Student loans are a part of life for 43.5 million Americans — 13% of the population — to the tune of more than $1.75 trillion. There are countless reasons why.  But the main one is that a college degree (or several!) is often the only pathway to pursuing our passions. For example, if you want to become an engineer, a doctor, an architect or countless other professions, it all starts with a bachelor’s degree.

It often pays off. “Studies show most people who get college degrees see their earnings potential go up,” says Betsy Mayotte, President of The Institute of Student Loan Advisors. “That’s worth it if it’s more than the debt you took on.”  But there’s also no denying that many people borrow more than they probably should (the rule of thumb is to try to borrow no more than you expect to earn the first year out of college).  And the ramifications of overborrowing can drag on for decades.

So how do you decide how to proceed? Here’s a look at the ways student loan debt can both help and hurt you.

How Student Debt Can Help You

It helps you build credit: While there are other ways to establish a good credit history — such as on-time payments with a credit card, auto loan etc. — student loan repayment is often many people’s first foray into building a credit history. “It helps you establish good healthy habits with credit that can be applied to other debt like a car and mortgage,” says Jill Desjean, Jill Desjean, a policy analyst at the National Association of Student Financial Aid Administrators (NASFAA). “You are thickening up your credit [file and history] which makes you eligible for better interest rates on mortgages and car loans.”

It can boost your credit score: In the same way that late or missed payments can damage your credit score, on-time payments can give your credit score a real boost. “Younger people, especially people who don’t have a credit card, can benefit from student loans by paying them back on time,” says Mayotte.

It increases your earning power — and staying power: According to a study from the Association of Public and Land Grant Universities, “college graduates are half as likely to be unemployed as their peers who only have a high school degree.” Average annual earnings for individuals with a bachelor’s degree are $36,000 higher —  or 84 percent higher than those who only possess a high school diploma. That same study showed that on average, college graduates are on track to earn $1.2 million more over the course of their lifetimes.

It can build a sense of responsibility: If higher earnings weren’t enough, student debt can often be the thing that inspires people to become a better financial steward of their own money. Because student debt is often a person’s first experience with debt and loans, it provides an excellent opportunity to establish good habits, learn how to budget, and understand how interest and repayment work. “Someone who made their first one or two years of payments on time is less likely to default than someone who doesn’t,” says Mayotte. “It’s about creating the habit of repayment. From that experience they learn how consumer debt works, the impact of interest accrued, which helps them make better financial choices in the future.”

How Student Debt Can Hurt You

It can make starting adult life a little harder: The average bachelor’s degree recipient who takes out loans to pay for college takes on $29,100 in debt, according to the College Board’s Trends in Student Aid 2022 report. If you assume an interest rate on your loans of 6% and a 10 year term (the length of time it will take you to pay back your loans) that comes out to a monthly expense of $323.07. (You can calculate how much you’ll owe per month here, based on your interest rate, term and the amount of loans you take out.) And while that might not sound like an insurmountable amount, depending on your starting salary out of college, it can represent a substantial portion of your after-tax take-home pay, and can negatively impact your ability to say, get your own apartment, buy a car, fully fund a retirement account or take other steps toward building an adult future.

It can cause delays in major milestones:  Four in five people with student loans say they’ve put off taking a major life step or crossing a milestone according to research from CNBC and Acorns.  A full third of the 5,000 Americans surveyed say they’ve delayed buying a home, 16% have delayed having a baby and 14% have delayed getting married.

It may reduce job flexibility: Some post-college workers are forced to stay in jobs that they’d prefer to leave for a host of reasons — because they can’t risk being unemployed.  According to the CNBC/Acorns study, 12% of respondents say that they’ve delayed finding a new job.

It can damage your credit if you don’t handle it properly:  If you don’t pay your student loans back on time, it could hurt your credit before you even have a chance to establish it, explains Desjean. There’s a six-month grace period after you graduate college during which time you don’t have to pay back your loans, but once that expires you need to be paying regularly in order to protect your score.  If you can’t afford payments and you have Federal loans, look into the new SAVE income based repayment program.  Read more about it here.

From our partnership with HerMoney/Filene