Back to School: Is That College Degree Worth the Debt?

News from the Federal Reserve Bank of New York indicates that debt from student loans rose 1.1% to $914 billion in the second quarter of 2012. The loans, taken out by students and/or their parents and backed by the U.S. government, increased from $904 billion three months earlier.

Last March, the Consumer Financial Protection Bureau estimated that combined student debt reached the $1 trillion mark, which includes private loans issued from banks and other lenders.

With an average student loan debt reported to be around $23,000 for recent graduates, is a college education worth the price?

A recent study by Georgetown University Center for Education and Workforce reports that college degrees are, in fact, "necessary" for post-recession employment. Furthermore, average lifetime earnings for those with a bachelor’s degree or higher can be more than $1.3 million over those without a college degree.

Although recent college grads are finding it difficult to acquire jobs that directly match their field, the study actually indicates that more than 2.2 million jobs for those with bachelor’s degrees were added since the recession began in 2007. During the same period of time, 5.8 million jobs for those with a high school education or less have been lost.

The unemployment rate for all four-year graduates has hovered around 4.5%. For recent graduates, it’s nearly 7%, with an underemployment rate of 14%. Recent graduates seeking work with a high school diploma are faced with 24% unemployment.

In terms of wage advantage, the average earnings of a worker with a bachelor’s degree currently remains nearly twice as much as that of a worker with only a high school diploma. The wage premium jumped from 44% in 1981 to 100% in 2005, only to dip a few percentage points since the beginning of the recession to a current rate of 97%.The annual wages of those with an associate’s degree or some college education has remained about 20% higher than those with only a high school diploma.

Simply earning that BA or AA won’t guarantee an easy way out of student debt. Many undergraduate degrees equate to average earnings comparable to those of a high school graduate.  Degrees in finance, computer science, engineering, and medicine continue to attract above average annual wages. Other factors, such as industry, geographic location, and experience affect the market rate for talent as well.

Check out our Education Center for Student Cost of Living and Career Salary Potential calculators. Detailed salary reports based on job title, location, and industry are also available. 

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