Is Education Still Worth the Debt?

As the years tick by, college is becoming increasingly unaffordable. Financial aid information site reports that the average college tuition is rising at nearly three times the rate of inflation. However, the percentage of college costs that federal Pell grants cover is diminishing. Lauren Asher, president of Institute for College Access & Success, an Oakland, Calif.-based advocacy group dedicated to increasing college access, says the financial burden of higher education is enough to turn off some students from it entirely. With student loan default rates up and employment opportunities down, is educational debt still worth it?

"There is no question that, on average, a college degree is still a very good investment," says Asher. "The unemployment rate for young adults who have just a high school diploma is more than twice the unemployment rate for those with a (bachelor's degree)."

Research shows that in addition to having more job options, bachelor's degree holders also have significantly higher salaries. A study by Georgetown University's Center on Education and the Workforce shows that the average worker with a four-year degree earns 84% more over his or her lifetime than someone with a high school diploma. That's a payoff of approximately $1 million.

Asher adds that oftentimes it's fiscally better to borrow and beeline your way to graduation than it is to minimize debt by juggling full-time work and studies.

"If you wait a while after high school before you go to college, if you drop out of school once you've enrolled to work for a while then go back, if you go to school part-time, if you go to a two-year school and you're qualified for a four-year school and if you work long hours, you're less likely to get a degree or a certificate. So in some cases, modest federal loan borrowing can really support (degree) completion," she explains.

While a four-year degree is statistically one of the smartest investments workers can make, students can still get into financial trouble by taking on excessively high debt, attending institutions with high loan default rates and borrowing risky private student loans over federal ones.

Instead of taking on excessive educational debt, Asher advises students to seek affordable institutions that won't require students to take on debt beyond the federal Stafford loan limit of $31,000 for dependent undergrads or $57,500 for independent students. Students can do that by comparing cost figures from the net price calculators each institution is required to have on their website.

"If the school you're interested in is urging you to take out a private loan or would require you to take out private loans in addition to federal loans, keep looking," she says, adding that private loans often come with few borrower protections and variable interest rates that can be unpredictable. "There should be schools where that is not necessary."