The Financial Pros and Cons of College: Should you even bother?

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*Last updated December 2014

For millions of students, the cost of higher education is beyond their reach. They may not have the luxury to choose whether to go to college or not, but those who are fortunate enough to have a shot at continuing their education after high school are still faced with some difficult financial decisions. Many students (and their parents) now question whether a college degree is actually a worthwhile goal, because the financial burden has gotten out of control.

It’s a well-publicized fact that going to college has become extraordinarily expensive. The National Center for Education Statistics reveals that the cost of undergraduate tuition rose 40 percent at public institutions between 2000 and 2010. The amount of student loan debt in the USA is now at $1 trillion. That’s even greater than our credit card debt – and Americans do carry a heck of a lot of debt on their plastic.

USA Today said that for students at more than 250 American colleges and universities, the chances of defaulting on a student loan are actually greater than their chances of graduating. By the way, if you default on a student loan there are laws that prevent you from just walking away and not paying.

Things Just Went from Bad to Worse

To add insult to injury, on the first day of July interest rates on student loans doubled in price. We can thank a politically divisive and notoriously unpopular Congress for that, because when legislators failed to reach an agreement before leaving Washington for their summer break America’s student loan rates jumped from 3.4 percent to 6.8 percent. Members of Congress did promise to wrangle with the student loan bill upon their return to Capitol Hill next month, but you cannot pay for school with a promise. That overnight hike in rates effectively cancelled the plans of thousands of kids to go to college this fall.

Financing a college education is not liking buying a washing machine, either. If it doesn’t work the way you expected it to you cannot go back and demand a refund. Millions of college graduates cannot find meaningful employment, yet they are still on the hook to repay those student loans. Once you commit to that money, you’re expected to pay it back, whether your education has rewarded you with a great career and salary or not.

Tech Schools and Community Colleges

Students who attend traditional 4-year university degrees are not the only ones affected. A Wall Street Journal piece that was published in April of 2013 revealed that sometimes a degree from a 2-year college or technical school can deliver a surprisingly robust return on your tuition investment. The article cited the example of students who study health care at Dyersburg State Community College in Tennessee. Here are some of those highlights:

  • Studies show that during their first year of employment after college, they earn more on average, than graduates of the more expensive University of Tennessee at Knoxville.
  • Those Dyersburg State Community College grads finished school twice as fast, two years versus four years, so they saved a considerable amount on tuition.
  • Those students also typically earned at least $5000 more during their first year out of college than their counterparts at a 4-year university.
  • In the state of Virginia, people with technical degrees from community colleges typically earn $20,000 more during that first year of employment than many people who have bachelor’s degrees in various fields.

Those are rather compelling figures, and help to underscore the point that a degree from an excellent accredited technical school or community college may be a fantastic bargain.

Are College Degrees Worth the Cost?

Should the above scenario lead people to believe that a college degree is no longer worth the trouble and expense? The answer, based on current statistics, is that higher education does still give you a huge advantage in the marketplace. As reported a couple of months ago in the New York Times, employment rates among college graduates have increased more than nine percent since the start of the Great Recession. It also depends on the responsibility of the individual student. Pay back your loans in the most affordable way possible for you.

By comparison, those with only a high school education have experienced a drop in employment of approximately nine percent during that same period of time. That’s an 18 percent differential, and serves as a sobering reminder and validation of the importance of a college degree.

*The content in this article is accurate at the publishing date, and may be subject to changes per the card issuer.

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