Student Loan Debt - Is College Tuition Worth It?

Every summer, American high school students graduate and begin to look towards university. For years, it has been the dream, to attend a good school and then get a good job. After all, it makes sense that if you get a business degree from Harvard, for example, you should find plenty of employment opportunities.However, something strange has happened over the last couple of decades. People are paying so much for school that the question has to be asked whether college tuition pays off in the end?

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That $35,000 Is Only the Beginning

Quite typically, most four-year schools will make students live in a dormitory or some type of university housing for the first two years. The average cost for this, as of 2018, is$10,800 per year. This is actually more than the education itself, and makes the debt run up to roughly $20,000 a year. At this point, out-of-state students get truly hammered, as they pay closer to $36,000 a year between education and room and board. While the education itself is only 40% of the cost, most of these expenses get rolled into the same loans or funding sources.

Let’s not forget books and other expenses. Laboratory equipment and necessary supplies, beyond books, add to the cost as well, with an average of $1,300 being what you can count on for your yearly expense. At this point, we are looking at about $22,000 a year for an in-state student at an average school.

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One of the Biggest Problems with Student Debt is Self-Induced

The biggest downside to student debt is quite often self-induced. This means that a lot of people go to school and fail to graduate. As of 2018, graduation rates in the allotted four years is roughly 53%. The graduation rate after six years for a bachelor’s degree is 65.6%, which of course is a bit discouraging. However, these are private institutions -which have much higher graduation rates than public institutions. For those in a public university, graduation rates at four years is a paltry 35%, while only 58.6% graduate after six.

Why is this relevant? To begin with, you are financing more education so obviously the costs increase. Paying for six years of school, typically a result of switching majors or something similar, is obviously going to be much more expensive than just working your way through a bachelor’s degree full-time. Unfortunately, the age of the student is typically such that they aren’t completely sure what they want to do with the rest of their lives.

Another major red flag in this statistic should be that roughly half of these people don’t graduate at all. Think of it this way: if you go to school for three years and run up$60,000 worth of debt without graduating, you have simply put yourself in $60,000 worth of debt. The take away from this is that if you start to go to school, you had better finish.At the very least you can have a bachelor’s degree to help give you a “leg up” on other applicants, even if it isn’t in your field of study.

Those with Degrees Do Earn More

Those with bachelor’s degrees do tend to earn more, with an average pay rate of$59,124 for 2018. The unemployment rate is just 2.8%, which of course is a huge advantage. Contrast this with someone who has only finished high school, with an average salary of $35,256 per year. The unemployment rate is 5.4% as well, making it a bit riskier as far as finding employment is concerned. Somewhere in the middle, those with some college but with no degree average around $38,376 a year, with the unemployment rate being roughly 5%. The problem they of course suffer is that they have large debt.

While making more money sounds appealing, many people find themselves in the same type of debt as a result of poor spending habits, which has become a big issue for Americans. In fact, this brings up the next crucial point.

The Take Away

The take away is that like any other type of debt, you should be cautious about how much you spend, and more importantly: what you spend it on. After all, getting an interpretive dance degree isn’t going to be as important financially to your well-being as a degree in mechanical engineering. Obviously, the choice of profession is going to be crucial. You want to get the best return for your investment, which is something you need to think about – view your student debt as an investment.

Far too many people jump into their collegiate years looking at the money as something that will be paid off “later on down the road when I’m making a fortune”, as opposed to something that is going to restrict your lifestyle in the future. Because of this, you should be clear as to what you want to do as far as your educational goals are and stick to the plan. While it’s not necessarily terminal to change your mind, do understand that the costs are going to rise.

Be cautious, and make sure that you are not using your borrowed money for things that are beyond necessary. Debt is no way to live your life, but if used responsibly, it can benefit the borrower. Because of this, the answer to the original question is: “Yes, but only if done responsibly.”