Student Loans Can Be Worth Every Penny

Don't let the headlines fool you...a college education is still well worth the cost

Jul 26, 2014 at 11:45AM

According to a recent report by the Wall Street Journal, the average 2014 college graduate with student loans owes $33,000, an all-time high. This is more than 12% higher than the average for 2012 graduates, which has led some in the media to label college as "unaffordable" or even to tuition itself as a "bubble."


flickr/ 401(k) 2012

Whether or not tuition costs and the resulting indebtedness that comes with it continue to climb at these rates is anyone's guess at this point. Easy student loan access and larger applicant pools every year are giving colleges little incentive to stop the tuition hikes. However, despite the large debt loads, it still appears that college is worth the cost. Here are a few reasons why borrowing to finance your education is well worth it, and some situations when it's not.

You'll make it back and then some
According to a study by Georgetown University, the average college graduate can expect to earn $2.3 million over their lifetime, and this jumps to $2.7 million with a master's degree. With just a high school diploma, lifetime earning expectancy plummets to just $1.3 million. All of a sudden, being $30,000 in debt doesn't seem like such a bad deal.

The median income for young adults (ages 25-34) is just $30,000 with a high school diploma, $46,900 with a bachelor's degree, and $59,600 with a master's or higher, according to the national center for educational statistics.

If you have the average student loan debt of $33,000, you can expect monthly payments of about $380 under the standard 10-year repayment plan, or $4,560 per year. So, the difference in salary more than makes up for the cost to pay off your debt. And bear in mind there are extended and income-based repayment plans which could make your actual payments much lower. The point is that you're much better off borrowing and going to school than going right into the workforce after high school.

And, some majors have much higher salaries, making the loans well worth the cost. To name a few, accounting majors average a starting salary of nearly $55,000, computer engineering majors $58,000, and the average electrical engineering major starts at more than $60,000.

But what if you get a low-paying job?
Sure it's worth it for engineers and accountants, but what about for students who aspire to careers with more modest salaries?

There are a handful of programs in place to make student loans even more affordable. For instance, the Pay As You Earn plan limits your student loan payments to just 10% of your discretionary income, and forgives any remaining loan balance after 20 years.

And, if you work in a public service career, such as teaching in a public school, law enforcement, social work, or many other non-profit careers, you could take advantage of the Public Service Loan Forgiveness option that takes care of the rest of your loan balance after just 10 years. For teachers, the deal is even sweeter, with an opportunity to have some of the loans forgiven after five years at certain public schools.

So, if getting a master's degree to qualify for your dream job will put you $70,000 in debt when the job only pays $35,000, don't worry. The actual amount you end up repaying should be much less than you borrowed.

The job security is nice
While the unemployment rate for very recent graduates is a little high (about 8.5%), once you land that first job, your employment outlook is much brighter with a degree.

The unemployment rate for all college graduates over 25 is just 3.3%, much less than the national rate of 6.1%. As you can see, the more educated you are, the better the unemployment picture is looking.

What it all means to you
Whenever you see a news headline about the "Student debt crisis" or the "tuition bubble", take it with a grain of salt.

Tuition is much higher than it used to be, but a college education is well worth what it costs to get it. And, for those who end up earning less money or have trouble finding jobs, there are several ways to lessen the burden of student loan debt.

The takeaway here is that no matter what you read, don't let the thought of taking out student loans prevent you from pursuing a college education.

The extra money your college degree earns can boost your retirement income
Once you graduate college, you'll need to start planning for your financial future.. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers