So getting a degree is important. It's just not necessarily cheap or easy. Loans have long since replaced grants as the predominant form of financial aid. You can try to go it alone by working and paying out of pocket for your education, but another Public Agenda study found that students doing so were more likely to drop out rather than finish their educations.
So taking on a moderate amount of student loan debt can be a sensible investment. To ensure you don't overdose, you should:
- Fill out the FAFSA so you can qualify for federal loans.
- Don't borrow more for your education than you expect to make your first year out of school.
- Consider limiting yourself to federal loans and avoiding private student loans, which have variable rates and lack consumer protections.
- Make sure you get your degree -- a college education is economically useless without that sheepskin.
3. "A college degree always pays off."
Some college graduates end up earning less than their peers who went to work right after high school. Nineteen percent of male college graduates and 14% of female college graduates aged 25 to 34 actually earned less than their counterparts who had only high school degrees, according researchers for the Center for American Progress.
And recent college grads with massive student loans -- but no jobs -- are a standard part of the "Occupy" protests around the country.
Yet I still hear from college students, and their parents, who are signing up for expensive educations with uncertain economic prospects. Many aren't even sure what the kid will study but are prepared to hock their homes, empty their retirement accounts and/or sign up for a lifetime of debt to pay for it.
You can't predict when a recession will upend career plans. But you can improve the chances a degree will pay off if you:
- Pick a major wisely. Love philosophy? Awesome. Go ahead and get a minor in it, but major in something with a better yield. A degree in an in-demand field typically is a far better investment than one in a stagnant or low-paying area. Another Georgetown survey, "What's It Worth?," shows the dramatically different payoffs of various majors, with engineering at the top (median income, $75,000) and social work and education at the bottom (median income, $42,000).
- Limit what you spend on education. Another way to put this: Kids, don't borrow six figures just to get a bachelor's degree. Parents, don't put your retirement at risk to pay for your child's education. If you can't pay for school using savings, current earnings and federal student loans, you may not be able to afford the education you're buying and need to look for more-affordable options.
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
