Every year, college graduates hope to make the leap from student to the workforce. Two-thirds of students graduate with student loans, with an average balance of $29,990. Student loans can be a burden, especially at the beginning of one’s career. With the average starting salary of around $52,000, many wonder if their investment will pay off. Unfortunately, there isn’t a simple answer. Here’s how to figure out if student loans are worth it for your family.
College cost varies by school
It’s easy to get carried away as college acceptance letters begin to roll in. You may have visions of your dream school—until you see the price tag. There’s a big difference in the cost between schools, especially when comparing public vs. private colleges. The average cost per year for a four-year school can range anywhere from $22,180 to $50,770, for public and private schools respectively, according to the College Board.
You may imagine yourself (or your child) sporting a sweatshirt from a big-name private university. But the cost of attending may not pay off, especially if you need large amounts of student loans to pay for it. On-time graduation rates may be higher, but private schools may not lead to better job prospects. Even an elite degree from an Ivy League school may not be the fast-track to success.
Before making a decision based on the school’s reputation alone, consider the full cost—and financing options—from a range of schools. After crunching the numbers, you may find some unexpected choices offering the best value.
Not all majors have the same income potential
At eighteen-years-old, it can be difficult to choose a future career. Students may pick a school based on a specific program, but 30% will change majors within three years, according to the Department of Education. While swapping majors may not seem like a big deal, your studies may have a direct impact on their future earnings.
Students with a STEM degree can expect to earn the highest average starting salary, according to a 2019 survey from the National Association of Colleges and Employers (NACE). Here’s the average starting salary that students can expect for several different majors:
Engineering – $69,188
Computer science – $67,539
Math and science – $62,177
Business – $57,657
Social sciences – $57,310
Humanities – $56,651
Agriculture and natural resources – $55,750
Communications – $55,750
Student loans are a big decision that you will have to grapple with for many years after college. Before signing up for a large student loan balance, do some research on their major’s income potential. It may be easier to justify a larger student loan balance for in-demand, higher-paying fields. But you may prefer to spend less for a major with lower earning potential.
College graduates may have more financial stability
While a college degree is no guarantee of future career success, experts agree getting an education is a good investment for most people. The median earnings for folks with a bachelor’s degree are 67% higher than those with a high school diploma, according to the College Board. The earnings gap is even wider for college-educated millennial women, who earn 84% more than women with only a high school education. And earnings for both men and women continue to rise with each level of education.
For those who worry about the economy and job stability—and many people do—the prospect of layoffs can be daunting. Unemployment is often twice as high for those without a college degree. During the reporting period, 83% of folks with a bachelor’s degree or higher had a job, though.
The report also found a college degree increases the chance of financial stability, and it reduces the likelihood of relying on public assistance. Earning a college degree may also lead to a healthier lifestyle and lower health care costs.
The data is clear: paying for a college degree with student loans may be worth it. But that doesn’t minimize the burden of a large balance. Luckily, there are ways to reduce college costs. By borrowing less, it may be easier to tackle student loans after graduation.
Are student loans worth it?
While a college degree may lead to higher income, that doesn’t mean student loans are always worth it. Borrowing money is a major decision, with many factors to consider. Your college major, job prospects, the cost of your school and the total amount of student loans may impact your family’s finances for decades. Before signing the dotted line, consider your field and income potential. Try to estimate your monthly payments and how they may impact your future budget. By knowing the key details before applying for a student loan, it may be easier to decide how much, if any, you’re willing to borrow for college. Before pursuing student loans, find free money for college by taking advantage of grants and scholarships.
FAQs
While a college degree may lead to higher income, that doesn't mean student loans are always worth it. Borrowing money is a major decision, with many factors to consider. Your college major, job prospects, the cost of your school and the total amount of student loans may impact your family's finances for decades.
Are student loans really worth it? ›
With careful planning, student debt is worth it
Student debt will not be worth it in every situation. Borrowing a large sum and entering a low-paying career will either not pay off financially or take a painfully long time to do so.
Do you think taking out student loans is a good thing or a bad thing? ›
They can be considered good debt because the money you're borrowing to attend school is your ticket to earning a degree and getting hired at a well-paying job. That debt should pay itself off over time with a lucrative career in place.
