Tag Archives: Student Loans

Is College Worth It?

The cost of a college education and the associated debt that often accompany a college degree were both hot topics during the recent presidential election cycle.  The price of college tuition has soared and greatly outpaced both incomes and inflation.  One fringe presidential candidate even campaigned on promises of “free” college education for all (rant:  We’ll be taxed all the more to pay for this “free” college).

There is a camp that believes all people should go to college no matter the circumstance.  This view, though, doesn’t address the financial implications of attending college and also discounts various nuances, including whether a person would like to pursue a trade or career that does not require a college education. Additionally, some individuals may not succeed in a traditional classroom or school environment. They may benefit much more from an apprenticeship or hands-on training environment where substantial education costs are not incurred.

Tradesman can expect to make respectable salaries, too. Salary.com indicates a plumber earns, on average, in the range of $36,568 to $51,610 annually as of January 30, 2017. Welders make on average $32,409 to $42,798 as of January 30, 2017 according to salary.com. US median household income is $55,775 as of 2015 according to census.gov, the United States Census Bureau, so these salaries are certainly competitive when considering they are earned by individuals (as opposed to households).

I have an undergraduate degree in a STEM major and a Masters in Business Administration with an emphasis in finance and real estate.  My undergraduate college was a liberal arts college and, while as a student I questioned the value of all those “useless” electives, I now value all the writing practice, communications skills, and soft skills I gained.  My MBA was 85% paid for by my employer and provided me with a ton of business, finance, and investing knowledge that I am leveraging to continue investing in equities, start real estate investing, and potentially start a business with a colleague.  Was an MBA needed to continue investing in index funds, start investing in real estate, and open a business?  Certainly not.  Having the MBA 85% paid for, though, by my employer made this a great opportunity and helps me understand most aspects of running a business, and this knowledge was conveyed to me by terrific professors and the learning was facilitated by classmates who had expertise in many fields, including investment banking, real estate, energy, supply chain management, and management.

So, is college worth it?  It depends on many factors.

If you’re going to college, here’s how you can increase your return on investment:

  • Advanced Placement Exams.  Take advanced placement (AP) courses while in high school. You can then sit for AP exams in various subjects.  Depending on how well you score you will earn a corresponding amount of college credit.  Each hour of credit you earn will save you hundreds of thousands of dollars.
  • CLEP Exams.  College Level Advanced Placement (CLEP) exams function similarly to AP exams and allow you to earn college credit.  As with AP exams, CLEP exams can save you hundreds or thousands of dollars in tuition.
  • Get Community College Credit.  Community colleges have tuition that is much cheaper than 4 year universities.  If you’re already attending a 4 year institution, look into their transfer credit policy and see which hours (especially basic credits) can be taken at the local community college and transferred.
  • Finish College.  According to a recent LinkedIn article, graduates with a bachelor’s degree earn over $1 million more in their lifetimes relative to those who only hold high school diplomas.  If you start college but don’t finish, and if you also incur student debt, you’re putting yourself in a hole that will be difficult to escape.
  • Choose Your Major Carefully.  Certain majors are more in demand by employers and certain majors typically result in higher starting pay.  It’s one thing to finish school with $200,000 in debt but a $100,000 starting salary as an analyst at an investment bank.  It’s a completely different ball game finishing school with $200,000 in debt but starting your career making $30,000 as a social worker.  Notice that I’m *not* saying don’t become a social worker (or any other major, for that matter).  Before you choose a given major, know reasonable starting salaries and how long it would take to pay off debt if you choose to carry debt. Educating yourself on your degree’s financial ROI will help you save yourself from the potential surprise and grief of monster debt when you graduate.
  • Have Your Employer Pay For It.  Many employers will subsidize part of your college education, especially if it relates directly to your job, while other employers, especially universities, will pay for your entire education.
  • Choose a College with Successful Career Placement.  I credit esimoney.com for this great, and often overlooked, idea.  A college education is a step toward employment, so visit the career services offices at your prospective school and ask the placement rate for students in general and, more importantly, for students in your major.

There’s no easy answer regarding whether college is worth it for a given individual.  If you’re considering a trade as a profession, college may not be the route you choose.  If you decide to attend a college or university, there are many factors to consider that can help you increase your return on investment.

Student Loan Debt Affecting Parents and Grandparents

A recent Wall Street Journal article indicates that an increasing number of parents and grandparents are being affected by student loan debt:  http://blogs.wsj.com/bankruptcy/2012/10/29/soured-student-loans-bankrupt-parents-grandparents.  From the article:

As young graduates and former students struggle to find work, their student-loan obligations are increasingly falling to the family members who agreed to back the debt in the event of default.  Bankruptcy lawyers report that a growing number of student-loan co-signers, especially grandparents, are trying to get rid of the loan obligations using bankruptcy, hopeful that they’ll find a sympathetic judge or a lender who’s voluntarily willing to lower payments.

Unfortunately, borrowers usually don’t receive favorable rulings in bankruptcy court, so parents and grandparents who co-sign for their children’s’ and grandchildren’s student loans are often left footing the bill.  This puts retired parents and grandparents in difficult predicaments due to being on fixed incomes.

My advice to parents and grandparents considering co-signing on student loans:  Don’t do it, especially not if it’s for an undergraduate degree.  If your prospective college student wants to attend a private undergraduate university but cannot afford it without sizable student loans, take a look at the many great public universities.  Remember that while higher education can be financed via loans, you can’t take out a loan for retirement.