Are student loans worth it?
According to a recent survey by Strada Education and Gallup, half of borrowers don't think so. Between April and December 2020, Strada Education and Gallup surveyed over 13,000 adults in the U.S. between the ages of 18 and 65 about their satisfaction with the value of their loans. Fifty-percent of all respondents said they did not think their loans were worth it. For Black and Latino respondents, the numbers were even lower; only 38 percent of Black borrowers and 47 percent of Latino borrowers felt their students loans had paid off.
The number of student loan borrowers has risen significantly in the last decade, and increased 51 percent since 2007. There are currently over 44 million student loan borrowers in the United States, and the balance Americans owe for student loans is on-track to exceed $2 trillion by 2022. The rising cost of college and stagnation of wages has made it necessary for many people to take out larger loans to pay for the cost of college, and many are still paying off their loans decades after graduation.
The good news: there is still a lot of value in earning a degree. According to the Bureau of Labor Statistics (BLS) college graduates make an average of $400 a week more than high school graduated without a college degree. And those with a master's degree earn, on average, twice as much each week as high school graduates with no college degree. College and grad school is one of the biggest investments you'll make in your future, and being intentional about getting the most for your money can help you feel more confident that your loans will pay off.
Consider Your Strengths, Interests, and Long-Term Goals
According to the Strada/ Gallup survey, the higher the degree attained, the more satisfied borrowers are with their loans. Alumni of graduate-level programs were much more likely to say their loans were worth it than those who had dropped out of school or earned a bachelor's or associate degree. Not surprisingly, people who earned the most money were also most satisfied with their loans' value. But, interestingly, people in the middle of the income spectrum were less-satisfied with their loans' than lower-earners. According to Nichole Torpey-Saboe, Ph.D., Director of Research for the Strada Center for Education Consumer Research, this finding may result from the fact that the survey asked about personal income, not household income. It's possible lower-earning borrowers are part of higher-earning households, giving them financial freedom to take time off of work or take lower-paying jobs that are more fulfilling.
To get more out of your investment in your education, think about your long-term career goals when first starting school. Choosing a program or major that aligns with your strengths and goals can make it more likely that you will finish the program in fewer years, and make it easier to transition to graduate school or a higher-paying job. Changing schools or majors can cost time and money, so a little planning can pay dividends. First, research what types of majors and careers align with your strengths and interests. Then, research the types of skills and experience required for those careers. You don't have to pick a specific job, but knowing what type of field or role you see yourself thriving in can help you be proactive about gaining the skills required. EMSI's SkillsMatch is a great resource for exploring career paths and the skills and education they require.
Research schools’ career support resources - and use them
One of the most striking findings of the survey is that, "alumni who feel their school provided them with resources and support to get a good job are eight times more likely to feel their student loans were worth the cost compared to alumni who didn't feel their school provided this support." In a webinar where several education policy experts discussed the Strada/ Gallup survey results, Dr. Courtney McBeth, Senior Vice President of Operations for Strada Impact, said the results are a "clarion call" for institutions to find creative ways to provide affordable ways to connect students with jobs.
McBeth said, "Can we offer more paid internships for juniors and seniors to serve as peer mentors for Freshman and Sophomores? What are ways we can be a little more creative than a traditional career services office? This is a moment when institutions should throw out the usual playbook and think about more multipurpose creative ways to provide career support."Many schools are offering new and creative ways to support students with career planning and job searching. Princeton Review publishes a yearly list of school's with the best career services. When visiting or researching a college or a graduate school, ask about the career services, alumni network, internship opportunities, mentorship programs, or other offerings that are intended to help students turn their degree into a fulfilling career.
Choose a high-ROI school
Juno founders Nikhil Agarwal and Chris Abkarians are dedicated to helping students get the best return on their investment (ROI) in education. As Harvard students, Agarwal and Abkarians pulled together over 700 student-loan borrowers and negotiated a better group interest rate than any of them had on their own. The effort saved each borrower around $15000 in loan debt, and launched a business that focuses on helping students maximize the cost-value ratio of education and get the best rate on their loans.Juno recently launched their 2021 Best-Value College Rankings. The rankings are based on weighing the average earnings of a graduate two-years post school with the "opportunity cost" of the school, which is the net price of the school plus an average high school graduates salary for four years. These numbers then produce a "years to break even" estimate. At all of the top ten schools, a student will break even in under 3.5 years. For some of the schools on the other end of the value spectrum, it can take close to an estimated 30 years to break even. This information is based on averages, and may vary depending on a students' major or the individual net cost of attending. While most of the best-value schools are highly-competitive, knowing where the schools you're considering fall in the Juno rankings can help you make a more informed decision about the cost-value ratio of a specific school.
Don’t count on student debt forgiveness
The Strada/ Gallup survey results are being released at a time when student loans are front of mind for many Americans. The Washington Post published a compelling feature highlighting some of the real people behind student loans. And President Biden is reportedly looking into cancelling between $10,000 and $50,000 in student debt. According to Annie Nova with CNBC, the $50,000 forgiveness proposal would eliminate student debt for a whopping 80 percent of current student holders.
Student debt forgiveness may lessen the load, but it won't solve the problem by itself. In the Strada Impact webinar, Will Del Pilar, Vice President for Higher Education Policy, Practice and Research at The Education Trust, warned that debt forgiveness may be a quick fix, but it doesn't necessarily solve the problem.
Del Pilar said, "If we don't tackle the problem [of student debt] holistically, we'll just kick the can down the road. For example, If we do student debt cancellation but we don't double Pell Grants or create a federal/ state partnership that manages accountability, then in ten years we're going to see the same problem. So I'm hopeful that we're in a space where there can be ideas and maybe even some agreement around things, but I'm not sure taking it piecemeal is going to solve the problems."
Student loan forgiveness will likely continue to be a hotly-debated topic for a long time. Even if some amount of debt is forgiven, it remains to be seen that that will mean for the next generation of students. There may be other reforms, like free community college, that change the cost-value equation in higher ed. In the meantime, clarify your long-term goals, research schools' career support services, and look for a school that offers a high return on investment. These simple steps may leave you feeling more satisfied with the value of your education for years to come.
Join the conversation about loan forgiveness on the College Confidential forums.