Why Student Loans Are Investment Loans — Part One
There is something I’ve noticed whenever we start talking about accountability in higher education.
It doesn’t take very long before somebody finds the emotional argument.
You’re attacking women.
You’re attacking teachers.
You’re attacking artists.
You’re attacking cosmetologists.
You’re attacking people who want to go to college.
And depending on the particular policy being discussed, there may be legitimate questions about who is affected, whether certain occupations are being measured fairly, or whether an earnings formula adequately captures the value of particular kinds of work.
Those are legitimate discussions.
But none of them answer the most basic question sitting underneath the entire student-loan system:
Does the financial transaction make sense?
Before we argue about who is supposedly being attacked, maybe we should determine whether the investment being financed actually has a reasonable chance of producing enough economic return to justify the debt.
Because when we’re talking about career-oriented higher education, that’s what a student loan really is.
Legally, a federal student loan isn’t a small-business loan.
Economically, however, there is a very obvious similarity.
You’re borrowing capital today because you believe investing that capital will increase your ability to earn money tomorrow.
That’s an investment.
The investment just happens to be you.
What Exactly Are We Financing?
Strip away the politics for a moment.
Suppose somebody walks into a bank looking for financing.
They say:
“I want $60,000 because I believe spending this money will allow me to make considerably more money over the next 10 or 20 years.”
The lender is probably going to have some questions.
What are you investing in?
How much revenue do you expect it to produce?
What are the expenses?
How much debt are you already carrying?
What does repayment look like?
What’s your history of meeting financial obligations?
And most importantly:
Is there a reasonable expectation that this investment will generate enough money to repay the loan?
Those aren’t insulting questions.
They’re normal questions.
The SBA’s 7(a) program, for example, requires an eligible business to be creditworthy and demonstrate a reasonable ability to repay. SBA says most 7(a) term loans are repaid from the cash flow of the business. (sba.gov)
That’s underwriting.
Nobody responds:
“Why are you attacking entrepreneurs?”
Nobody says:
“Small businesses are important to society, therefore you shouldn’t question whether this particular business can repay $100,000.”
The social value of entrepreneurship doesn’t eliminate the math.
So why should education?
I Have to Make This Calculation in My Own Work
This isn’t theoretical for me.
I work in rideshare.
Suppose I decide that I want to make a substantial change in my business.
Maybe I want to replace my current vehicle with an EV.
Maybe I want a significantly more expensive vehicle that qualifies me for a different class of service.
Maybe I want to move toward black-car work and build a different customer base.
Maybe I believe that spending considerably more on a vehicle can move me into a market where I can earn considerably more.
That’s an investment.
And unless I’m sitting on enough cash to buy everything outright, I’m probably going to finance at least part of that investment.
Now the boring questions become very important.
What does the vehicle cost?
What’s the payment?
What will the insurance cost?
What additional licensing or commercial requirements might I have?
What about tires?
Maintenance?
Charging?
Depreciation?
How many miles am I going to drive?
How much additional revenue can this vehicle realistically produce?
How much additional profit does it produce after all of those expenses?
And, ultimately:
Can the business reasonably service the debt?
I don’t get to walk into a lender and say:
“Transportation is extremely important to society. Give me the money.”
They’re going to care whether I can pay them back.
They’re going to care about my creditworthiness.
They’re going to care about my financial history.
They’re going to care whether I have enough income to support what I’m asking them to finance.
And even if somebody approves the loan, I still have another responsibility.
I have to determine whether taking the loan is actually smart.
If buying a much more expensive vehicle increases my costs by $15,000 a year but only increases my net income by $5,000, then I don’t have a good investment.
I have an expensive vehicle.
Those aren’t the same thing.
Loan Approval Doesn’t Make an Investment Good
That’s an important distinction.
Somebody being willing to give me financing doesn’t prove my business idea makes sense.
It only proves financing is available.
Loan eligibility is not investment viability.
And I think we’ve confused those concepts in higher education for a very long time.
A student being eligible to borrow enough money to attend a particular school does not establish that attending that school is a good financial investment.
