It isnt hard to see that the cost of education is going up. In fact, it is going up way faster than inflation and much faster than wages should justify. But that still doesnt stop millions of young people from enrolling in college each and every year. Is it worthwhile to take out student loans in order to get a degree? Heres a quick look at the math behind the loans and behind the costs of your education.
Cost of a Degree
For the 2013-2014 school year costs to attend a public university (with in-state tuition) were right around $8,900 per year. Not including room and board, you would spend about $35,600 to go to college for 4 years (ignoring increasing costs while you are in school). Keep in mind this is the national average for a 4 year degree; costs can vary by degree and by location.
Cost of a Loan
Currently interest rates on student loans are still pretty low. Until July 1st 2015, that is when the rates will adjust, your loan will run you 4.66%. Once you lock in that rate, then you get that rate forever. Assuming you take a 20 year repayment plan, you will pay back $228 each month, and in the end you will pay $19,194 in interest. Total cost tuition, fees, and interest on your 4 year degree: $54,800. But right out of college you have a mountain of debt.
Varying Income Levels
If you were to get a job right out of high school, you could expect to earn about $30,000 each year. If you get a job right out of college, you can expect to earn about $46,900 per year. Keep in mind, once again, these vary depending on location, degree, job, and a host of other factors. Each year that you have your degree, you earn an additional $16,900 over and above what your peers that skipped college earn. That means that after 3.5 years you will have more than recouped the $54,800 that you spent on your education. Over the next several decades you can be prepared to earn hundreds of thousands of dollars more than your lesser educated peers.
Its not all fun and games repaying those student loans though. In fact, if you get caught up in the consumer lifestyle, you can find that repaying thousands of dollars of loans is downright hard. There is a silver lining though. You can deduct the interest from your student loans off of your taxes. Its not much, but every little bit helps.
If you want to pay off your loans faster, you can do so. Just look at how Joe Mihalic managed to pay off his $90k+ of debt in less than a year. To do so you have to have discipline, earn money on the side, and pay attention to what you are doing.
Do you have student loans? If so, what is your plan to wipe them out?