This is a time of year many families are having discussions about college.
For starters, who is paying? A recent study of 1,000 students revealed that 84 percent presumed parents would be paying. When the parents were questioned, only 34 percent said they would be.
There’s no question that additional, quality education increases income potential. According to the U.S. Bureau of Labor Statistics, the median income nationally for young adults with a bachelor’s degree is $54,756, an associate’s degree is $39,936 and a high school degree is $33,176.
The consequences of a rising debt load may not be immediately noticeable in the years just after a student graduates, but the long-term impact could be crushing. To defer payment of student loans can cripple finances for a long time.
Graduates can find that being able to afford the necessities (groceries, rent, etc.) becomes difficult and non-necessities (vacations, eating out, etc.) virtually impossible. Less spending power affects decisions about saving, merging debts in marriage, purchasing a home or vehicle and starting a family.
Regardless of how interesting a major is, can a degree in that area provide a livable salary? It also is important to appreciate the debts accumulated by students who drop out of college before earning a degree and how they struggle the most.
What if you can’t find a job within your field? The burden of college loans can get very heavy. Each major has different job potential and different potential for income and debt repayment. Humanities majors have higher unemployment rates and typically earn less.
Fifty-four percent of college graduates in Colorado in 2014 graduated with a student debt of more than $24,000. Students should strive to graduate with a total college debt that is less than their annual starting salary. Once deductions are accounted for, an annual salary of $45,000 amounts to about $2,500 per month. The typical college loan over 10 years requires a monthly payment of $260 at 6.8 percent interest. Consider the difference between paying $200 monthly for 14¾ years versus 10 percent of gross salary a month for a debt payoff in six years.
As those college-bound students prepare for a new adventure, here are a few suggestions to make the most of it before, during and after college.
If the major of choice leads to a low-paying job, take that into consideration when applying for student loans. The average humanities graduate earns $1,625 (after taxes) monthly and carries a monthly loan payment of $229. Contrast this to a computer science graduate who earns $2,696 with monthly loan payments of $265.
There are numerous websites to help identify income based on profession of choice. Before selecting a degree in arts or humanities, carefully evaluate the long-term impact of student loans.
email@example.com or 382-6461. Wendy Rice is the family and consumer science agent for the La Plata County Extension Office.