Is Student Debt Worth The Investment?

student debt

Is the cost of an education worth the results?

If you want a solid career and a great future, most of us assume that an education is the key. But is the cost of schooling worth what you get out of it?

student debt

A recent study commissioned by the Financial Industry Regulatory Authority Inc. found that more than half of college-bound students failed to calculate their potential student loan costs before taking out loans and, of course, later regretted their decisions to the tune of $1.3 trillion in student debt.

A triennial study published by the Global Financial Literacy Excellence Center surveyed 27,000 respondents to benchmark financial literacy characteristics among various categories. It found that three in five student loan borrowers did not try or did not know how to figure out their future monthly payments.

“Most students are looking ahead to their future with rose-colored glasses,” said Robert Schmansky, founder of Clear Financial Advisors. “They’re not worried or even thinking about future costs.”

Federal loans are a popular choice but don’t cover the full tuition cost, prompting some borrowers to take out private loans. It is this lack of awareness in the future costs that prompted over half of the respondents to regret their loan decision, according to the study.

“If you’re going to borrow, make sure you understand the basic components of a loan and calculate what your payments are going to be with a timely graduation,” said Douglas Boneparth, a partner at Longwave Financial. “Having this knowledge will help you understand which loans are more attractive to use when borrowing.”

In fact, those who did try to estimate their potential monthly payments are 15 percentage points more likely to be satisfied with their loan choice than those who did not, the study said.

That said, students are increasingly unable to repay their loans due to rising costs and sticky wages. Student loan borrowers have almost doubled in the past decade to 43 million from 23 million, the study revealed. Average tuition and fees at public colleges grew faster than wage growth and inflation grew 13% in the last five years.
– via

There Are Many Factors To Consider

At the end of the day, there is no single right answer when it comes to higher education, or how you pay for it. Making sure you taking all factors into consideration – and really, really read the fine print – you’ll be able to make the right decision for yourself and your family.

Another indisputable fact: A college education still has value. A recent Georgetown University report clearly illustrated the importance of having some sort of formal education beyond high school.

The greatest gains have been for students with a bachelor’s degree while job gains for those with a high school degree or less have remained almost unchanged. This indicates pursuing a degree provides a substantial return on investment if students are able to manage their debt load.

With the importance of ensuring the student loan total does not unnecessarily reduce the return on one’s academic investment, it is necessary to consider all available schools and programs carefully.

Dr. Debra M. Townsley, former president at William Peace University, had valuable insight into how students and their parents could best accomplish this. “Families need to do a cost-benefit analysis of different types of education available vs. the student’s future career goals.” Many students make these decisions based on emotional preferences rather than their future needs, which can be a costly mistake. While a dream school may be initially the most attractive choice, it may not be the best financial decision or even the best academic fit.

Factors that should be considered as part of the analytical process include:

  • Learning environment
  • Degree programs offered
  • Growth potential of career field
  • Financial situation of the family
  • Available financial aide
  • On-time graduation rates

Townsley further explained that not all students are best served by attending college. Many may be better suited to exploring certification in areas with high growth rates such as plumbing, HVAC, and electrical fields.


Here’s why it pays to be cautious in taking on student loan debt. The Institute for College Access and Success recently released an analysis of the student debt for those graduating from college in 2015. The data showed that about 68 percent of graduates had student loan debt, with the average amount per borrower totaling $30,100 – an increase of 4 percent from the report on 2014 grads.

A recent GAO report made it clear that a significant number of those students who leave with a degree and debt will be in default with their student loans. However, the increasing number and the cause has not been adequately explained.

David Levy, a former director of financial aid and current editor at Edvisors, and Senior Vice President Anita Thomas took the time to explain some of the steps current and prospective students can take to ensure they are able to repay their loans.

  • Do not consider loan limits targets; borrow as little as possible.
  • Do not use student loans to pay for unnecessary expenses. Interest rates effectively cause each dollar spent to be repaid as two. If there is any alternative method to pay for daily expenses, it should be utilized.
  • The total amount of debt should not exceed the student’s starting salary.
  • Exceeding the amount of the borrower’s expected salary may make it impossible to repay the loan within 10 years under such methods as income-based or extended repayment plans, which will add both years and amount of interest paid.

– via

Do you have student debt? Or are you considering going back to school and weighing the pros and cons?

Leave a Comment