Student Loans - Worth it?
Find a Conversation
| Tue, 11-02-2004 - 1:34am |
I am just curious if going to college was worth it for all of you that have these large student loans to payback?
I personally never went to college. I am very pro-college when discussing the academic future of my children. I hope to be able to start pre-paying college credits for my kids once the bulk of my own debt is gone, my in-laws are also putting away some money for the kid's college. I would be very pleased if they could get scholarships, but in all honesty it looks like they may to end up with some large student loans by the time they graduate. Especially my DD who insist that she will be going to college for 6 years. She is just 10 so she may change her mind sometime over the next 8 years, but for now she is determined to be a forensic scientist. I also always liked the idea of myself going back to school someday and getting a college degree. I guess there is no reason too, it would just add a lot more debt and I have a good paying job that I enjoy. Anyway, I was just curious if anyone would like to share their feelings on this.
-Darcy

That's a good question... $54k later and 3 years after graduation, I still don't know if it was worth it. I'm tempted to say I think it was worth it.
Here's why: I went to a very elite private college. Bc of the name it was expensive (well I guess good profs go along with that name for the most part). College honed my thinking skills, but I can tell you that I do not feel that I remember one thing that I actually learned there (theoretical-wise). I do not use the material that I studied for my job today. However, I made the best friends in the world there. The latter sounds so trivial, but had I not gone to that college and paid that much, I would not have the friends that I have today (the lifelong kind IYKWIM).
I followed up college with an MBA. That is part of the $54k in debt I ended up with. My MBA opened doors for me, but again, I am not using what I learned during my MBA for my current job (well, that might not be entirely true, but I could do this job without the MBA).
I honestly feel that most people learn how to do their jobs on the job. Most jobs can be done without a college education IMO (I mean, look at Bill Gates... self-taught and richest man in the world). However, today's job market requires a college degree. As a result, I think it's necessary that we spend what we spend on our educations.
As for the burden of debt... yes it's a bit of a burden... when I consolidated my loans, they put me on a 25 year repayment plan (bc by federal standards, anything over $25k is eligible for a 25 year term). I currently pay $300/month but in another couple years, I plan on more than doubling that payment bc I want to have the whole thing paid off by 2015 if possible (so I will pay less in interest). Honestly the $300 doesn't feel that bad to me... the only time I realised that it's quite
cl-tiffany10605
Got debt questions? We got answers.
Debt Q&A
What I didn't do was plan very well. I didn't think about how I would repay them, and when I graduated I signed up for the repayment plan that gave me the lowest monthly payment. This was bad because it made my student loans a low priority. In addition, I have never lived within my means until recently, and I've never saved. I've never had sound financial priorities until now.
To know if a student loan is worth it, the student should figure out how much they need to borrow, how long it will take to repay it, how much interest will be paid over the repayment period, and how much income will you have after graduation vs. what you would have without the degree. Just like anything, you should only borrow if you can repay it and net you come out financially ahead.
I also borrowed to cover my living expenses while in college. And remember, I've never lived within my means. So some semesters student loan money, after paying tuition and books, went for clothes (more than basic necessary clothes), furniture, trips and who knows what else because I never kept track. I had a part time job and that paid my living expenses, and so I always blew the excess. If I could do it over, I'd still borrow the maximum but I'd live frugally and invest the excess borrowed money (it was as much as $7,000 in some years). Then when I graduated I'd have paid it back (student loans are interest free while in school, and I'd have been earning interest on the investments) or possibly continued the investments if the interest I was earning was higher than I was paying. Or I could have used the money to pay cash for a car, which would have saved me in the long run because I did buy a car after graduation and was paying interest on the car loan *and* the student loans. Or I could have actually only borrowed what I needed.
I have student loans of around $40,000, and I earn about double that. My ex on the other hand has student loans of over $100,000 for is undergraduate and graduate degrees, and a hefty charge for legal fees and penalties when he was taken to court for defaulting on one of the loans. He earns just over $40,000. I think my student loans and the result of my education was worth it, but I don't think my ex made a wise choice of a career given the cost. It's all relative and when making the decision, one should look at all relevant factors.
A few years out of college I decided I wanted to take some business classes (I was starting my own at the time and felt I needed to be more marketable . So I enrolled in a professional certificate course (3 semesters) in General Business. I took a 10-year student loan (since paid back/3 yrs early). I then embarked on a 'career' consisting of a string of crappy admin asst jobs (with a break in between where I was hired as a legal assistant--loved it/paid well--but was laid off). Fortunately my little business (8 years old) does well for its size and I truly enjoy it--but it did not require taking classes I did not have the $$ for at the time (library books would have sufficed; I just WANTED to go back to school! It was a want vs a need!!).
I guess the point of my rant is that while a liberal arts education is a lovely life experience (I certainly enjoyed mine), going into debt for it does not necessarily put you ahead or make you more employable, unless you want to enter a highly specialized field like law or medicine. I personally think trade schools give you more bang for the buck. So I will wrap this up by saying that in my opinion, from a strictly financial standpoint, student loans are NOT worth the stress later on (but seem to have become a way of life in this country). There is nothing wrong with saving first and THEN enrolling in school, but very few people seem to take that path, myself included.
