There’s some new statistics out regarding student loan debt. 36% of college graduates found that taking out student loans was not worth it. They don’t regret going to college necessarily, but say that taking on the student loan debt wasn’t worth it. Merrill Lynch conducted a survey involving 2,700 young adults.
Another poll from GoBankingRates came to the same conclusion with their own pull. Again, they’re not saying going to college was a bad thing. They’re finding that the financial hardships that their student loan debt puts them in almost doesn’t make it worth it. Many millennials are struggling to build their life after they’ve graduated.
We’ve written many articles here at Financial Helpers about the problems student loan debt causes. At the age when you should be building your life, those with debt are putting off major life decisions. The younger generations are waiting longer to have children, get married, and buy a house. All of this is a major cost to the U.S. economy.
Student Loan Debt by the Numbers
Currently in the United State, 44 million people owe $1.53 trillion worth of student loan debt. As of 2017, the average amount of debt owed per student is $28,650. This is due to a recent report released by the Institute for College Access and Success. Younger Americans carry even more debt.
It was found that students aged 18 to 34 owe on average $36,888. That’s because the cost of tuition keeps climbing exponentially. This data is from the Federal Student Aid Office of the U.S. Department of Labor. This year, the average monthly student loan debt payment will be around $371. If you make $50,000 per year, that’s around 9% of your pre-tax salary.
With costs that high and stacking student loan debt, many wonder if it’s worth the investment. Students definitely do better if they have a degree, but do they do well enough? Author James Altucher has been quoted as saying “a degree means nothing”. In a lot of cases, he might just have a point. Others appear to be leaning against it.
Grant Cardone, one of the most popular online figures and a self-made millionaire says, “Most people should not be going to college.” Reddit co-founder Alexis Ohanian has also asked if student loan debt is worth the degree. Personalities like Mike Rowe believe it’s best go the route of seeking a trade rather than a 4-year degree.
Questioning if Student Loan Debt is Worth It
While critics are certainly unhappy with the situation, experts say it pays off in the end. We live in a time where immediate satisfaction is king. If you have to wait ten or more years to pay something off, of course you aren’t going to be happy in the moment. But, if you wait for it to pay off, you might feel differently later.
The Pew Research Center found that eventually, a college degree is worth the fuss. When you look at the overall financial situations between people who went to college and those who didn’t, there’s a huge divide. Having a degree can make all the difference. Ramit Sethi is the author of the book “I Will Teach You to be Rich.” He says:
“I want to encourage everyone here to not just take advice from a bunch of people on Twitter who are telling you, ‘Drop out of college — student loans are bad,’” he says.
Think of it like this: there’s good debt and there’s bad debt. Good investments and bad investments. Good types of debt, like student loan debt, serves a greater purpose. It can definitely lead to a much higher earning potential. The problem is, people want satisfaction immediately. They might not find themselves in that great scenario right away.
“Given the modest levels of student debt that the typical millennial grad is taking on, it still looks like college is working out pretty well for them,” Richard Fry, a senior researcher at Pew Research Center, told CNBC.
Salary Differences
The research done by Pew found a very large gap in salary between people who have a degree and those who don’t. It’s about a $20,000 per year difference. The median annual salary of someone with a bachelor’s degree is around $56,000. Millennials who didn’t complete college earn around $36,000.
That extra $20,000 per year can go a long way towards paying back student loan debt. In fact, by living under their means they can get it over with in a few years. Then you can really start to see that extra money stack up throughout the person’s lifetime. Again, that means allowing the investment to work for you over time.
“For the average millennial grads, relative to their counterparts who stopped their education in high school, they tend to do much, much better,” Fry says. “And those with at least a bachelor’s degree will continue to receive those gains throughout the next two to three decades of their working life.”
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When it’s all added up, people with degrees make, on average, $1 million more than those without. There are plenty of other benefits as well. When the economy goes down, having a degree gives you a leg up. You’re more likely to find profitable work. In that way, degrees can be recession-proof, depending on the field in which you work.
“Don’t buy the typical advice that everyone seems to be throwing around these days saying college loans are the worst thing on earth. They’re not,” Sethi says.