It establishes that the student can get the money.
Those aren’t remotely the same thing.
If somebody borrows $70,000 for a credential that realistically increases their earning capacity by $25,000 a year, maybe that’s a compelling proposition.
If another person borrows $70,000 for a credential that realistically increases earning capacity by $2,000 a year, that’s a very different equation.
The second field of study doesn’t have to be worthless for the financing to be questionable.
That’s the distinction we keep losing.
You Can Respect the Profession and Question the Price
Take childcare.
You can believe early-childhood educators provide enormous social value and simultaneously ask:
Why should somebody need tens of thousands of dollars in debt to qualify for a job that doesn’t pay enough to comfortably service tens of thousands of dollars in debt?
Those ideas do not conflict.
Maybe childcare workers need to earn more.
Maybe the education needs to cost less.
Maybe employers are demanding too much formal education.
Maybe government should directly subsidize training for occupations society considers particularly important.
Maybe apprenticeship or employer-sponsored education would work better.
Those are all legitimate possibilities.
What isn’t an answer is pretending the financial equation doesn’t exist.
The same thing applies to cosmetology.
Saying:
“Why does this cosmetology program cost this much compared with the earnings somebody entering the profession can reasonably expect?”
is not the same thing as saying:
“Cosmetology is worthless.”
One evaluates the occupation.
The other evaluates the price of entering it.
The same applies to massage therapy, teaching, social work, music, fine art, business degrees, graduate programs and everything else.
The profession may be perfectly legitimate while the price being charged to enter it isn’t.
Then There’s English
English is an especially interesting example because it forces us to be precise about what we’re talking about.
English itself is obviously fundamental.
We live in a country where English is the dominant language of government, business and education. Reading comprehension, writing, communication and the ability to understand an argument are foundational skills that students should be developing long before college.
We absolutely need people who teach those skills.
That is not the question.
The question is what somebody is purchasing when they borrow a significant amount of money specifically for a four-year degree in English or English literature.
What additional economic opportunity does that credential create?
What careers specifically require it?
What do people holding the degree typically earn?
What alternatives exist?
And how much should someone reasonably borrow to obtain it?
Those questions don’t mean an English degree has no value.
The Bureau of Labor Statistics reports that workers with bachelor’s or higher degrees in English had a median annual wage of about $60,000 in 2023, compared with $70,000 across all degree fields. English degree holders aren’t all working in one occupation either: BLS shows them spread across education, management, business and financial operations, arts and media, administrative work and numerous other occupations. (Bureau of Labor Statistics)
So this isn’t as simple as saying:
English degree equals bad investment.
That’s lazy analysis too.
The real question is:
At what price, for which student, pursuing what career?
An inexpensive English degree obtained by somebody planning to become an English teacher may be a perfectly rational investment.
An English degree used as preparation for law school may be part of a completely different educational strategy.
Somebody studying English because they want stronger writing and communication skills may decide that the education itself is valuable enough to justify the cost.
But somebody borrowing an enormous amount of money because they believe an English or creative-writing degree is their ticket to becoming the next famous novelist needs a different conversation.
Wanting to Be a Writer Isn’t a Financial Projection
This is where the mythology surrounding creative careers becomes dangerous.
We know the names Hemingway.
Poe.
Stephen King.
Hunter S. Thompson.
And countless other famous writers.
But famous writers are exactly that:
Famous.
They’re exceptional outcomes.
They’re not a normal earnings projection.
Their educational paths weren’t even remotely identical.
Ernest Hemingway went directly into newspaper work as a teenager rather than following a college-English-degree pipeline. His Nobel biography describes him beginning his writing career in a Kansas City newspaper office at 17. (Nobel Prize)
Edgar Allan Poe attended the University of Virginia briefly and left without completing a degree. (Anthology)
Stephen King provides the opposite example. He earned a bachelor’s degree in English from the University of Maine, qualified to teach high school, eventually taught English, and continued writing before Carrie allowed him to become a full-time author. (Stephen King)
Those examples don’t prove that college produces successful writers.
