Student loans benefit these two groups of students the most


When it comes to borrowing money to pay for a college degree, two major groups will benefit more than the others: students who pursue higher education so that they can earn a hefty salary someday, and those who borrow. very little to quickly access the university. in high paying fields.

At the other end of the scale, we’re talking about workers like doctors and surgeons, who can borrow $ 200,000 or more to complete their education but would earn a median annual salary of around $ 208,000 as of 2019. And what about orthodontists? These professionals also spend 10 to 11 years in school and various stages of training, but they can expect the same earnings of $ 208,000 once they are finished.

On the other hand, we are mainly talking about students who pursue two-year studies in profitable fields. Dental hygienists, for example, usually only need an associate’s degree to start, but they earned a median annual salary of $ 76,220 in 2019. During this time, most radiation therapists spend two years in the hospital. college and earn a median salary of $ 85,560.

Students who fall somewhere in between tend to get the least value from their college degrees, studies show. If you borrow $ 60,000 to get a Bachelor of Liberal Arts and find a job that earns $ 40,000, for example, you definitely won’t get the best return on investment (ROI) of your university degree.

A recent Federal Reserve study highlighted this fact by showing how the incomes of higher education graduates have not kept up with the rising costs of higher education. According to the study, consumers with a college diploma “actually experienced relatively large declines in median and average income, while those with a high school diploma and those with some college experience experienced relatively large declines in median and average income. earnings ”during the 2016 to 2019 study period.

Meanwhile, “the income gap between families with a university degree and those without a degree has narrowed.”

Will your university degree pay off? Here is how to say

If you’re hoping to get ahead financially when you graduate from college and enter the workforce, experts agree you’ll need to do your research ahead of time.

According to Josh Simpson, a financial advisor at Lakes Advisory Group In Lady Lake, Florida, your job begins with finding the average starting salary of a person with not only the degree you are pursuing, but also the average starting salary of a person with a degree in general. Fortunately, you can search for the latest numbers for various degree fields using the Bureau of Labor Statistics Occupational Outlook Handbook. You can even break down income by region or industry for different types of work.

Simpson says it’s also important to keep in mind that many people end up changing jobs later in life. In fact, a recent study by the Federal Reserve Bank of New York showed that only 27% of college graduates had jobs related to their major in 2019.

Meanwhile, students should consider the cost of the school they plan to attend and whether they would be better off with a more affordable option.

“Just because a school is more expensive doesn’t mean you’ll make more money during your working years, so do your research,” says Simpson.

If you can getting a degree cheaply then you should at least think about it, and this is especially true if you have to rely on help for every penny you need. After all, your total student loan balance will make a huge difference in your monthly payments on a 10 year repayment plan.

Are you borrowing too much?

Speaking of student loans, Mark Kantrowitz from offers a general rule of thumb for determining whether your loans will be affordable or not.

If your total student debt at graduation is less than your expected annual income, you can probably afford to pay off your student loans in 10 years or less, he says. If you borrow more than what you are likely to earn in your career a year from now, you may struggle to keep up and need an extension or income based repayment plan to pay loan repayments.

This is the worst-case scenario for borrowers who want to get out of debt as soon as possible, and it’s a scenario you should strive to avoid.

“That means they’ll pay off their student loans over 20, 25, or even 30 years,” Kantrowitz explains. “They will still be in debt when their children enroll in university.

Kantrowitz says another sign you’re borrowing too much might be a need private student loans. After all, federal student loans have limits that limit the amount of help you can get, and needing more than those amounts “can be a sign of over-indebtedness,” he says.

The bottom line

If you are planning to earn a two-year degree in a medical or technical field or are considering a profitable trade, you could probably borrow very little and immediately start earning more than the median household income. Likewise, earning a graduate degree that allows you to become an engineer, doctor, or orthodontist can be a profitable decision even if you have to borrow six figures to complete the program.

But those in the middle should be careful and calculate the numbers to see if their time and effort will be worth it. Statistics show that an expensive degree in a general field may no longer be a good investment, but colleges and universities are still more than happy to raise tens of thousands of dollars in tuition fees. When it comes to making sure your college’s ROI makes practical sense, it’s up to you to do the research, calculate the numbers, and decide.

Additionally, this advice applies to both prospective students and their parents, as some experts agree that parents may push their children to more expensive schools for the wrong reasons. Financial Advisor T. Jack Wang of Longhorn Financial says he often works with parents who have gone to a cheaper public school but still want expensive private education for their children. Sometimes the parent’s ego plays too big a role in the chosen school.

But, families really need to ask themselves if this elite private school is worth it, especially for higher-paying professional fields, he says. Racking up hundreds of thousands of dollars in student loans is a snap if you go to expensive college, but paying it off can make life miserable for decades to come.

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