The Cold, Ugly Truth About Earning A Degree In 2020
Are you betting on higher education to secure you a better job or a higher salary? Think again.
The cold truth: There is absolutely no guarantee that having another degree under your belt will improve your career prospects or increase your return on investment (ROI).
So if you, and/or someone you know, is considering starting a new educational program, we want to provide you with key information that will help you make a more informed decision.
Side note: If you're mainly concerned about increasing your salary, there's an income growth calculator you can use. This will compare what you're currently making to your anticipated future earnings post-graduate degree. The calculator also takes into account your estimated annual student loan payments from the degree.
Here are the facts you should know about earning a degree in 2020:
1. College Doesn't Only Require Tuition
Tuition is just one expense of attending a university. Transportation, supplies, and personal expenses all fall into the cost of attending school.
- Where will you live?
- Will you have funds to travel if out-of-state?
- Will you choose to have a car on campus?
- Books alone can cost up to $1,000/semester, are you prepared to cover this expense?
In addition, think about the hard work and time you are personally investing to complete your degree.
2. The Current Total U.S. Student Debt Is About $1.5 Trillion
There are 45 million borrowers who collectively owe more than $1.5 trillion in student loan debt in the U.S.
Student loan debt is now the second highest consumer debt category—behind only mortgage debt—and higher than both credit cards and auto loans.
3. Your ROI Will Depend On Multiple Factors
It's a common belief that Ivy League schools or more prestigious institutions will offer a higher ROI than public schools. But the actual stats may surprise you. More prestigious schools are often more expensive and, many times, disproportionately so.
Technical colleges, however, can offer a higher ROI like SUNY's Maritime College in the Bronx, which offers the highest ROI of any public U.S. school. Post-graduation, alumni have median salaries similar to those of an MIT grad—$1,586,000 compared to $1,606,000, respectively.
4. Repayment Almost Always Equals More Than You Borrowed
What does this mean? Let's review the basics first:
(A) Loan repayment terms simply means the amount of time you have to pay your loan back. For most federal loans, there's a 10-year period. But unfortunately for some, it can take up to 30 years. For private loans, the term varies depending on your loan agreement.
(B) Interest rate is how much interest you'll be paying on the loan. Federal loan rates can vary per loan, but usually stay the same annually (i.e. are fixed). Private however, can vary A LOT, and can either be variable or fixed (also depending on your credit score).
(C) The principal is the base amount you owe for the loan, NOT including interest.
Example: If you borrowed $35,000 in loans, that is your principle. By the way, that is also the average amount of debt each student loan borrower will graduate with!
Now, let's get to the math and put this example into perspective!
Explained by Dave Ramsey:
"Let's take that $35,000 principal and say you have a 10-year loan repayment term with a fixed interest rate of 5%. (Typical interest rates can range from 4.53–7.08%, depending on the loan type.)
With those numbers, your monthly student loan payment would be just over $370, and the total amount of interest you'd pay during the loan term would be almost $9,550. So, you might've started out by borrowing $35,000, but in the end you'd really pay about $44,550."
Borrowing money is a risk that does not always reap a reward. It's important to examine your rationale before entering a program as well as research your options before you apply.
Still not sure what your next career move should be? Here's a great checklist on how to determine whether going back to school is right for.
At Work It Daily, we understand each professional will have a different story and may need a customized plan. That's why career coaches exist! Let's get you clear on your next career move. Join our career growth club today!
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