Assets and liabilities are the two building blocks of your personal finances, and understanding them early — while you’re still a student — makes every borrowing decision you’ll face for school easier to reason about.
What counts as an asset
An asset is anything of value that you own: cash in a checking or savings account, investments, a car, or property. For most students, assets are simple — savings, maybe a car, and whatever is in a checking account.
What counts as a liability
A liability is anything you owe: student loans, a credit card balance, a car loan. Not all debt is equal — a low-interest federal student loan behaves very differently than high-interest credit card debt, even though both are liabilities.
Net worth: the number that actually matters
Subtract your liabilities from your assets and you get your net worth. It’s completely normal for a student’s net worth to be negative once student loans enter the picture — that’s not a red flag on its own. What matters more is the trend over time and whether the debt you’re taking on is financing something that increases your future earning potential.
Using this when you borrow for school
- Before taking a loan, ask what asset or capability it’s building — in most cases, your degree and the earning potential attached to it.
- Compare loan terms the way you’d compare any liability: interest rate, repayment flexibility, and what happens if your circumstances change.
- Keep a running, even rough, tally of your own assets and liabilities. It’s the same habit you’ll rely on for the rest of your financial life, just starting with smaller numbers.
Treat this as a lens, not a test to pass — the goal is simply to be deliberate about what you own, what you owe, and why.