A new report by USA Today finds that Americans’ student loan debt is $850 billion dollars, which actually exceeds the total amount of Americans’ credit card debt. What does that mean for our newest generation heading off to college? Basically the debt they create in the next four years is going to substantially curtail other aspects of their financial lives. With mounting student loan debts, students who would have graduated and moved out of their parents’ homes are now returning to the nest and staying – sometimes for years after earning a bachelor’s degree. With unemployment still hovering at 9 percent, college graduates are taking lower-paying jobs in retail and other fields, rather than in the areas in which they were educated. Without a good paying job and steady benefits, graduates are delaying other important decisions in their lives as well. There are fewer automobile purchases, less home buying and travel and well, simply less consumer spending – unless of course, credit is being used.
A more important underlying factor in this discussion is that student loan debt, unlike credit card debt, survives a bankruptcy and is nearly impossible to remove. An 18-year old high school graduate is facing four years of undergraduate school tuition and possibly an additional two to four years of Master’s work in order to be ‘marketable’ in today’s economy. The average undergraduate student loan debt for this student will be approximately $22,900. For graduate school, tuition is currently averaging $30,000 per year for in-state public schools, while private institutions cost 30% more.
According to the Project on Student Debt, “out of the colleges surveyed, students graduating in the District of Columbia and New Hampshire had the most debt — carrying average loads of $30,033 and $29,443 respectively.” That data isn’t a big shock to those of us from New Hampshire. We’re faced with a very limited state college system and the highest state tuition in the country.
Once they graduate, these post-baccalaureate students are earning less than those who graduated even four to five years ago. According to a study released in May from Rutgers University, “graduates of four-year colleges in 2009 and 2010 earned a median starting salary of $27,000, down from $30,000 for those who entered the work force between 2006 and 2008.”
So the question arises, is a college degree still worth it? I would have to answer in the affirmative with a few caveats. First, a college degree is always worth the effort, but it makes good sense to shop around. Where you obtain your degree (as long as it is an accredited program) isn’t nearly as important as the grades you receive and what you do with the degree. Which leads me to my second point, be sure that your post college career choice will enable you to earn a salary that will make paying off those college loans feasible and manageable. A study by the Brookings Institution backs up my logic. According to the study, “a college degree is the best long-term investment – by far, promising higher returns than stocks, bonds, housing and even gold.” But, if you’re taking $50,000 in student loans to become a pre-school teacher, just know that you’ll never make enough money to realistically pay down your debt in just ten years. Lastly, working through school isn’t just the poor student’s answer to paying for college debt. A 20-hour a week, part-time job during the school year, with more hours in the summer, can make all the difference in paying for a degree or going into debt. Working hard in your late teens and early 20’s is well worth the sacrifice of less social time so that you aren’t burdened with suffocating debt into your 30’s or even your 40’s.
So if at all financially possible, seek out that college degree, but use common sense when deciding which institution to attend and how much, if any, debt you are willing to assume in the process. It IS possible to graduate college debt-free if you are willing to work hard, give-up the ‘dream’ school for a 2-year community college program and then transfer to a 4-year college, and aggressively look for the best financial aid packages available. When you’re pining away for ivy covered walls, just remember that your ‘dream’ college may end up costing you nearly $75,000 in student loans totaling nearly $1,400 a month in repayments for ten years or longer. Is that vision really worth starting your adult life in such overwhelming debt?