Hi Darcy - great question!
All my best,
Danni
What has a college education done for me? Everything, really. I couldn't have gotten my first post-MBA job at Ford Motor Company without the MBA, and I couldn't have gotten the MBA without having gotten a BA. I don't need an MBA to do my current job, but I couldn't have gotten the job without the previous one, which *did* require an MBA.
Now, there are some caveats here. I went to public universities for both my BA & MBA. I took out $4000 total for my BA and $4000 total for my MBA. My parents helped pay for my BA, and all the money I made working during the summers went to college tuition (I didn't work during the school year). I completed my BA in 3 years because I had taken so many Advanced Placement courses in high school, and back then schools were more liberal in granting college credits for AP courses. I was able to go to B-school only because I got a graduate assistantship that included a complete tuition waiver and a small stipend in return for 15-18 hours of work a week (it wasn't enough to live on, so I did take out $2000 a year in loans).
The downside of my education primarily has to do with the schools I went to. My BA is from one of those "public Ivies," you know, the Ivy League-quality education from a public university. But there is one thing that public Ivy didn't give me, and that was an alumni network. There is a significant advantage to going to an Ivy League school in that regard. My MBA was from a third-tier public university, and I vowed that I would hold out for the most high-profile, promising job I could get after I got the degree to compensate for the lousy sheepskin.
I have 3 children to send to college, and I absolutely, positively will send all 3 if I have to straitjacket them and tie them to their dorm room beds to do it. ;) A college degree is so much more than a ticket to more money. Specifically, going away to college exposes you to people, experiences, and ideas you will never get by staying at home. I work with young people who went to Ivy League schools, some who went to other universities, and some who never went away at all. Without exception, the ones who cut the apron strings when they were 18 are far more mature and experienced than those who didn't. Those who went to Ivy League schools have a much more sophisticated and complicated view of life than those who went to other universities, with only one exception.
How do I plan to pay for it, that is the question! My oldest will be going in 6 years, #2 in 9 years, and #3 in 14 years. We probably will pay cash for it as they go. Right now DH is a SAHD and doesn't work - we figure by the time DD#1 goes to college, he will be working, and most, if not all, of his earnings will be paying for her education. We don't want the kids burdened with college debt right from the start. However, if they go on to grad school, they'll have to figure out how to pay for that themselves. I just don't know how we could afford that, too.
I also have my own heuristics about what kind of education is worth paying for. I won't pay to send them to a private university or college that doesn't offer signficantly greater benefits than our state's public school system, e.g. a strong alumni network, famous alumni, outstanding professors, a unique degree. I will gladly send them to certain Ivy League schools if they get in, or to public universities other than our own state's system, especially if it attracts students from other states and countries.
Kelly
I just wanted to add some clarification to my post and I'm going to do that by responding to some other posts that followed mine.
To know if a student loan is worth it, the student should figure out how much they need to borrow, how long it will take to repay it, how much interest will be paid over the repayment period, and how much income will you have after graduation vs. what you would have without the degree. Just like anything, you should only borrow if you can repay it and net you come out financially ahead.
Yes, that is ideally what they would do, but how many 18 y.o. kids do this? When I was 18 I took it for granted that I would go to one of the nation's best colleges at whatever cost. It's difficult for someone of that age to really understand the conseqences of repaying a loan when they have never had significant debt. Also, it's impossible to know what you will earn upon graduation. I assumed I would earn $50k since that is what my school kept telling us was the average graduates starting salary (I failed to realise that that meant some ppl would be earning $70k at the investment banks while others earned $30k at the non-profits). Finally, interest rates change in the 4+ years they are at school (again, this is hard to foresee). Mine went from 8.5% my first year to 3% my last year.
My parents were not well off, and I qualified for financial aid.
cl-tiffany10605
Got debt questions? We got answers.
Debt Q&A
YOU: "Yes, that is ideally what they would do, but how many 18 y.o. kids do this? When I was 18 I took it for granted that I would go to one of the nation's best colleges at whatever cost. It's difficult for someone of that age to really understand the conseqences of repaying a loan when they have never had significant debt. Also, it's impossible to know what you will earn upon graduation. I assumed I would earn $50k since that is what my school kept telling us was the average graduates starting salary (I failed to realise that that meant some ppl would be earning $70k at the investment banks while others earned $30k at the non-profits). Finally, interest rates change in the 4+ years they are at school (again, this is hard to foresee). Mine went from 8.5% my first year to 3% my last year."
You are right. I think very few people actually do this. But it's what I wish I would have done. And when my dd is 16 and thinking about what type of career she wants and where she might want to think about going to school, I'm going to get out a spreadsheet and help her figure this out. It won't be the only deciding factor in her choice. Having a carrer you want and are happy in is better than one you hate but worked out to be economically better, but going through this exercise might help her make her decision, and it will help her be informed about the costs of education. You will always run into problems with availability of jobs and changing interest rates, but I believe if you do some research and make some reasonable assumptions, going through this exercise makes a lot of sense.
Tiffany,
My parents had a set amount of money they could contribute to my education, and the school I attended worked with me and increased their contribution to make it affordable to me.
All my best,
Danni