Is Student Loan Debt Worth It?

by Sophia Bera on October 21, 2015

When you’re weighing whether or not to take out loans to complete your education, it’s hard to avoid the news about the student debt crisis. The college class of 2015 was the most debt-laden in U.S. history, with an average debt of $35,000 per student. It begs the question: is all this debt worth it?

Taking on student loan debt is a highly personal choice you need to make (with input from anyone in your family who may help fund your education). These choices aren’t easy to make when you’re 16 or 17 years old. The lure of the expensive name-brand university is strong. It doesn’t help that parents compete with each other for bragging rights, pressuring their kids to outshine their classmates.

The message Gen Y grew up with was, “work hard at school, go to a good college, and you’ll make it in life.” But that formula doesn’t work for everyone. Millennials, especially those who graduated during the Great Recession, began their adult lives a rough job market. Many turned to grad school to beef up their resumes and put off the job hunt for a few more years, but that added significantly to their debt load without necessarily paving the way for higher-earning careers.

When you’re weighing the costs and benefits of higher education, there are a few important things to keep in mind. Consider these factors when making your choice.

The Four-Year Degree

A Pew Research Center study from 2014 found that Millennials with four-year degrees, and those who stopped after earning a high school diploma, are both doing worse economically than previous generations did when in similar stages in their lives, and the value of a college degree is declining. However, but the value of a high school diploma is declining even more.

Recent studies have shown that getting your bachelor’s degree boosts your earning potential. Workers with a four-year college degree earn about $1 million more in their lifetimes than workers with a high school diploma do. Millennials with four year-degrees also find jobs more quickly and work in entry-level jobs that are more directly related to their career interests or fields of study than Millennials with a high school education.

While there are exceptions to the rule that a bachelor’s is a must-have, most Millennials will reap the benefits of the investment over the life of their careers.

What About Grad School?

The benefits of an undergraduate degree are largely considered worth the investment. But what about grad school? The answer is…it depends.

What you definitely shouldn’t do is dive headfirst into grad school with no plan other than, “a master’s degree or Ph.D will look good on my list of credentials,” or “the job market is terrible right now, so this will buy me some time.” Instead, do some research.

Are you considering a career where an advanced degree is required, or changing your existing career so much that you need more education? What’s the job market like for graduates of the programs you’re considering? Can you afford to take yourself out of the job market for several years and then spend the first few years of your career paying back loans? How long will that delay your ability to contribute to your retirement savings? Will attending a more affordable mid-tier program give you the same opportunities as people who spent more on an Ivy League degree?

Think long and hard about grad school. It’s a serious investment of time and money that isn’t guaranteed to pay off. In many lines of work, a bachelor’s degree and on-the-job experience is sufficient.

Maximizing the Return on Your Educational Investment

If you’re heading to college or grad school, there are things you can do to increase the value of your investment, set yourself up for an easier job search when you graduate, and maybe even reduce the amount you borrow to pay tuition.

First, consider which schools are the best value for you. Look beyond the school’s name. Which schools, even lesser-known ones, are highly-ranked in your particular field of study? Are you able to get scholarships or grants that can offset what you owe? Is there a strong alumni network and a record of alums getting jobs when they graduate?

Next, don’t wait until you graduate to get relevant work experience in your field. Internships and freelance work will help you hone in on what kind of work you enjoy and will also strengthen your resume before you begin looking for your first full-time job. Get to know your professors, who are rich sources of job contacts and can serve as references when you’re close to graduating.

Finally, think broadly about the kind of work you can do with your degree. A lot of people don’t end up in jobs that match the majors they chose at 18. You probably have a lot of skills that translate into a variety of careers, so keep an open mind to all the possibilities.

An education is often a solid investment. But before you saddle yourself with debt you’ll be repaying into your 30s or 40s, do what good students do: your homework!