Taking on debt of any kind, including student loans, is usually a terrible idea. You’re paying interest for something you couldn’t afford to pay cash for. But if there were ever a type of debt that might pay off in the future it would have to be education debt.

The idea is you are being trained up with skills you didn’t have that will be worth more than you paid for them over your career. Since those skills we eventually pay off, then adding in some debt isn’t all that bad.

But is that premise accurate?

What is the Value of Your College Degree?

Whether or not your college education is worth the cost and any associated student loans depends on the field that you enter.

Having a college degree is valuable, that much is certain. A study done at titled “The College Payoff: Education, Occupations, Lifetime Earnings” (PDF – 1,824 KB) done at Georgetown University’s Center on Education and the Workforce showed that college grads earn 84% more than those with just a high school diploma over an entire lifetime. That’s a huge difference in income that can help justify taking on some debt in order to get your degree.

However, how much debt you take on and what kind of return on investment you receive from that expensive tuition is important to calculate as well. Also know that often the calculations you are making are estimates. As many recent college graduates have discovered, the economy can change from the time you enter school as a freshman and when you graduate. Your hot degree program with great career prospects can flame out over the course of four years, making paying off those loans a hefty task.

Which Degree Program is Worth Going Into Debt?

Generally speaking, some degrees are worth more than others. Payscale has a great chart that shows both the starting median pay and the mid-career median pay for a large number of different degree programs. The top 6 degrees are all some form of engineering. The median starting pay for all six is at least $60,000 per year. You’ll note the bottom six degrees include Child & Family Studies, Special Education, Social Work, and Elementary Education. All very important items, but often careers that do not pay well. The median starting pay for the bottom six are all below $35,000 per year.

Top College Majors
Source: PayScale

That isn’t to say that if your heart is set on being a teacher that you shouldn’t become one. Not at all. You just need to be aware of what to expect in terms of earnings so you don’t take on so much debt that you can’t enjoy life.

For example, if the starting teacher salary in your state is $32,000 per year that means you’ll gross about $2,667 per month. After 25% tax and other costs like healthcare you might clear $2,000 per month. If your student loan payments are $500 you are going to spend a long time paying off your debt and unable to do much with your money. The $500 monthly payment comes out to 25% of your take home pay. Your remaining $1,500 per month is likely to be eaten up by apartment rent, utilities, and so on. (At 6.8% interest it would take about $43,500 in total student loan debt to have a $500 monthly payment over 10 years.)

On the other hand if your degree is going to gross $60,000 per year, that’s about $3,750 after 25% is taken out for taxes and healthcare costs. Having $500 per month in loans is still painful, but it only represents about 13% of your take home pay. You’ll have a lot of extra money compared to the teacher’s salary and be able to pay down your loans faster.

The Problem with Median Salaries

There’s a slight problem with trying to estimate how much your degree is worth if you rely on just median salaries. Why? Because median salaries are just, they are the exact middle point of the salary for those working in the field that responded to the survey that the report is based off of. With any median there will be a large set of the population above the median and a large set below the median.

How do you know where you will fall in that range? Can going to the pricey private school catapult you to the upper tier of salaries? Is it based on internships?

That answer is difficult to know which is why limiting your debt regardless of your situation is the smart move.

Limit Your Student Loan Debt

Should you go to the out of state private school with amazing facilities and an eye popping price tag? Or could you get the same degree at an in-state school that would cut 75% of the private school’s costs out?

That’s the calculation you have to make when deciding on a college to get your degree at. The expensive non-state funded schools are really nice, and you might get a slightly better education there. But quantifying exactly how much better that education is – and how much more you might make in your career by going there over the public school – is incredibly difficult.

It is always financially better to take the option that results in fewer loans and debt. That doesn’t mean you can’t go to the private institution, you just might want to secure some scholarships and grants first. And don’t let money be the only decision that sways you: if you can go to a top 25 school, see if you can make the money work. Even if you can’t it doesn’t mean you have to scrape the bottom of the barrel to find the cheapest school possible.

Another factor to consider: what industry you are entering. If you are going into a public sector like elementary education then it doesn’t matter if you outperform everyone, your starting salary will be the same as everyone else in your state or county. Your pay is based on how long you’ve been teaching. In this instance an amazing degree from an incredible private institution might increase your odds of getting hired – a good thing – but it can’t do anything to bump up your pay. If you are entering a field where the starting salaries are essentially fixed then the cheaper option with the lowest amount of debt is the best move.

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