One of the most popular questions right now is whether student debt is worth it or not. Whether you’re a parent who has already paid for college, a student, or a young professional about to graduate, you might be wondering if paying for a degree is worth it. The answer to this question depends on several factors, such as the length of your education, your job outlook, and your personal circumstances.
Average indebtedness per student
The average student loan debt in the United States per student is nearly $20,000. This is more than the burden of car loans or credit card debt. A recent study by the Institute for College Access and Success confirms that record high.
Approximately 43 million borrowers have $1,447.1 billion in outstanding debt. Almost half of that total is in federal student loan debt. Private student loans comprise another $32 billion.
Student debt is growing faster than the rate of inflation. It is also the largest type of consumer debt in the United States, surpassing auto loans.
According to the National Association of Realtors, student loan debt is a major factor in the delay in purchasing a home. Researchers found that in some schools, default rates were higher than graduation rates.
For many students, student loans are their only option. But they can be a burden, especially for low-income borrowers. As more students attend college, student debt grows.
In the past decade, student debt has risen 302%. Total debt balances have increased at an average quarterly rate of 1.48%.
More than one-third of borrowers are delinquent in their student loan payments. This is comparable to the mortgage market before the 2008 crisis.
Students in their 20s and 30s account for most of the outstanding student loan debt. However, borrowers under age 24 owe a mere 7.5% of the total.
While the average debt burden per student remains high, the amount of loans taken out has stabilized. Those with a four-year degree earn 1.8 times more than those with only a high school diploma.
In August of this year, President Biden announced that he will help certain borrowers with federal student loans. However, the amount of relief will not meet the full need.
Lifetime earnings for those with a high school education average about $1.3 million
The following estimates are based on the results of survey data from the American Community Survey (ACS) and administrative records of Social Security earnings. For the purpose of this study, the ACS data were pooled from 2009 through 2019.
Workers with a high school education have average lifetime earnings of about $1.3 million. This is higher than the average earnings of bachelor’s degree holders who earn about $2.8 million over their lives. In addition, workers with associate’s degrees earn about $2 million.
Similarly, men with bachelor’s degrees earn more than workers with associate’s or high school degrees. Those with a graduate degree earn more than $3.05 million, compared with those with a bachelor’s degree.
Women with a high school education earn an average of $81,000 over their lifetimes. A woman with a bachelor’s degree earns about $2.4 million.
Is a high school education enough?
The highest-paid occupations are health practice, computer and mathematical positions, and other technical and professional occupations. Workers with a high school education or less are more likely to be unemployed during downturns.
Those with a bachelor’s degree are more likely to be employed full-time, but less likely to retire early. Despite the difference in earnings, workers with a high school education are not more likely to drop out.
Several studies have examined the lifetime earnings of different levels of education. Some studies have used cross-sectional data while others have relied on synthetic cohort methods. These methodologies provide useful baseline estimates and can help analyze the labor market return to higher education.
Although some studies have used administrative records, most studies have analyzed earnings data from Social Security. Using Social Security data allows for more robust estimates of lifetime earnings by educational attainment.
Government student loans come with income tax benefits
When it comes to student loans, the federal government has your back. Besides the usual helpful programs, there is also the Student Loan Repayment Program – or SLRRP for short. The most notable feature is its tax-free repayment options. In addition to the more than generous payment schedule, the program is also the envy of its peers in terms of customer service. Indeed, the program was rated number one in the annual Customer Service Index (CSI) for the past four years.
There is no shortage of qualified and competent representatives who are ready to help you if you’re stuck in the sandbox. The SLRRP program is not for everyone, though. To make your life a little easier, check out the links below. If you are looking to save some green, this may be your ticket to a new and improved fiscal future. Whether you’re already a student loan aficionado or a first timer, the program will provide you with the tools and guidance needed to achieve your education and career goals. After the application process is complete, the program will provide you with all the resources you need to succeed.
Even though President Joe Biden is trying to cancel student debt, you have to keep in mind that you will end up paying for it in taxes later. There can never be a student debt cancellation that doesn’t get paid by someone.
Calculating ROI with college and student loans
If you want to calculate the Return on Investment (ROI) of college or student loans, you can choose a few variables to customize your estimate. For example, you can adjust your calculation based on your age at entry to college, the number of years you spend in college, and the field of study you pursue.
Among other factors, your discount rate can change the magnitude of your ROI estimate. Typically, higher discount rates reduce the NPV, or the lifetime dollar figure, of your ROI. Higher discount rates also create a greater preference for money in the present.
You may wish to consider taking out student loans in order to disperse your costs over a longer period of time. In the long run, this can save you money. However, there are limitations to this strategy.
Working can help offset costs
If you plan to work while you are in college, you can use your earnings to help offset your expenses. However, you need to be careful to choose a reasonable discount rate. The higher the discount rate, the more likely you are to find yourself with too much debt. You can use the College Scorecard to estimate the direct costs of attending college. This tool provides earnings data for all dependent students and all independent students. Unfortunately, this data does not include information about earnings after ten years.
Another option is to use the Custom ROI Calculator. In this calculator, you can select your discount rate, the number of years you spend in college, your field of study, and your demographics. You can then compare your ROI to other institutions and demographic groups.
Regardless of the choice you make, you can expect your ROI to fluctuate with graduation, your age at entry to college, your transfer status, and your field of study.
If you like what you read, check out our other finance articles here.
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