Does a College Education Justify High Priced Student Loans?
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UPDATED: Nov 30, 2011
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As schools’ tuitions, costs, and fees continue to rise, and movements such as Occupy Wall Street and Occupy Student Debt gain momentum, pursuers of higher education may be asking themselves whether college is even worth it. After four years of rigorous studying and taking on tens of thousands of dollars in debt for student loans, some feel slighted when they receive nothing more than a piece of paper with the cursive words, “Bachelor’s Degree,” scrawled across the center.
But that’s simply the documentation, not the reward. When thousands of dollars and sometimes years of debt are the result of a college education, current and prospective students need to be told what the pay off will be.
The good news is a college education still leads to hundreds of thousands of dollars in lifetime earnings over that which a non-college educated individual will make.
The Cost-Benefit Analysis
According to a 2011 United States Census education report covering the 2008 census, those who had a high school education earned an average yearly amount of $21,569. Those who had a Bachelor’s degree earned an annual average of $42,783. That comes to be a difference of $21,214 per year.
In a typical 40-year work-life period, that difference works out to be $848,560. The true difference between a Bachelor’s degree and a high school education is nearly a million dollars.
And that’s during a recessionary period.
This increase becomes more drastic as even higher education is pursued. Those who hold Master’s degrees, for instance, earn an average of $53,716 more than high school educated individuals. That’s an annual difference of $32,147, or a lifetime difference of $1,285,880.
Finally, those who hold Doctorate degrees earn $73,575, which creates a financial gap between its high school counterparts’ incomes by over $2 million.
It may be hard to imagine such high dollar amounts flowing into your bank account throughout the years ahead, but when faced with this cost-benefit analysis, the amount of debt created by student loans is rather insignificant.
The Earning-Increase Trajectory
The ultimate earnings accrued over a lifetime are nice, but instead of only focusing on the end product, one should also think about how their career will grow and expand during that lifetime. One needs to consider the means to the end rather than just the end itself.
Those with a high school education usually see a pretty shallow and stagnant trajectory of yearly earnings. Those ages 25 to 29 earn a yearly average of below $30,000. That number only slightly rises as they age, reaching the mid-to-high $30,000’s by ages 40 to 50.
Compared to those with Bachelor’s degrees, who typically start out around the low-to-mid $40,000’s at ages 25-29, that number is much higher. By a Bachelor holder’s early 40’s, they can expect to see an average of over $60,000 per year.
The benefit of employment opportunities for the educated versus the uneducated is extremely important when weighing the pros and cons of a college degree.
Just over 50 percent of those with just a high school education were employed full-time during the 2006 to 2008 time period, according to the census report. This is compared to Bachelor’s holders with just over 60 percent full-time employment.
That’s a 10 percent better chance of being employed during a time when jobs are scarce.
While it is hard put a definitive number on this percentage representing the monetary advantages, there absolutely is a financial benefit of being employed over being unemployed—no matter how short that stint without work may be.
All of the hard work and financial planning required to manage the debt derived from student loans pays off in the end. While some proclaim that degrees are losing their value and no longer worth the effort of obtaining an education, look at the numbers and look at the future. When one’s mind moves from the present to the future, an education is still a sound, wise, and invalua