More on college debt

One factor in the value of a college education is the resulting amount of debt to get it. Paying $300 a month for ten years after graduation is a huge chunk of retirement money that could be used more productively. A $300/month investment in a safe product for 40 years (ages 22 – 62) could return over $450,000 for retirement. But if that period is reduced to 30 years (ages 32 – 62) because of student loans for the first ten (ages 22 – 32), the final return is closer to $250,000. That’s a significant difference.

Here are some interesting numbers:

  • The average college grad finished with $24,000 in debt in 2009 (Project on Student Debt)
  • 2009 grads faced the highest annual unemployment rate on record (8.7 percent) for their age group (20 – 24 year olds)
  • Since 1978, costs have increased:
    • 2.5 times for cost of living
    • 6 times for medical costs
    • 10 times for tuition and fees

I suppose at this point I could relabel the post “College debt is bad.” And nothing I’ve said is noteworthy. Well, it’s not new. Yet expected debt isn’t a major factor when considering what school to attend. I know it wasn’t for me. According to a UCLA survey referenced by US News & World Report here, the cost of attending a particular institution was the fourth most important consideration. But expected debt upon graduation wasn’t on the list at all. I wish that meant that students and their parents are selecting schools they can afford, but it doesn’t.

Though some are asking Is College Worth the Money?,the answer is still yes. But student loans are often mistakenly considered “good debt.” There’s no such thing. Yes, the rates can be reasonably low (6 to 9 percent, depending), but the long-term repayment schedule is a killer. Even with low rates, college debt can be stifling–it affects everything from retirement in 40 years to career choices now. When college debt meets real life, it can get ugly.

The best way to fight back? Earn more.

Not to over-simplify, but debt is more easily managed when it’s a smaller relative burden. The only way to change the equation is to earn more.

“Duh–we all want to earn more.”
Yeah, but what do we do about it? Get a better-paying job, a promotion, or a raise. Those are big deals, but we know what they say about the journey of a thousand miles. It starts with a single step. Raises, promotions, and even finding new jobs are rarely the result of single, miraculous achievements. They’re awarded to dedicated, hard-working team players who always exceed expectations and make those around them better. We can all do more every day to improve our value. Easy examples:

  • Start showing up earlier or working later
  • Build an on-boarding kit for new employees
  • Start an outreach team
  • Research the competition and present it to the team
  • Find the job definition for the next role above you and start learning some of those skills

These are easy things, but people don’t often look at their career as a part of their financial portfolio. A $5,000 raise one year earlier than normal has dramatic impacts over just the next few years. And getting in the habit of out-performing isn’t such a bad thing, either. There really is a clear line between people who care about their career and work hard at improving their performance and people who, well, just do their jobs.


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