Is College Still a Good Investment?

Is College Still a Good Investment?

The headlines seem to be full of stories about recent grads struggling with crushing student loan debt and working low paying jobs to make ends meet with no prospects and no relief in sight.  It used to be that everyone was given the advice to go to college (for something, anything) – but is it still a good idea, especially if it means the student is saddled with debt?

College students do carry education loan debt – but it’s not as bad as sensational headlines would have us think.  The New York Federal Reserve Bank reported that fewer than 1 in 30 students have debt loads above $100,000 and economists still affirm that borrowing for college is a good investment. Even though the market is tight right now, college grads still earn more ($650,000 is a lifetime), are more likely to have health insurance, retirement savings and longer lives.

The average college loan is right on par with the average new car loan – around $27,000.  Student loans can be spread out over decades, making the payments very manageable, and making borrowing for college a good bet.  In fact, new options are income-contingent and payments are capped at 10% of discretionary income and the balance forgiven after 25 years.

Of course, borrowers need to consider the earning potential of their chosen fields.  Artists and archaeologists probably should keep their loans to a minimum.  Engineers and nurses are clear to borrow more since the employment outlook is good.

/ MoneySmart 4 College