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College degree: Look at costs vs. benefits

Don't take out thousands in student loans if you want to be a poet.

By Teresa Mears Dec 16, 2009 4:23PM

During a recession, with college tuition rising, some young people are questioning whether a college degree is worth the money.


No matter which article you read, the answer is usually: It depends. What are you going to study and what is your earning potential with or without the degree?


Perhaps the best question to ask is not whether a degree is worth it, but whether the degree you hope to attain at your college of choice is worth what it will cost you, especially if it means going deeply into debt to pay for your education.


College graduates earn 60% more than high-school grads on average, both annually and over their lifetimes, and the income gap has been growing over time, says a 2007 report by the College Board quoted by Sue Shellenbarger in her most recent Work and Family column in The Wall Street Journal.


In a competitive employment environment, you often need a degree just to get an interview for a job, let alone a job itself. But we all know people who have graduated from college with tens of thousands of dollars in debt they can’t begin to repay on a starting salary in their chosen field.

Those who graduate during a recession not only have a harder time finding a job, they tend to start at smaller and lower-paying companies, USA Today reported, citing a 2006 study by the National Bureau of Economic Research. The study found that those who graduate from college during a recession suffer an average 9% reduction in annual earnings initially, and that the discrepancies don't disappear until about 10 years after graduation.


As college costs rise, it pays to be realistic about how much you can spend and how much it makes sense to borrow.


In her WSJ column, Shellenbarger raises four issues to consider:

  • Will it be a path to a better-paying job?
  • Will it prepare you for a rich, well-rounded life?
  • Will it help you find work you love?
  • Will it make you part of a useful or influential network?

The WSJ wrote about a new tool that predicts how much a student is likely to earn the first 10 years after graduation, based on test scores, high school and college attended, grades and field of study.  The online calculator,, will do the calculations based on several scenarios. We couldn’t get it to work, but it raises a key issue: Consider how much you’re going to make after you graduate when you consider how much you’re going to spend to get your degree.


USA Today reported earlier this year that the recession was making many young people reconsider their plans. And some wish they had reconsidered.


Darla Horn, now 26, graduated from State University of New York in 2005 with a double major in journalism and anthropology -- and $80,000 in student loan debt. Her loan payments were manageable, she told USA Today, until she lost her $100,000-a-year job as an information technology recruiter.


Now, she wishes she had taken a year off between high school and college to figure out what she wanted to do with her life before investing so much money and incurring so much debt. "To this day, I have yet to see the complete value of my education," Horn says.


USA Today reports that more students are attending more economical community colleges before going off to four-year colleges. Others are giving up on expensive “dream schools” in favor of more affordable state universities.


Sandy Baum, senior policy analyst for the College Board, told USA Today she believes a college education is more valuable during a recession, not less. “…unemployment among college graduates is still half that of high school graduates,” she said.” A college education payoff is at least as high as it was before the recession. You're so much less likely to struggle if you have an education."


But, she echoes others who say it’s important to consider salaries in your chosen profession before taking out student loans. As she told USA Today, "If you think you want to be a preschool teacher, you should be more hesitant about borrowing than if you think you're going to be an engineer."


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