College is expensive; it’s almost a cliché. Still true, though. Student loan debt is a national burden totaling $1.26 trillion across the US, affecting 43.3 percent of Americans, with average monthly payments of $351. A quick look at the statistics from Student Loan Hero makes that much clear.
At the same time, college is worth it. Right? Even though "it costs too much," according to Liz Weston at Reuters, most graduates end up saying they're glad they went.
Still it’s one thing to be happy about your experience, and quite another to emerge with the earning power you need to pay off your college debt. So how does the value of a college degree stack up to student loan?
College graduates earn more; how much more is a question
"According to the National Center for Educational Statistics, a bachelor’s degree accounted for an average of $16,900 in additional income per year compared to a high school diploma ($30,000 versus $46,900)," said Trent Hamm at the Simple Dollar.
That sounds pretty good. Who wouldn't want to earn an extra 16 thousand dollars a year?
Unfortunately, the reality is a bit more complex. Those with college degrees do earn more on average, but there are many variables. For example, the income of your family.
If your parents had a low income when you were growing up, your degree will improve your earning potential significantly less than it would have if you’d been more financially secure, according to Brad Hershbein at Brookings.
- College graduates whose families made less than 185 percent of the federal poverty level earned 91 percent more than high school graduates from the same background
- College graduates whose families made more than 185 percent of the federal poverty level earned 162 percent more than high school graduates from the same background
Another factor: which school did you attend, and which degree did you get?
The Wall Street Journal reported that shelling out for a prestigious school pays off in some fields; not so much in others. If you're interested in STEM (science, technology, engineering or math), save your money. Your earning power will end up being about the same no matter where you went to college.
Variables like these – how expensive was your education, which field are you headed for, what background do you come from – can dramatically affect how easily you’ll be able to pay off that debt.
Earning power versus student loans ... which wins?
The benefits of college are easily demonstrated, from greater earning power to a lower risk of unemployment. However, the cost-benefit of your future paycheck to your student loans is unfortunately not so straightforward.
According to USA Today, when Goldman Sachs calculated the ROI of a degree, it concluded that "wages still aren’t cutting it to make up for education costs." For example, Mary Kate Baumann spent $200,000 on her undergraduate degree, but her first job paid only $28,000. "That’s a large disparity," Baumann said.
"Does this mean that you should abandon plans to attend college?" said Suzanne McGee at The Guardian. "Not necessarily. It does suggest that you should be very, very hard-headed about it."
The ratio of earning power to student debt can make sense for many individuals, but clearly, the cost-benefit is worth considering carefully before you make the jump. And if you decide that college is right for you? Make sure to protect the earning power you’ve worked so hard to attain. Learn more about paycheck protection or get an online disability insurance quote.