They don’t prove that skipping college produces successful writers either.
They demonstrate something much more useful:
There isn’t one educational pipeline to becoming a successful writer.
That’s exactly why somebody thinking about borrowing significant money for that purpose needs to separate two questions:
Will studying English or creative writing help me develop?
and
Does borrowing this particular amount of money for this particular program make financial sense?
Maybe the answer to both is yes.
Maybe the first answer is yes and the second is no.
Those possibilities have to be allowed to coexist.
Don’t Finance the Fantasy
This is where colleges, students and lenders all have to be careful.
There is a difference between aspiration and expected return.
A person can genuinely love writing.
They may have real talent.
They may have been writing stories since they were 10 years old.
They may eventually publish books.
Fine.
But none of that turns becoming a bestselling author into a reasonable loan-repayment projection.
You cannot underwrite an educational loan based on:
“Maybe I’ll become Stephen King.”
Any more than I can justify an expensive vehicle for my rideshare business by saying:
“Maybe I’ll build the next Uber.”
Exceptional outcomes aren’t useless.
They’re just terrible assumptions for ordinary financial planning.
If the education is worth purchasing because of the education itself, say that.
If it’s supposed to provide a career return, show the career return.
Don’t confuse the two.
Social Value Doesn’t Automatically Equal Debt Capacity
This might be one of the biggest mistakes in the entire conversation.
We frequently use social value as though it automatically answers a financing question.
It doesn’t.
Something can be enormously important and still be unable to support a particular amount of debt.
A schoolteacher can provide tremendous value to a community.
That doesn’t tell me whether $150,000 in educational borrowing to become that teacher is financially sustainable.
A musician can create culturally valuable work.
That doesn’t tell me whether borrowing $120,000 for a music degree creates enough additional earning capacity to repay $120,000.
An English teacher can spend decades improving children’s ability to read, write and communicate.
That doesn’t automatically establish that every possible price for obtaining that teaching credential is reasonable.
The occupation and the price of admission are different questions.
Education Doesn’t Have to Be About Money
And here’s the obvious response:
“Education is about more than making money.”
Correct.
People study things because they love them.
History.
Philosophy.
English.
Literature.
Music.
Art.
Science.
There is value in learning that cannot be represented on a spreadsheet.
I don’t dispute that.
But we have to distinguish between:
“This education has value to me.”
and:
“Borrowing $80,000 to obtain this education is a financially sustainable investment.”
Those are not the same claim.
If someone has the resources and wants to spend $100,000 studying literature because that’s how they want to spend their money, that’s one decision.
Once someone needs to borrow $100,000 based partly on the expectation that the resulting education will improve their financial future, there is another question:
How will the debt be serviced?
That’s not reducing education to money.
That’s acknowledging what a loan is.
The Government Is Starting to Ask About Return
This is why the current federal accountability debate deserves something better than slogans.
The Department of Education finalized its Student Tuition and Transparency System, or STATS, and Earnings Accountability framework in 2026. The existing Financial Value Transparency and Gainful Employment system remains in effect through June 30, 2027, and STATS replaces it on July 1, 2027. (FSA Partner Connect)
Under the new earnings framework, undergraduate programs are generally compared with the earnings of workers with a high-school diploma, while graduate programs are compared with workers holding bachelor’s degrees. A program that fails the earnings measure in two of three award years can lose eligibility for the federal Direct Loan program for at least two years. (U.S. Department of Education)
We can debate how that test is constructed.
We should.
Are tipped occupations being measured properly?
How should self-employment be handled?
What about regional wage differences?
What about occupations with significant social value but low wages?
What period should be used to measure earnings?
And, as we’ll discuss later in this series, what about the people who borrowed money but never completed the degree and therefore disappear from some graduate-earnings comparisons?
Those are serious questions.
But notice what we’re debating.
We’re arguing about how to measure return.
That doesn’t mean asking about return was wrong in the first place.
Treat It Like Someone Brought You a Business Proposal
Take any proposed college investment and imagine somebody brought it to you as a business plan.
