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Should I Borrow for School or Work More?

Net Earnings Calculator

Working long hours has been proven to have a negative effect on academic performance, yet today so many students are working long hours to pay for their education. Is this a wise financial strategy? The following two examples suggest it may be penny wise and pound foolish to work long hours, especially if you have not yet explored the option of student loans.

Example 1: Work more, borrow less, and finish later
	Meet Ishaq. Ishaq is an intern for a local business working 25 hours per week at $8.00 an hour. His heavy work schedule means less time to study, and as a result it takes him five years to graduate. The extra year of college (books plus tuition) costs him $5,000. Using this strategy, Ishaq comes out about $1,000 ahead on graduation day.

Example 2: Work less, borrow more, and finish sooner
Meet Rebecca. Rebecca takes out a $7,000 loan to help pay for her education. She uses the loan to reduce her work time to 15 hours per week. As a result, she graduates in four years and finds a job earning $28,500 per year. Even if she paid back her entire loan her first year out of college, Rebecca would still come out over $10,000 ahead!

You can determine your own net earnings using the calculator below. It is designed to show you whether it is in your best interest to borrow, or borrow more, and finish sooner or work and borrow less or not at all. The calculator assumes that you can borrow more and finish college sooner or work more, borrow less, and finish later. If this is not true in your case, it may not help you.

The calculator will estimate the cost to you of increased borrowing versus taking additional time to finish college. The first scenario assumes you would borrow the same amount you have been borrowing or no borrowing at all. The second scenario is based on only the additional amount you would have to borrow to graduate sooner. You should estimate how much you would need to borrow in order to keep the amount of time you spend at work to a level that would allow you to graduate earlier.

An important consideration in this calculation is how much you expect to make once you complete your degree. For most students, the less you make now compared to after graduation, the more likely it is to be to your advantage to borrow and finish sooner. If you would have to borrow a great deal more, you do not expect to earn significantly more once you graduate, or you already make a relatively high wage, borrowing is less likely to be an advantage. For purposes of comparison, the second scenario assumes you will pay off the full cost of extra borrowing in the first year after graduation to approximate the difference in total costs. In most cases, you will spend loan repayment costs over several years.

Enter term type and number of terms. Please enter whether your school runs on the semester or quarter system, and then enter the number of terms you want to consider in the calculation. Numbers from the examples above are pre-entered for your reference only.

This calculator was developed using data and concepts set forth in: Jacqueline E. King (2002). Crucial Choices: How Students' Financial Decisions Affect Their Academic Success. Washington, DC: American Council on Education.