Head splitting, body aching, my iPhone alarm pierces the morning air.
It’s Commencement day at Grove City College.
In a YOLO state of mind, I spent the day before playing corn hole and drinking cheap beer with fraternity brothers. At the time, it seemed like a great idea.
It was a terrible idea.
Seconds tick by as my vision comes to focus. “8:33 am?!” I begin crunching numbers, “If Commencement starts at nine, I have exactly 27-minutes to be showered, dressed, and on-campus!”
I skip the shower.
Teeth brushed, face washed, hair combed, I bolt out the door. My Christmas green 1997 Toyota Avalon – affectionately named Oscar after the grouchy Sesame Street character – bellows like a Formula 1 car as I race towards campus. Tires screeching to a halt, I throw her in park and sprint towards the gymnasium.
With my haphazard appearance largely hidden beneath the tradition of cap and gown, I join my classmates just moments before the procession line begins.
“Made it!”
We take our seats, eagerly awaiting the moment we walk across the stage and receive our diploma. Two and a half hours of ceremonial speeches stand between us and the real world.
Finally, it’s my turn. “Kyle Richert” roars over the loudspeakers. I march tall towards the President of the College, making sure to give him my best handshake. I’m ecstatic! But with every step towards exiting the stage, my elation fades to anxiety. Staring at my diploma, I ask myself, “Was it all worth it? Is this piece of paper worth a mountain of student loans!?”
Whether you’re a new graduate or are several years into the workforce, looking at a massive student loan balance is painful. But rest assured. You’ve made the right decision!
Although college is becoming more expensive by the second, it’s still worth the money. According to the U.S. Bureau of Labor Statistics, college graduates in the U.S., on average earn 65 percent more than those without a post-secondary education.[1]
However, does the increase in earnings offset the cost of college?
Let’s dive right in.
Average Versus Actual
Averages are useful tools in representing large sets of data. In this instance, I’m using average income to compare career earnings between those with and without a college degree. However, averages can be misleading. The actual profitability of your career will heavily depend on your specific vocation.
The highest-paying college majors (medicine, economics, computer science, and engineering), on average earn $120,000 by mid-career. Other majors are not as financially secure. The lowest paying college majors (musical theatre, social work, and education) only average about $40,000 per year.[2]
Conversely, just because someone doesn’t go to college isn’t a guarantee they’ll make less money. Trades such as plumbing, steam fitting, and carpentering are excellent careers. In the case of union trades, most have a defined benefit pension to boot. Couple those two things with having zero school debt, and you have the ingredients for a great job!
The point is that no matter what you do, you have a shot at success if you’re willing to work!
College or No College
John represents the average income in the U.S. without a college degree, approximately $37,000 per year.[3] To account for inflation, John receives a 3% pay raise every year. He is 18 years old and expects to work till age 65. His career earnings total $3.71 million. John has zero debt since he did not go to college.
Jane represents the median income in the U.S. with a college degree, approximately $62,000 per year. She is 22 years old and expects to work till age 65. Her pay will also increase by 3% per year. After 42 years, her gross earnings add up to $5.30 million.
However, this extra income wasn’t free. Jane financed her education with student loans. Using the average amount of debt for new graduates in the U.S. ($35,000 at a 5% interest rate over ten years), she makes $44,520 in payments to the student loan company.[4] Let’s call it an even $45,000.
The equation below calculates Jane’s net career earnings.
Net Earnings = $5,300,000 Gross earnings-$45,000 student loan payments
Net Earnings=$5,255,000
Even considering Jane’s loans, she out earns John by roughly $1.6 million!
Stop Beating Yourself Up!
Student loans are stressful because it’s difficult to see the bigger picture. You’re so focused on the monthly payment that you forget about your monthly paycheck. The reality is you wouldn’t have the income you do today without student loans. In fact, you’ll likely earn millions more throughout your career as a result of your college education.
So, take a deep breath! In the end, the math works out.
Stay savvy, my friends.
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Sources:
[1] U.S. Bureau of Labor Statistics, U.S. Bureau of Labor Statistics, 21 July 2017.
[2] U.S. Census Bureau, American Community Survey
[3] https://www.bls.gov/opub/ted/2017/high-school-graduates-who-work-full-time-had-median-weekly-earnings-of-718-in-second-quarter.htm
[4] https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2019Q2.pdf
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