How much money do you need?
$75,000.
How long before the investment begins producing income?
Four years.
Okay.
What does somebody with this credential typically earn?
What does somebody without it earn?
What’s the additional earning capacity?
What’s the probability of completing the program?
Does the occupation actually require the credential?
Are there cheaper ways to obtain the necessary training?
How much of the additional income will go toward servicing the debt?
What happens financially if the student leaves after two years?
What happens if they complete the program but don’t enter the field?
Those aren’t hostile questions.
They’re due diligence.
If I want to put another vehicle into my own business, I have to think this way.
I wouldn’t want an 18-year-old making a financial commitment that may follow them for decades to have less information and less scrutiny than I use to decide whether I should buy another car.
And That’s Where the Emotional Gotcha Falls Apart
If an accountability rule disproportionately affects women, examine that.
If its methodology incorrectly measures tipped occupations, fix the methodology.
If it treats an important public-service occupation unfairly, examine the benchmark.
If regional differences distort the comparison, investigate them.
If English programs are being lumped together despite producing wildly different outcomes at different institutions, examine those programs individually.
That’s what serious policy analysis looks like.
But saying:
“This affects women.”
doesn’t tell me why the program costs what it costs.
Saying:
“This affects artists.”
doesn’t tell me whether $100,000 of borrowing is reasonable.
Saying:
“English is important.”
doesn’t tell me whether this particular English degree is worth this particular tuition.
Those arguments may identify other important considerations.
They don’t answer the financial question.
Maybe We Should Have Asked Before Making the Loan
This is the part of the student-debt discussion that seems backwards to me.
We wait until everything has already happened.
The student enrolled.
The school got paid.
The student borrowed the money.
Years passed.
Maybe the student graduated.
Maybe they didn’t.
Now the debt exists.
And suddenly everybody becomes interested in the numbers.
Why can’t this borrower make the payment?
Should interest change?
Should the repayment plan change?
Should some of the balance be forgiven?
Who absorbs the loss?
Those may all become legitimate questions once the debt exists.
But wouldn’t the better time to determine whether a $70,000 investment can reasonably support a $70,000 loan be before somebody borrows the $70,000?
That’s how I would approach an investment in my own business.
I don’t want to discover three years into a vehicle loan that the numbers never worked.
I want to know before I sign.
Someone investing in education deserves the same opportunity.
There Is Responsibility on Every Side
And this is why this discussion isn’t ending with one article.
Because the borrower isn’t the only participant.
There is a government financing system deciding what it will fund.
There is an educational institution selling the education.
There are employers determining which credentials they require.
There are statistical systems deciding what qualifies as a successful outcome.
And there is ultimately an individual deciding what they want to do with their life and how much they’re prepared to invest in getting there.
Every one of those participants has responsibilities.
We’ll get to all of them.
But everything starts with this basic premise:
Borrowing money for career-oriented education is an investment in future earning capacity.
That doesn’t mean education has no value beyond money.
It doesn’t mean English is worthless.
It doesn’t mean art is worthless.
It doesn’t mean every career should produce a six-figure salary.
And it doesn’t mean everybody should choose whichever major currently pays the most.
It means that once we’re borrowing significant amounts of money based on the expectation that education will improve someone’s economic future, asking whether that expectation is supported by reality is perfectly reasonable.
I have to ask that before making a substantial investment in my own business.
A lender has every reason to ask it before financing a business.
And taxpayers have every reason to ask it when federal lending is financing education.
Before we turn the conversation into an emotional argument about who is supposedly being attacked, maybe we should begin with something considerably less exciting:
Show me the math.
Because wanting the investment doesn’t make it financially sound.
Getting approved for the loan doesn’t make it financially sound.
Loving the subject doesn’t make it financially sound.
And pointing to one extraordinarily successful person who studied—or didn’t study—the subject doesn’t make it financially sound.
Eventually somebody has to answer the same question every other major investment has to answer:
Can this realistically produce enough value to justify what we’re spending on it?