Is a College Education Worth the Investment?
In an age when student loans can only rarely be discharged in bankruptcy -- and jobs are hard to come by -- has it come time to question whether an expensive four-year college education is always worth it?
April 28, 2011
Is a College Education Worth the Investment?Recent headlines show improved unemployment numbers and hint at a recovering economy. But millions of new college graduates still face bleak job prospects after graduation. It's no secret: most college grads are saddled with student debt. The nation's total student loan debt, by some estimates, exceeds $830 billion - more than the nation's total credit card debt. When such debt is compared to the average salary for recent college grads, one must ask: Is an expensive college degree always worth the investment? Given how difficult it is to discharge student loans in bankruptcy, new generations of students should think long and hard before taking on massive amounts of debt.
Going to College
Now, it's not enough to say that college might not be worth it. In many respects, it likely is. College is the traditional, tried-and-true path toward a stable career in corporate America and many other sectors. But the financial climate of past decades facilitated this path. A college education was not as expensive as it is today, and financial compensation for entry level jobs was generally enough for college grads to enjoy both a decent lifestyle and the ability to pay back student loans.
Today's economy calls the college tradition into question in three ways:
1. Tuition costs now outweigh new graduates' salaries. According to a report released by the Department of Education, prices for undergraduate tuition rose by 30 percent between 1997 and 2007. Salaries did not keep pace. Those with bachelor's degrees now earn an average of $51,206 per year, compared to $45,400 in 1997 - a rise of only 10 percent. The correlation with career success is not as strong as it used to be, and every student at the same school pays more or less the same price of tuition no matter the field of study (i.e. accounting pays better than social work). It's increasingly common for new grads to hold retail or service jobs outside their chosen field of study while they apply for employment - or even to hold those second jobs while working at their daytime entry-level positions.A growing segment of the population believes that the "college experience" is overrated, that comparable experiences and lifelong friendships can be had without accruing $100,000 in student loan debt. In fact, the Harvard Graduate School of Education released a study in February suggesting that internships and apprenticeships would be better for the newest generation of students. And there's much to be said about college "drop-outs," entrepreneurs who build successful businesses without college degrees, like Bill Gates (Microsoft), Larry Ellison (Oracle), David Geffen (DreamWorks Studios) and Steve Jobs (Apple), as well as "ordinary" men and women who establish livelihoods without having gone to college.
The Biggest Disappointment
The amount of debt - not whether a young person fails to attend college and get a degree - is the biggest disappointment in today's economy. The staggering amount of debt that students accumulate over the course of their college careers, to be saddled with a burden that effectively makes them indentured servants, changes their standard of living so drastically that college simply isn't worth it.
In speaking to the New York Times, Mark Kantrowitz, publisher of FinAid.com and Fastweb.com, explained that most people with student loans will just be paying them off when their kids begin college. And according to Lauren Asher of the Institute for College Access and Success, people with large sums of debt will have vastly different choices compared to the generation of graduates before them. They may not be able to purchase a home, start a business, or save for their own children's education because of their loan obligations.
Undue Hardship
And student loan debt is generally not dischargeable in bankruptcy but for a showing of "undue hardship." Essentially, a borrower must show that he or she cannot maintain a minimum standard of living while paying the loans, that their poor financial situation is likely to continue, and that they made a good faith effort to repay the loans.
Undue hardship is a very difficult legal standard to satisfy. Even with such a lofty standard, there is still a general reluctance to discharge education loans - but this does not mean there aren't options for you to get debt relief, like discharging credit card debt, medical bills and other types of unsecured debt.
A college education should not be discouraged. Millions of successful professionals attended college, paid their loans and have used their education to enrich their lives. But the educational landscape has changed. Students should develop contingency plans in case their initial choices do not work out.
Article provided by Joseph C. McDaniel, P.C.
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