At 46 years old, my wife and I still carry student loan debt, loans that only a year ago finally ebbed below $100,000. I’m not only alright with that, I’m grateful because those loans gave each of us careers as college professors, occupations that wouldn’t have been available to either of us without borrowing.
Is College Worth Attending?
There is something in the zeitgeist—a seeming truism—that college has become so expensive that it is no longer worth attending. While university tuition is expensive, and as you likely know, has increased in price at a rate exceeding inflation, it is still financially better, in aggregate, to attend college. And if you like school, or at least don’t hate it, attending college is a financial no-brainer.
While university tuition is expensive, and as you likely know, has increased in price at a rate exceeding inflation, it is still financially better, in aggregate, to attend college. And if you like school, or at least don’t hate it, attending college is a financial no-brainer.
An average adult with a bachelor’s degree (but no graduate degree) will earn $1.4 million over their lifetime; compare that to an average adult with a high school diploma (but no college) who earns only $770,000 in lifetime wages. But what about after factoring in the tuition, fees, student loan interest, and lost wages for the four years you are in college and out of the workforce?
The Half-Million Dollar Difference
Even after accounting the cost of college and the opportunity cost of lost income from not working full time for the years you are in school, the difference between a student who chooses college and one who doesn’t is well over a half-million dollars!
The problem with the discussion on student loans is that they rarely compare apples-to-apples. You hear that I have $100,000 in student loans and your mind goes immediately to the difference between my annual salary and what my annual salary would have been had I not graduated from college—surely nowhere near a $100,000 difference! But comparing my total loan debt to my annual salary misleadingly compares a quantity to a rate.
The problem with the discussion on student loans is that they rarely compare apples-to-apples.
You need to either:
Compare total loan indebtedness to lifetime earnings
Compare annual loan payments to annual salaries
If you want to compare my $100,000 loan to my salary, first multiply my monthly payment for that loan by 12 to return my annual loan payment of $7,800.
Then compare that $7,800 annual expenditure to my annual salary to determine if college loans were a good idea.
The enemy then isn’t student debt, but rather high-interest student debt. Depending on the terms of the loan, that same $100,000 may ding your annual income by as little as $5,000 or as much as $15,000 or more.
Remember to Choose Quality
Of course, while on average a college education more than pays for itself, you are unlikely that particular “average” person.
Your specific payback varies with the cost of your tuition, the academic reputation and earning power of your school’s graduates, the job market associated with your major, and, importantly, whether or not you complete your degree and graduate.
Not completing an online degree from a pricy for-profit college will have a different cost-benefit profile than graduating from a high-reputation, in-state, inexpensive public college in a lucrative field.