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Is college always worth the debt?

Kelly Dilworth

A few years ago, I asked a family member where he was planning to go to college after he graduated high school. It seemed like an easy enough question. He was smart and hardworking and had a special aptitude for computers. So I figured he’d have little trouble finding a good job after he finished his degree.

But instead of ticking off a list of possible schools, he shrugged. It wasn’t worth the debt, he said. He knew too many people who borrowed heavily for school and then struggled to find a decent job after college and he wasn’t going to make the same mistake. To him, the economy was too soft — and tuition was too high — to take that kind of risk. Why sign a part of your life away if you’re not going to get a good return on your investment?

Is college always worth the debt?

I fumbled for an answer. The conventional wisdom is that a college degree is still worth the extra debt — even if it takes a while to pay off. And research backs that argument up.

According to a recent analysis by researchers at the New York Federal Reserve, for example, the lifetime return on a college degree for the average college graduate is currently near record highs. By the Fed’s estimates, a college degree today is worth approximately $275,000 — well above the average amount of money it takes to earn it. (According to the College Board, the average in-state student will pay approximately $35,572 in tuition and fees for a four year-degree from a public university.)

Meanwhile, the amount of time it takes to pay off that degree is historically low, despite the tepid job market. According to the New York Fed, it should take the average college graduate about 10 years to earn back what they initially paid.

When you view the debate through that lens, it’s hard to argue that investing in college is a raw deal. Unless you’re a born entrepreneur, or a talented computer programmer, your chances of earning the same amount of money with a high school degree are relatively slim — especially since wages for high school graduates have shrunk in recent years.

The problem, however, is that the research doesn’t apply to everyone. It’s true the average college graduate earns substantially more than the typical high school graduate — making the cost of their degree worth it. But as researchers at the New York Fed point out, a sizeable number of college-goers don’t earn enough money to recoup their investment once they graduate. Instead, many college graduates are having a tough time finding a good job that pays a reasonable income.

As the New York Fed’s Jaison Abel and Richard Dietz argue in a Sept. 4 blog post, “Not all college students come from Lake Wobegon, where ‘all the children are above average.’ … A good number of college graduates earn wages that are not materially different from those of the typical worker with just a high school diploma. This suggests that, at least from an economic perspective, college may not pay off for a significant number of people.”

Abel and Dietz also point out in a related blog post that a substantial number of college students don’t complete their degree in four years and that, too, cuts into their lifetime earnings and makes going to college a much shakier investment. “All in all, an extra year of staying in school costs more than $85,000,” write Abel and Dietz. “For those who take two years, it costs about $174,000.” Considering that many of the students who take so long to graduate are the ones who can barely afford it in the first place and so must work while they’re in school, it’s hard to argue that their investment is still a sure thing. If you have to borrow tens of thousands of dollars to get through school, you need to make a pretty solid income to earn back what you put in.

Personally, I still feel like borrowing for college is worth the risk — for most people, anyway. After all, that’s certainly been my experience. On an anecdotal level, the members of my family who graduated college are doing much better financially than the ones who stopped at high school. That’s true for the younger family members who skipped going to college as well as for the older ones — several of whom are working physically demanding jobs that are ruining their bodies as they age.

But when a family member tells me they’re skipping college in order to avoid the extra debt, I can’t bring myself to tell them that they’re making a huge mistake. A lifetime of low earnings makes it tough to get by. But so does crushing debt.

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