Even though it may not be the sexiest topic, student loans are a hot topic in the personal finance world today. There is a lot of discussion around the impact student loans have on millennials, the housing market, and the overall economy.
College tuition continues to rise faster than wages and inflation which can’t be sustainable long-term. Total student loan debt is more than 1.4 trillion and the average graduate leaves school with debt of $38,000, on average. Most individuals who graduate with a degree will likely be okay in the end. However, there are a lot of former students who go to school for a few years, rack up tens of thousands of dollars in debt, and end up with nothing to show for it. These are the individuals who will likely be hit the hardest when it comes time to pay back their student loan debt.
Regardless, I believe that college is absolutely still worth it as long as you are reasonably smart about it. The pay gap between college graduates and non-college graduates is significant and continues to grow.
I’ve mentioned in previous posts that my wife and I have paid off nearly $50,000 in student loans since 2011. What I haven’t mentioned is our student loan debt was all from my wife’s college experience. I know what you’re thinking, she must be one special person if I still married her with all of that debt (and she is!) 🙂
I graduated with my Bachelor’s and Master’s degree with zero college debt and had very little help from my parents along the way. I did it by working hard to find or follow scholarship opportunities while also getting a little lucky. With that being said, what I’ve learned is hard work and luck seem to go hand-in-hand. My college career took a non-conventional path that included stops at two different community colleges, transferring to a small state school for my undergrad, and then enrolling in a different state school for graduate school.
Even with some luck, I also did what many do not. Instead of having my mind set on an out of state private or big name university, I followed the opportunities that were presented. I didn’t end up at my dream school(s), but in the end I don’t think that mattered much. College is what you make of it, and you can have a great college experience at most any school with the right attitude.
What I’m also finding is the further you get away from college the less the name of the school on the diploma matters anyway. I will share my college story in more detail at some point, including how I went to school for six and a half years and barely paid a dime of tuition from academic/athletic scholarships and internships.
My wife took a more traditional route to her undergraduate degree. She briefly went to a small private university that charged a ridiculous tuition. Fortunately she transferred after her first semester to a more reasonable state school. She still ended up graduating with about $25,000 in student debt and then went back to school after deciding to get her teaching certificate which cost another $25,000. It was all still worth it as she’s been a teacher going on six years and loves it.
To reiterate, even with $50,000 in student loan debt it was still worth it because she has a job that she loves. So keep this in mind as my thoughts below are not for shaming anyone but are suggestions that should be taken into consideration when determining the cost/benefit of college.
From personal experience and years in the workforce, below are a few general thoughts I have on college and student loans.
Consider Going to Community College
Here’s a little secret, nobody cares if you went to a community college after you graduate from a four year university. I know community college isn’t the full college experience. I know the statistics show the dropout rate is higher at two years schools compared to four year schools. And if you can afford to pay or have scholarships for a four year university as a freshman, then by all means go there. However, I’m not sure if it’s worth going into debt at the tune of 5 to 10 times the amount when in the end the name on your undergraduate diploma will be the same. Community college allows a much cheaper option to get through your first two years of college. I know that community colleges are not available in every state, though there are some states where community colleges are completely free!
The Name of Your College Doesn’t Matter as Much as you Think
Let’s get this out of the way, there definitely are schools where the name on the diploma is important depending on your field of study. Ivy League schools are incredibly expensive, though if you are smart and ambitious enough to make the cut then it may be worth taking on six figure debt. Additionally, if you are in a niche field it may also pay off to go to one of the top schools in your field. I would argue the main benefit of going to a top school isn’t education but the network you build as an alumni. It’s up to you to decide if that’s worth tens or hundreds of thousands of dollars in debt.
For the vast majority of us, the name of the school you go to doesn’t matter all that much in the long run. I wouldn’t go so far as to go to an online or non-accredited school. However, if your school is accredited then more than likely its not going to make much of a difference between a private university where tuition is $50,000 per year. The name of the school you go to may help you to get that first job, but the further you get away from college the less the school you went to matters. After five years or more hiring managers want to see experience and a history of results. What gets people promoted mid-career is a history of achieving results and the ability to build effective relationships.
Scholarship Money is Everywhere
You may not be able to get the scholarship or grant you want at your top school. Though I’m willing to bet about anyone who works for it can get a decent scholarship or grant at a college somewhere. There are billions of dollars in federal grants left on the table every year. My brother went to college on a bowling scholarship. My wife got thousands of dollars off her tuition after her aunt wrote one short letter telling her story. You may not get those scholarships at your dream school, but you also need to consider if it’s worth passing up free money to go into tens or hundreds of thousands of dollars in debt at your favorite school.
It may take some hard work to get that scholarship or grant, but the payoff can be huge. I ended up getting a 5th year scholarship as I needed to go an extra semester to complete my undergraduate degree. I was one of the only student athletes to apply for the scholarship and ended up getting it mostly due to lack of competition. There were dozens of other students who could have benefited from the scholarship but they either didn’t proactively seek it out or didn’t put the work in to complete the application.
The Bottom Line
College is still a good investment, the name of the school usually doesn’t matter much for most of us, and if you work hard you can find scholarship or grant money.
When I look around I see way too many kids who are getting buried in student loan debt. Going the community college route, not getting stuck on expensive schools, and working hard to find scholarships can make a huge difference.
In the end, the root of the issue is the overall lack of financial literacy taught in K-12 schools, which results in kids and parents making poor financial choices when it comes to college. We need to do a better job of setting expectations with high school kids and their parents when it comes to financial literacy and student loan debt. A better understanding needs to be developed on just how much money fifty or a hundred thousand dollars really is.
The data show a college degree is usually well worth the investment over the long run even for those of us who ended up having to pay for student loans. However, if there was a way to leave college with less debt wouldn’t that lift a huge burden as you’re looking for a job, buying a house, or starting a family? Hopefully this blog post gave you a few things to think about if you or your child needs to make a decision about college soon.