How Much Should You Spend On A College Degree?

by Ron Haynes

Remember, Student Loans are No Fun!

Since the cost of obtaining a college degree has, unfortunately, grown much faster than wages, the cost of a college education shouldn’t be taken lightly because student loans can handicap you financially for years. Instead, take the same approach a company would take toward capital expenditures – look at the potential return on your investment.

Some experts suggest that students should not borrow more than their projected average annual income during the first ten years after they obtain their degrees. For example, a person should only have $40,000 in student loans if his or her average annual income is forecasted to be $40,000.

Using more than 10 percent of your gross income to pay for student loans may impede your ability to save money for other important things, such as a down payment on a home or car. Student loans, when not coupled with a big increase in annual income, can lead to a huge debt problem. Evaluate the costs and the benefits of a college degree, just as you would with financial investments. A college degree may lead to an extremely rewarding career, and thus you may not care if it takes 20 years to pay off the student loans. However, you should still consider the financial ramifications before you enroll in a degree program.

Staggering Total Student Loan Debt

In 2011, the total amount of American student loan debt was over $1 trillion, and approximately 25 percent of these borrowers are behind on their loans. Many college graduates begin their careers with significant debt. According to The Project on Student Debt from the Institute for College Access & Success, students who borrowed money to acquire their bachelor’s degree in 2011 graduated with an average student loan debt of $26,600.

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In 2010-11, the National Center for Education Statistics calculated the average total annual cost of going to college for first-time, full-time students at public four-year schools living on campus and paying in-state tuition was $20,100. For a private, nonprofit four-year school, the average annual cost was $39,800. These totals include tuition, books, supplies, required fees, and room and board, as well as other expenses.

Are Prestigious Schools Worth The Money?

Prestigious private colleges cost significantly more than most colleges, but for some career fields it may be worth the additional expense. Depending on the major, graduates from prestigious schools typically have a better chance of obtaining jobs in their selected fields and may begin with higher salaries.

Researchers from the RAND Corporation, along with Cornell University and Brigham Young University researchers, found strong evidence of a significant economic return from attending an elite private college.

The researchers discovered that people who graduated from the most selective colleges earned on average 40 percent more per year than people graduating from the least selective public universities (these salaries were calculated 10 years after folks graduated from high school). However, many public schools, such as UC Berkeley, UCLA, and the University of Michigan, cost significantly less than Ivy League schools and their degrees are looked upon very favorably by employers.

Top colleges have become more generous with grants. Many parents making close to $60,000 per year with typical assets don’t pay anything for their child’s Ivy League school education. Every Ivy League school has a “no-loans” policy so that students get grants instead of taking out loans. Of course, not everyone gets accepted into Ivy League schools.

Allied Health Careers Offer Great Alternatives

Many of the Allied Health occupations only require two-year degrees or less. These degrees are usually available at inexpensive community colleges. For example, physical therapist assistant positions only require a two-year associate’s degree. In 2011 The median wage for physical therapist assistants was $51,040 (from the Bureau of Labor Statistics). This is one of the nation’s fastest growing occupations, with the BLS forecasting a 46 percent employment growth from 2010 to 2020.

The BLS believes that more new jobs will be created in the healthcare field than in any other field. The agency forecasts continued demand for healthcare workers at all education levels.

Due to the high cost of a college degree and the tough job market, get out the calculator and roughly figure out the potential return on investment before borrowing too much to go back to school.

Brian Jenkins writes about careers in physical therapy assisting, as well as other career fields in allied health, for the Riley Guide.

About the author

Ron Haynes has written 1001 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


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