Higher education is supposed to be a no-brainer: Even if you have to borrow, you'll earn more with a degree. But that ROI is breaking down. As more students take out gigantic student loans and struggle to find the right jobs, they ask: is student loan debt worth it or not?

Right now, Americans have over $1.2 trillion in student loan debt. Even worse, one in three loans are in some stage of default.

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But I didn’t need to see those stats to know that the student loan crisis is real. The last time I polled Money Under 30 readers, repaying student loans topped the list of financial priorities. And I get emails every week from readers trying to manage payments on student loan burdens that top $50,000 or even $100,000.

Are student loans still an investment?

Is Your Student Loan Debt 'Worth It'? - Are student loans still an investment?

To me, there’s no question that education is important. The statistics are clear: over time, a college degree is still a good investment. On average, Americans with bachelor’s degrees (regardless of field) will earn about $1 million more than Americans who never attend college.

The smarter you are about it, the more you can maximize your ROI, of course. Find a low-cost school, pick up specific skills instead of majoring in sociology like, ahem, this blogger.

And you could, of course, use those numbers to justify a $200K student loan for a bachelor’s degree, as indeed a few unscrupulous college admissions reps might. “This degree is worth at least a million! Why wouldn’t you invest $200k?”

Evaluating student loan debt

Now that you know the importance of determining ROI, how do you go about doing it? Start by looking at how much you’re likely to earn the first year in a job, then consider how many years you’ll have to work to pay off your student loan debt. A good rule of thumb is to avoid racking up more student loan debt than you’d earn in your first year on the job.

If, for instance, you plan to turn that sociology degree into a career as a school guidance counselor, pay ranges from $34,380 to $96,090. At entry-level, you’ll likely make less than the median pay of $57,040 in those early years. Since the average student loan debt is $29,900, as long as you stay within the average, you should still fall safely below that first year’s salary.

The amount of debt you’ll rack up depends largely on the educational institution you choose. U.S. News & World Report compiles an annual list of tuition costs for colleges around the country. For 2019-2020, the average annual cost of in-state tuition was just over $10,000, while out-of-state tuition surpasses $36,000 a year.

But this is only the beginning of your college costs. You’ll also need to pay for books, housing, and meals. You can easily surpass $29,900 in that first year if you aren’t careful.

That said, even if you take out a loan, you can reduce your costs by applying for any scholarships and grants that are available to you. So much of this process is online now, you can easily shop around and keep your tuition costs low. I’ll provide more details on how to do that below.

Careers that help with student loan debt

Is Your Student Loan Debt 'Worth It'? - Careers that help with student loan debt

In some jobs, your employer will help you with that student loan debt. It’s a job perk. Why? In a competitive job market, it gives employers the edge when it comes to attracting the best candidates.

These benefits are offered through something called Student Loan Repayment, which is a federal program that allows employers to repay loans on behalf of employees. If you’re interested in lining up this type of arrangement, you may need to focus your career search on larger corporations. But don’t rule out the possibility of negotiating the perk during your job interview with a smaller business.

One field where this perk is often seen is finance. SoFi and Fidelity are among the many employers helping employees pay off their student loans. Many government agencies also participate, including all 15 federal cabinet-level departments and the Peace Corps.

But perhaps the biggest need for loan assistance is within the medical industry. According to the American Hospital Association, approximately 73% of all U.S. hospitals would qualify for loan forgiveness, so it’s merely a matter of finding a medical facility that participates.

Should you go into debt for an education?

That brings me to the big question. Is that debt worth it? My answer to that question would be, “It depends.”

First, if you’re going into a field that requires a degree, you then have to pay for that degree. Unless you have money to pay tuition, books, and other expenses out of pocket, financial assistance is your only option.

Without that degree, how much will you make? Will your annual salary bring enough income to pay off your loans while still enjoying a lifestyle similar to what you would have without it? If so, look at how long it would take you to pay off $30,000 or more in debt so that you can start bringing in the extra income you’re earning.

You may consider all those factors and decide that it’s not about money. It’s about pursuing an occupation that brings you happiness. If that’s the case, it may be worth years of loan payments.

Alternatives to student loans

Is Your Student Loan Debt 'Worth It'? - Alternatives to student loans

Maybe you’ve considered all these factors and you’re uncomfortable with going into debt for your education.

Yeah, I don’t blame you. In fact, leaving college with as little debt as possible will give you a great headstart on your financial future.

But that doesn’t mean you can’t get help with the costs. There are several alternatives to the loans if you don’t have the money in the bank to pay the costs now.

Grants and scholarships

Whether you choose to take out a loan or not, you should definitely apply for grants and scholarships. Start your search by filling out the FAFSA, which is short for the Free Application for Federal Student Aid. This uses your financial situation to match you with grants that can help reduce your college costs.

