College can be a costly venture, and student loans can be staggering. Many people find themselves economically crippled by student loans for a significant portion of their lives. To prevent this from happening, consider preventative measures.
Cost of College Education vs. Wages
The common misconception of students fresh out of high school and getting into college is the wages made after college will more than cover any student loan debt. Unfortunately, this isn't always the case. In fact, the cost of a college degree has grown at a much faster rate than average wages, according to The Wisdom Journal.
These kinds of costs shouldn't be taken lightly; high amounts of student loan debt can financially hamstring a person for years, especially if future wages don't make up for the costs. Jason Hartman recommends analyzing college as you would any other investment, and look at the potential
return compared to the required investment (tuition and room and board).
Overwhelming Amounts of Student Debt
According to American Student Assistance, there's roughly $1 trillion worth of student debt today, and that number is growing. Many of these students are behind on their loans, largely because their wages aren't high enough to cover the monthly payment. More and more often, students find themselves buried in debt the moment they step into their first jobs.
Some students have to start paying off debt before they even find a job. The National Center for Education Statistics hypothesizes the cost of full-time students going to public four-year colleges to be around
$20,100, including dorm costs and fees. For private schools, the total is closer to $39,800.
Is it Worth it?
Is the cost ultimately worth the diploma hanging on the wall? The answer depends on your situation, career, and the degree you choose. Some students go to prestigious, private institutions to receive their education. For some people, it's worth it to pay the extra money for a respected name. Statistics have suggested a significant economic return for attending an elite college such as Harvard, perhaps as much as 40 percent more per year.
But is it a leap everyone should take? Probably not. Though many of the costs at these colleges are covered by grants and other financial help, it can be difficult to qualify. If you do have to pay the cost of an expensive private institution, the amount of debt can be truly staggering.
What to do about this? Think of college as an investment. If your wage, or return on investment, is high enough to justify high student loans then a college degree might be right for you. To determine how much you should spend on a college degree, it's generally recommended that a student borrow no more than their projected ten year income. For instance, if a projected income is around $25,000, a student should borrow no more than that amount. (Top Image: Flickr | Occupy* Posters)
The Young Wealth Team