaterhouseCoopers (PwC) study, workers with student debt were found to be in much worse financial shape across the board than those who didn't take out loans for higher education purposes. And the impact of college debt reached far beyond workers' ability to keep up with everyday expenses; many reported that their retirement savings were suffering as a result of having borrowed money to finance a degree. It just goes to show the importance of keeping student debt to a minimum -- challenging as that may be.

Woman sitting at a table holding her glasses with her eyes closed, stressing out over finances


Rising costs, rising debt

Student Loan Hero reports that the average Class of 2016 graduate came away $37,172 in debt, up 6% from the previous year. And while that might seem like a lot of money, it's actually somewhat reasonable when you consider the cost of attending college nowadays.

Here's what tuition and fees averaged for the 2016-2017 school year, according to The College Board:

  • $33,480 at private colleges
  • $9,650 at public in-state colleges
  • $24,930 at public out-of-state colleges

These numbers, however, don't include the cost of room and board, which can easily run another $10,000 per year. Though that $37,172 figure might seem high, it actually isn't even enough to cover the cost of a four-year public in-state degree for a student who lives at home and doesn't dorm. The problem, of course, is that many students borrow well above that $37,172, and it's those who are most likely to feel the effects later on.

How borrowing impacts our finances

It stands to reason that those who owe money are the most cash-strapped, but the extent to which debt-saddled workers suffer is enough to make would-be borrowers think twice about taking out loans. According to PwC, 81% of workers with loans are regularly stressed about their finances, versus 46% of those without loans. Furthermore, 65% have trouble paying their basic household expenses, versus 35% of non-borrowers. In fact, 41% of borrowers use credit cards to cover living expenses because they otherwise can't afford them, while just 22% of non-borrowers do the same.

But it's not just everyday expenses that are impacted. A good 63% of workers with student debt have less than $50,000 saved for retirement, versus 43% of non-borrowers. Worse yet, 57% of borrowers expect that they'll need to tap their retirement savings for non-retirement purposes, whereas only 40% of non-borrowers say the same. Not only can early retirement plan withdrawals result in sizable penalties, but they can also leave workers cash-strapped in their senior years. And that's a disturbing prospect on many levels.

Think before you borrow

While many college hopefuls have no choice but to take out loans, if you're smart about how much you borrow, you're less likely to suffer the aforementioned financial consequences that currently plague so many working Americans. For one thing, you can aim to keep your education costs as low as possible. Rather than spring for a private college, stick to a school in your home state so you can benefit from the lower tuition.

Better yet, skip the state school altogether for your first two years and attend community college instead. Community college tuition costs for the 2016-2017 school year averaged $3,520, compared to $9,650 for public in-state tuition. Taking the less expensive route for two years could shave over $12,000 off your total cost. Furthermore, if you have the option to live at home during your studies, take it for a least a year, if not all four. Commuting could save you a solid $10,000 for every year you do it, thus limiting the extent to which you need to borrow.

Finally, aim to stay away from private student loans, which often come with higher interest rates and offer few options for deferring or restructuring payments in the face of financial difficulties. If you've maxed out your federal loan options, you might consider working part-time during college or even deferring enrollment for a year to work and save up some cash.

Taking out loans might be an unavoidable step on the way to a college degree, but that doesn't mean you shouldn't be judicious about how much you borrow. The less debt you come away with, the less you're likely to suffer financially down the line.