According to the Washington Post, total outstanding student debt has passed $1 trillion, more than the nation’s credit card debt, and average indebtedness for students is rising. While I’ve often written about whether college is beneficial in modern society (where some of the most successful and wealthiest entrepreneurs are college drop outs), for many there is proven long-term fiscal value of a degree. But not everyone can afford to pay outright for skyrocketing tuition costs.
- Public four-year colleges charge, on average, $7,605 per year in tuition and fees for in-state students. The average surcharge for full-time out-of-state students at these institutions is $11,990.
- Private nonprofit four-year colleges charge, on average, $27,293 per year in tuition and fees.
- Public two-year colleges charge, on average, $2,713 per year in tuition and fees.
I had a bit of a debate with my father recently over the Occupy Wall Street movement, and how I felt people — esp young, just out of college folks, had a right to be mad at the way the economy is right now, esp in terms of the bailouts and lack of accountability. My dad, a staunch republican conservative type, thinks kids just expect too much when they graduate college. What he doesn’t realize is how most families cannot afford to send their kids to college outright (which was the case in my family, and I realize I am very privileged in this sense).
But really, one has to wonder if the people who complete college are just the same types that will be proactive in the world to apply their knowledge, take some risks, and gain more knowledge along the way. Plus, those who go to and complete college tend to — although not always be more intelligent then the people that don’t — are more confident about their intelligence and abilities.
Lots of well-educated people still argue that college is worth it. Even with the high unemployment rates for college grads, those rates are a lot worse for people without college degrees. And, according to the Center on Education and the Workforce, Georgetown University, there is a growing demand for college-educated workers that matches the supply. (Granted, a University would be biased in this research, wouldn’t it?)
Personally, I believe someone doesn’t need a college education to be successful, but having one helps you get your foot in the door. You’re still better off spending the time tinkering with computers if you plan to spend your life running startups, but (despite what it seems like in Silicon Valley) the startup life isn’t for everyone. For all the many other jobs in the world, a college degree is a requirement for many of them.
And so students are taking out thousands upon thousands of dollars in loan for their credentials. If everyone was happily employed in jobs that paid enough to cover the basics plus loan repayments, the world would look a lot different.
The college board says about 56 percent of bachelor’s degree recipients at public schools graduated with debt averaging about $22,000. From private nonprofit universities, 65 percent graduated with debt averaging about $28,000. Obama’s new plan, which will start in 2012, makes it so you only have to pay 10% of your yearly income, up to 20 years, to repay your debts. After that your loans are forgiven.
So let’s say you become a teacher and make a decent $40,000 a year salary, but have $28,000 in debt. That means you will pay $4,000 a year back in student loans, over 20 years, and you will be in the clear early (if you paid $4k for 20 years you will have paid back $80,000). The hardest part is those first few years when you may not be employed or be underemployed. So, if you have $30k in student loans and made $15k for you first year out of school, you may have to pay back $1500 in loans, but you’re still going to be in trouble when it comes to paying other bills — unless you’ve moved back in with mom and dad (which many of my friends, who graduated in 2005, have.)
Meanwhile, the real whopping debts start to pile up when you talk about professional degrees. I’ve avoided getting an MBA because I can’t quite see the value in taking on the debt required of an MBA program. The latest data from U.S. News & World Report shows that it varies greatly from school to school. At the top of the list, the graduates who have the most debt hail from Wharton, the only school where MBAs leave with six-figure debt totals. The average debt burden of a Wharton grad is a whopping $105,489(!!!), according to U.S. News. Next on the list? Graduates who get their MBAs from Yale ($99,418), Duke ($88,050), Carnegie Mellon ($87,592), and Chicago ($86,758). The least debt? According to U.S. News, it’s MBAs from Fayetteville State University in North Carolina ($3,810).
Promises for higher salaries with these degrees may be accurate, but I believe with hard work, execution, and a little negotiating skill you can land yourself in the same well-paying gigs. I still would like to get an MBA at one point, but I’ve realized the only way I’ll do this is if I attend and executive program and if my work has the means to pay for most or all of these credentials. If it doesn’t happen, it doesn’t happen. In the startup world, an MBA means less anyway, though it does help with earning what I like to call “handshake respect.”
With just a bachelor’s degree, the chart to the left shows the average annual earnings for college graduates is much higher than for employees without a college degree.
“College is still the best investment you can make in the future and our country’s future,” says Lauren Asher, president of the Institute for College Access and Success, the home of the debt project. “But like any investment, the returns are not guaranteed.”