Is $10,000 in student loans a lot? ›
The average outstanding federal student loan debt per borrower is $37,853. 52.6% of indebted borrowers owe $20,000 or less in federal student loans. 32.1% of indebted student borrowers owe $10,000 or less in federal student loans. 15.0% of borrowers owe less than $5,000.
How many people regret student loans? ›
Roughly 61 percent of college students said they regretted how much they borrowed with student loans, according to the report.
Is $40,000 a lot in student loans? ›
Just because the average student graduates with nearly $40,000 worth of student loans to repay, it doesn't mean you have to choose between college or debt. There are ways to minimize the cost of college, and the amount you need to take out in loans, such as: Save up for college during a gap year.
What are two cons of a student loan? ›
Con: Student Loans Can Penalize You for Late Payments
Some of these penalties include added interest, higher fees, or even wage garnishment. As mentioned above, this also affects your credit score, having a rippling effect on big purchases you plan to make.
Is it wise to take a student loan? ›
Benefits of a student loan. If money is what's standing in the way of the life and career you want, then a student loan could help you afford your education without stressing about how you're going to finance it.
What are 3 benefits pros of student loans? ›
The benefits of borrowing federal student loans
- No credit history needed.
- No co-signer needed.
- Fixed interest rates.
- Lower interest rates than private loans.
- Interest accrual may begin after college.
- Forbearance and deferment options.
- A repayment grace period.
- Income-driven repayment options.
Student loan debt can prevent you from making major purchases like a home or a car. An economy may see fewer new businesses when there is more student loan debt. Student loan debt also limits consumer spending. Economic recovery can be more difficult when there are many people carrying student loan debt.
What is the monthly payment on a $70,000 student loan? The monthly payment on a $70,000 student loan ranges from $742 to $6,285, depending on the APR and how long the loan lasts. For example, if you take out a $70,000 student loan and pay it back in 10 years at an APR of 5%, your monthly payment will be $742.
Why are student loans so hard to pay off? ›
Key Points. Interest can make student loans more expensive, while inflation can make that debt harder to manage alongside other bills. Paying off some of your debt during your studies could ease the burden later on and save you money on interest.
How long would it take to pay off $100000 in a student loan? ›
How long does it take to pay off $100K in student loans?
| Repayment term | Monthly payments | Total interest paid over the life of the loan |
|---|
| 5 years | $1,933 | $15,997 |
| 10 years | $1,110 | $33,225 |
| 15 years | $844 | $51,984 |
| 20 years | $716 | $71,943 |
1 more rowMay 28, 2024
Carrying student debt can affect your ability to buy a home if your debt-to-income ratio is too high. If you have too much student loan debt, you won't be able to save as much for retirement. Student loan debt can lower your credit score, especially if you fail to make on-time payments.
How many people actually pay off their student loans? ›
20% of U.S. adults report having paid off student loan debt. The 5-year annual average student loan debt growth rate is 15%. The average student loan debt growth rate outpaces rising tuition costs by 166.9%. In a single year, 31.5% of undergraduate students accepted federal loans.
What percentage of Gen Z has student loans? ›
Student loan debt
Young people are more likely to have student loan balances: 24.3% of millennials and 20.2% of Gen Z are in student debt, compared to 14.9% of Gen X, 6.1% of boomers and only 1.4% of the silent generation.
Is it smart to take out a student loan? ›
Yes, debt can negatively impact your future, but there are benefits to taking out student loans. Namely, helping you to obtain the education you need for your future career. Getting a good education at the best possible price is essential to a stress-free future.
Do student loans ruin your credit? ›
How student loans affect your credit score. Student loans are a type of installment loan, similar to a car loan, personal loan, or mortgage. They are part of your credit report, and can impact your payment history, length of your credit history and credit mix. Paying on time could help your score.
Is a student loan good or bad debt? ›
Student loans can be another example of “good debt.” Some student loans have lower interest rates compared to other loan types, and the interest may also be tax-deductible. You're financing an education, which can lead to career opportunities and potentially increasing income.
Is 100k student loans a lot? ›
If you're a recent college graduate with a mountain of student loan debt — say $100,000 or more — paying off such a large amount could be a major struggle. For example, if you're making payments on federal student loans under the standard 10-year repayment plan, your minimum monthly payment might be quite daunting.
