As the interest rate on government-backed Stafford college loans prepares to double today -- from 3.4% to 6.8% -- for new student borrowers, the value of a post-high school education is, once again, under discussion. As many have sought to battle the recession by enrolling in college or graduate school, stories of the crippling debt a great number of students have taken on have been grabbing headlines. With unemployment remaining stubbornly high, many wonder if obtaining a college degree is worthwhile at all.
William C. Dudley, President and CEO of the Federal Reserve Bank of New York, recently addressed this very issue. Late last week, Dudley answered the question, "Are recent college graduates finding good jobs?" with a qualified, "Sort of." Like others who have taken a good look at this issue, he found that the answer is not an easy one.
College still has value -- with qualifications
Most studies continue to show that workers with a college degree fare better than those without, particularly in times of economic recession. With the total U.S. student loan debt load totaling $1 trillion, however, much of this research has been trained on which degrees are apt to win the graduate a well-paying job.
The consensus of opinion remains that a college education puts job-seekers in a much better position than those with only a high-school diploma. A study published last summer from Georgetown University showed that from 1989 to 2012, job opportunities for those with at least a four-year college degree increased by 82% -- compared to 42% for a two-year degree. For those with high school diplomas -- or none at all -- employment prospects dimmed by a depressing -14%.
The latest news from Georgetown researchers takes a look at the type of college degrees that give students an edge -- and those that don't. Overall, the authors of the study maintain that a college degree is still valuable, noting that even an initial 8.9% unemployment rate for new graduates, while high, pales in comparison to the whopping 22.9% experienced by those heading into the workforce armed with only a high school diploma.
Some of the report's findings do not surprise at all. For instance, the study notes that unemployment is very high for architects because of the housing crash. And while information systems majors tend to have a high initial unemployment rate of 11.7%, the rate drops to only 5.4% as those who gain experience move up. Recent graduates in the health care and education fields find jobs rather easily, experiencing a low 5.4% initial unemployment rate.
Cost versus results
For college to be "worth it," then, students must weigh the value of a particular degree against its cost -- usually in long-term student loans -- and the chances of actually landing a job. For many, this scenario has not played out well at all, and a majority of Americans are now saddled with tens of thousands of dollars in student debt, which numerous graduates are finding to be an onerous burden.
This crushing debt is turning out to be a drag on the economy, too. The FRBNY noted earlier this year that money owed on student loans is preventing a whole generation of graduates from purchasing new cars and homes. In fact, the study showed that 30-year-olds without college debt, for the first time in a decade, are buying more homes than their debt-laden counterparts.
This is a real problem. A recent article in Forbes shows that 60% of all student debt has settled on the shoulders of those over 30 years of age, and that it takes, on average, 20 years to pay off such debt. Indeed, 15% of college loan debt is held by those over age 50.
For recent graduates, the feeling that they have made the right decision seems to be waning. A survey back in May showed that fully one-third of those polled said they now think they would be better off if they had entered the work force rather than pursued their college degree.
This feeling is shared by other age groups, too. An awesome series on the site Gawker.com collected "Unemployment Stories" for one year, and the personal stories are worth more than a casual read. Now, at the end of the series, the author outlined five lessons showcased by the responses, one of which is this: A college degree doesn't always help. Many reported lingering unemployment, now complicated, regretfully, by a higher debt load.
Whether or not a college education is advantageous, it seems, depends on many variables -- not the least of which is a student's ability to pay the costs associated with a four-year degree, which seems to deliver the most bang for the buck. Still, the Great Recession has made having that piece of paper more important than ever.
Persistently high unemployment and rising education costs have left their mark, but the recession has been especially tough on those without college degrees. The disappearance of nearly 80% of jobs associated with an education level of high-school diploma or less since the recession began leaves workers with no choice but to retrain.
The interest rate hike on new student loans may yet be overturned, but the stark reality of the new job market is unlikely to give the vast majority of job seekers any true relief.
Tax increases that took effect at the beginning of 2013 affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes, and potentially even lower your tax bill. In our brand-new special report, "How You Can Fight Back Against Higher Taxes," the Motley Fool's tax experts run through what to watch out for in doing your tax planning this year. With its concrete advice on how to cut taxes for decades to come, you won't want to miss out. Click here to get your copy today -- it's absolutely free.