Should You Go Into Debt To Go To College

Debt Free, College, Financial Freedom

For a long time going to college has been expected of recent high school graduates.  If you were not able to get a scholarship or have your parents pay for college, getting a student loan was a no-brainer.

You would go to college and when you graduated you would get a job.  This job would pay a living wage and enable you to pay off your student loans over the next 5-10 years.

And Then…Everything Changed

In 2008, we entered the worst recession since the Great Depression.  The jobs that were once readily available vanished.  Experienced employees who were displaced after the economic downturn began to take the jobs usually occupied by new graduates.

The new graduates, the millennial generation, were left to fend for the entry level jobs that remained.  With such a huge supply of potential employees, these jobs did not have to offer high salaries to attract talent.  Now we have a generation of college educated and college indebted individuals barely making enough to make a living.

A college education seemed to no longer lived up to its promise to provide a sustainable income above and beyond its cost.  The return on investment appears to be negative.

Maybe It’s Not So Bad

However, it may not be as dire as it appears to be.  According to an article by Business Insider, the Bureau of Labor Statistics says that a college graduate earns a median 67% more than a high school graduate.

So if a high school graduate makes $20K a year, a college graduate can expect to make $33K a year on average.  That is a $13K annual wage gap.

To attend a moderate state school can cost $24K and a moderate private school can cost $48K.  So in 2 to 4 years, the additional salary you can earn with a college degree would pay for the cost of attending college.  And once the student loans are paid off, you will continue receiving the additional income.

College or No College?

When you are considering the cost of a college education, you have to think of the lifetime earning potential that it provides.  The idea of going into a large amount of debt can be daunting.  There is no guarantee that you will get your dream job after graduation, and that can be scary.   However, there is no better way to set yourself up for success than with a college degree.

Graduate School

The big question for most of us is whether or not it is worth going into debt for graduate school.  The cost of graduate school can range from $40K to well above $80K for a two year program.  That amount of debt above and beyond your undergraduate debt load can be a lot to manage.

The answer again comes down to the Return on Investment.  How much money can you expect to make with the additional education?  This answer is….it depends.  US News states that the rule of thumb is your student loan payments should not exceed 10% of your monthly income.  When you are considering if a graduate degree will pay for itself, you need to do the research for your specific situation.

You have to determine what the expected salary is for someone in your field with a graduate degree vs without one.  There are many careers where the graduate degree will not make much of a difference in salary.  However, in careers that are very competitive, you may need a graduate degree just to your foot in the door.

Do The Research

One of the best resources that I have come across is  Glassdoor is a job search app, but it also provides the expected salary range for a specific job posting.  Do a search for your target job title at your desired company.  The average student loan payment for $100K in debt over 10 years is about $1,100.00.  If this new position will give you a net salary increase of $1,100.00, or you can afford it through other budget cuts, then go for it!

One of your motivations for getting your graduate degree may not be money.  If that is the case, that is ok too.  I know that higher education represents so much more than money for so many people, myself included.  Pursue your educational goals.  I know that you’ll do what it takes to make it affordable and I’ll be here to help you along the way.

I would advise that you go over to US News and visit their Graduate School Rankings.  US News has ranked the best Graduate Schools in the country and one of the criteria they used is the expected starting salary and bonus after graduation.  In general, the closer the school is to the top, the more money you can expect to make with a degree from that school.  Not surprisingly, the closer the school is to the top, the more expensive it is and the harder it is to get accepted.

The Verdict

So, to summarize, going into debt for your bachelors degree is still a good investment.  When you are considering graduate school, the answer is not so simple.  Take your time and do the research.  Maybe you won’t be able to pay off your loans in 10 years, and it takes 20?  That is perfectly fine if that is your goal, just know what you’re getting into beforehand.

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