A recent New York Times article featured 23-year old Kelsey Griffith. Though both her parents earn modest incomes, Kelsey was wooed by Ohio Northern University as a freshman and wound up with $120,000 in student loans by the time she graduated this year. With a degree in marketing she’s only landed two restaurant jobs. Her loan payments of almost $900 a month have forced her to move back home with her parents. It will probably take her at least 15 years to pay off her loans.
College debt is now at a record-high of over $1 trillion. Education costs rose faster than health care costs in the past decade, and they rose even faster than real estate prices before the crash.
Does it still make sense to go to college? Of course it does. Those with a bachelor’s degree or higher had an unemployment rate of only 4.3% in May 2012, much lower than the national average of 8.2%, according to the Bureau of Labor and Statistics, college grads earn more money over their careers.
But those are national averages – it really depends on which school you graduate from and what your major field of study is.
Don’t attend a school just because of name prestige if you have to borrow a lot of money. Unless you’re going to one of the top 100 universities in the country, the higher price tag many times isn’t worth the debt burden. If you’re going into a specialized field, such as veterinary medicine, you may have only a few schools to choose from, but you can earn a marketing degree almost anywhere.
Choosing the right major also makes a big difference. Grads with degrees in education and health have the lowest unemployment rate at 5.4%. These grads are generally always in demand and the jobs pay well. On the other hand, art majors have twice the unemployment rate at 11.1% and liberal arts grads are at 9.4%. Choose a profession that has a low unemployment rate and a higher starting salary.
If you need student loans, look at the monthly payments and your expected starting salary to make sure you can pay off those loans within 5 years. Talk to someone who’s financially savvy that can help you look at this realistically.
One of the benefits college grads enjoy is a higher standard of living throughout their career. But if you’re shackled with excessive debt payments then the cost of college defeats the purpose. Don’t make the same mistake Kelsey Griffith did by burying yourself in debt.
Gary E.D. Alt, AIF®, CFP® is co-founder of Monterey Private Wealth in Pleasanton.