College Is STILL Worth It!

As the Class of 2014 throws their caps into the air during this graduation season, many graduates must now face the stark reality of a mound of education debt. Given the still-tough job market, many families continue to wonder whether college is worth it. The answer is yes, with a caveat.

Let’s start with some of the numbers: 37 percent of households are carrying some student debt – the highest share on record and total outstanding student debt (federal and private) stands at over $1.1 trillion. A recent Federal Reserve Bank of San Francisco study found that most students recover from those loans within 20 years of graduation, which may impair their ability to buy homes or to consider a wider range of career opportunities than those who have no debt.

But that college degree provides a distinct advantage over those who don’t have the coveted diploma. While the job market is still weak (9.8 million people remain unemployed), according Economic Policy Research, the unemployment rate for young college graduates stands at 8.5 percent, much lower than the 22.9 percent for high school graduates. And research from Pew Research shows that the household income of young adults with college loans is nearly twice that of people who didn’t attend college ($57,941 vs. $32,528).

That differential adds up over time: a new study from the Federal Reserve Bank of San Francisco shows that the average US college grad can expect to earn at least $800,000 more than the average high school graduate over a lifetime, though Priceonomics blog pegs the 30-year wage premium at $200,000 of extra income ($6,667 a year) compared to that of a high school graduate’s salary. Either way, you get the gist—a college degree usually translates to more income over time.

Here’s another reality: college education is in high-demand and is projected to rise. Researchers at Georgetown predict that in the next six years, the share of jobs requiring post-secondary education will likely increase to 64 percent by 2020, which would be a big increase from 50 percent in the 1970s. This trend leaves adults with only a high school diploma with far fewer job options.

Still, piling on education debt willy-nilly can be a recipe for disaster, for both students and their families. One way to keep debt levels in check is to only assume a total student debt load that matches what you think you will earn in your first year of work. If you’re going to be an engineer, you can borrow more than say, an art history major.

According to the April 2014 Salary Survey fromthe National Association of Colleges and Employers, the overall average starting salary for Class of 2014 bachelor’s degree graduates increased by 1.2 percent to $45,473 from the results of the Class of 2013, but engineers saw an average of $62,719 as a starting average salary (not to mention the eye-popping starting salary for petroleum engineers, who start as $95,300), versus those graduates earning degrees in the humanities and social sciences, whose overall average starting salary was $38,365.

Go forth, earn that degree, but don’t go into hock up to your eyeballs -- and parents, please don't raid your retirement accounts and borrow against your home -- to do so.

For more, go to Jill on Money.com

Image by Flickr User Texas A&M Marketing and Communications