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Is a College Degree Really Worth the Money?

June 22, 2010 By: Category: Aid for College, Loans, Student loans, The financial insider

Today we have a guest post from Josef Katz from Straighterline, a company that offers a new way to complete your required college courses online with convenient and affordable online college courses that you can take on your own schedule.

A new report from the U.S. Census Bureau predicts that the more you learn, the more you will earn during your working career:

• High school graduates will earn an average of $1.2 million over their careers
• College grads with bachelor’s degrees will earn $2.1 million
• People with master’s degrees will earn $2.5 million
• People with doctoral degrees will earn $3.4 million
• People with professional degrees will earn $4.4 million

Source: The Big Payoff: Educational Attainment and Synthetic Estimates of Work-Life Earnings 


Photo by gadget dude

Based on those predictions, it would be tempting to think that the road to riches is paved with diplomas. But is it? Not necessarily.

A recent article in The New York Times, “Placing the Blame as Students are Buried in Debt”, tells the story of Courtney Munna, a 26-year-old woman who took on $100,000 in debt while she was an undergraduate at NYC. Ms. Munna’s story is harrowing. She has not been able to get a job that pays what she was expecting to earn. She is deep in debt and unable to dig out. To delay making loan payments, she has become a night student. (That lets her delay repaying her loan. However, it doesn’t keep prevent interest from piling up on what she owes.)

Many people find themselves in Munna’s predicament. Part of the problem can be false optimism. Students and their families look at statistics like those that I cited from the U.S. Census above and think, “I’m getting a college degree. I am going to earn a lot more. So why not pay more now for my education, or borrow a ton of money?”

What’s the Solution?

I am not going to become popular when I say that you don’t have to be an Einstein to dig to the bottom of this question. You only need to do some adding and subtracting after you answer questions like these:

  1. What is the market for what I am learning? Are there jobs to be found?  If so, how much can you expect to earn in the first year you are employed – and in the fifth year, and the tenth? Don’t be naively optimistic. Do some research at, and through professional associations.  (They exist for professions, from physical therapists to mechanical engineers to chiropractors; get to know them). Total up what you can expect to earn in your first 10 years of working life – the time when you will be repaying educational loans.  Will that income cover what you have to pay back on your loans?
  2. Based on what I learned in question one just above, how much should I spend on my education – and how much should I borrow? Be realistic. If you will earn $1 million during your first decade of working as an accountant, for example, maybe you could consider taking on $50,000 in debt. But if you are an English major who is simply hoping to write a bestselling novel – well, then it might not be too wise to take on that same kind of debt.
  3. How can I reduce the cost of my education? I am not talking about taking loans here. I am talking about paying less for your education.  There are ways to do it. You can spend two years in a state or community college and then transfer to a tweedier school. You can convert life experience into college credits. You can take college courses online to satisfy curricular requirements. You can take advanced placement courses in high school to reduce the number of classes you will take in college. You can take extra credits every semester in school and earn your degree in less than four years. You can take advantage of educational programs for veterans. You can explore innovative programs that let you telescope college into high school, so you spend fewer years in college before you earn a degree.

So, is a college degree worth it?  It depends on your ability to be a smart consumer who pays a fair price for what you are getting. You do that when you buy a pair of shoes, a car. or a house. Why not do the same when buying a college education?