Ask the Experts

Education and Earning

A college education isn’t cheap, and I am accumulating a lot of loans here. Lately, I’ve been wondering if it’s all worth it. Don’t get me wrong, I value an education–I really want to learn and I really want to succeed in school. But from a cost-benefit perspective, I’m less and less sure this is worth it with each passing day. My friends who have graduated are overburdened by student loans, and some of them aren’t earning enough to manage both their living expenses and their loan payments. I wonder if I should have just gotten a job after high school instead of going to college. Statistically speaking, what’s the reality here? Do college graduates really make enough to justify these huge student loan burdens?

There’s no denying that student loan debt has become a serious problem in the United States of America. Americans owe a staggering $1.3 trillion in student loan debt, and 37% of adults under 30 years old owe a share of it. All of this is enough to make many of us doubt the entire educational system. Is it right to force all this debt on some students? Is an education worth that kind of risk? Liberal arts colleges and research universities alike prefer to think of education as good in and of itself, not just as a ticket to a higher salary–but the reality of debt makes college a financial decision for many, many students.

The central question, of course, is whether or not college graduates make much more money than non-graduates. The short answer to this is, yes. The average 25 to 32-year-old will make $17,500 per year more if he or she has a college degree–and that gap is growing.

Of course, the issue isn’t that simple. The number of jobs requiring a college degree is growing (it’s expected to hit 65% by 2020) and it’s fair to ask whether or not every degree requirement makes sense. Is the market’s way of valuing a college degree fully justified? Or are too many employers ignoring non-graduates?

Plus, not everyone without a college degree is a hard-working high school graduate. College graduates make more no matter how you slice it, but the picture for non-graduates is a bit rosier when you leave out high school graduates–to say nothing of sub-groups like violent criminals (crime rates are often linked to education levels) and other groups that may add noise to the statistics. On the other side of the coin are highly educated non-college graduates, such as graduates from technical colleges, says administration at NYADI (an automotive technical school). For instance, not every non-graduate can be an air traffic controller–but the ones with the right training can, and they’ll make a median salary of $122,530, which is higher than the salaries of many college students.

And not all college degrees pay equally well, either. College graduates can go on to have lucrative careers in finance or business or consulting, or they can head to graduate school for law or medicine and make big bucks a little later on–or, of course, they can go into social work, the arts, or a host of over lower-paying careers. For a college student determined to become a painter, large sums of student loans are a very questionable idea.

There’s a reason that student loans are a hot button political issue, and we won’t get into the right and left of things. The short answer to your question is that college graduates make quite a bit more than non-graduates, but that variations in salaries mean that student loans don’t make sense for every student. That leaves plenty of questions left unanswered, say advocates. Should student loans be designed to suit every person? Should students have to take out loans at all? We’ll leave those big-picture questions to you in the hope that we’ve given you the background you need to determine where you stand.

“To contract new debt is not to pay the old one.” — George Washington

Marcus Williams is a Senior Financial Consultant in Financial Services and Advisory at EY.