Your next stop should be the financial aid office of your target school. They’ll help you track down any scholarships that are available based on your achievements, grade point average, and special memberships, among other factors. You can also lookup scholarship opportunities online. However, it’s important to avoid any sites offering to help you find scholarships for a fee. These are usually scams.

Work-study programs

In addition to grants, your FAFSA application will also help determine your eligibility for the Federal Work-Study (FWS) Program. This is also based on your financial need, and participation is limited.

With a work-study program, you’ll work part-time throughout the semester in exchange for part of your tuition being funded. Colleges, nonprofits, and government agencies participate in the program and must follow strict standards to be eligible.

Trade schools

It’s a common misconception that you have to go to a four-year college or university to land a well-paying job. In fact, some trade-based occupations can earn you a higher salary than you’d get after putting in four years.

High-paying schools that allow you a shorter, more specialized education include:

  • Licensed practical nurse.
  • Electrician.
  • Respiratory therapist.
  • Dental hygienist.
  • Radiation therapist.
  • Web developer.

Look into your local community colleges, technical schools, and online learning options to find degree programs that can keep your financial burden low.

Go to work

Of course, you don’t have to go to college at all. A high school degree can land you plenty of high-paying, challenging jobs, including work in transportation, manufacturing, and agriculture.

In fact, if you’re entrepreneurial, you can start your own business and join the ranks of the many successful professionals without college degrees. Ted Turner, Michael Dell, and Rachael Ray are among the many who have become household names without earning a degree.

There’s also the option of doing a little of both. Land a full-time job and, working nights and weekends, work toward earning that degree. With so many online options available, it’s easier than ever to get a degree on your own terms.

Finding good student loans

One thing I wish I’d done differently was shop around for different loan options before starting school. Today, it’s easier than ever to compare student loans. I recommend you look at the interest rate, the repayment terms, and how quickly you’ll get a quote after completing the application.

Although you should still shop federal loans, also consider looking at some private lenders. You may find your federal loans barely cover the cost of tuition and books. A private loan can help you with other expenses, like room and board, groceries, and a personal computer.

Here are a few lending options for getting quotes for personal loans.

Credible 

Is Your Student Loan Debt 'Worth It'? - CredibleDon’t waste time shopping around. Credible lets you get quotes from multiple vetted lenders immediately, only entering your information once. Credible doesn’t charge any fees for its services.

You can use Credible’s services to shop loans for undergraduate and graduate degrees. The rates you’re provided are actual rates, not estimates, and you’ll have flexibility in your repayment.

If you already have a student loan, take a look at Credible’s refinance offers. In only a couple of minutes, you can get offers from 10 vetted lenders. Credible can help you refinance your federal, private, and ParentPLUS loans.

Earnest

Is Your Student Loan Debt 'Worth It'? - EarnestWith variable rates starting at 1.74% APR, Earnest is a great resource for finding affordable private student loans. You’ll simply input some information and, in a couple of minutes, determine if it’s the best option for your needs.

But what I like best about Earnest is its flexibility. You can set up payment plans that meet your own needs and even enable autopay once you’re ready to start paying it off. Once a year, they let you skip a payment to give you a little extra breathing room.

Another perk you get with Earnest is an extended grace period. While many other lenders give you six months to start paying after graduation, Earnest extends it to nine months, allowing you a little extra time to land that great new job.

Knowing when it is time to refinance your student loans

When considering if student loan debt is worth it, it is a good idea to always consider how refinancing can help you pay it off. Refinancing gives you the ability to pay off your loan for less money than you agreed upon when signing the dotted line on your original loan.

The truth is, there is a good chance that at some point during the life of your loan, you will find out that a different lender offers better loan terms. If that happens (and it will), it is time to start researching your options for refinancing.

You will also want to consider refinancing your loans if you are having trouble balancing different loan rates and different lenders. Refinancing your student loans with one lender can help clear up the confusion of having to make multiple loan payments and will standardize your rates across all of your loans.

If you’re considering refinancing your loans, one of the companies below can help you find the best rate for your financial situation:

Summary

For some, student loan debt just isn’t worth the cost. Big loan debts do the opposite of saving -they inhibit your freedom to do anything but work and make your payments, month after month.

My biggest regret about being in so much debt throughout my 20s is the opportunities lost. If I hadn’t been in debt, where might I have traveled? If I hadn’t been in debt, what risks might I have taken? Maybe I’d have been able to afford to stay in New York City, or moved somewhere new entirely.

I’ve learned to realize regret is silly, and that much of my life today that’s so good is a direct result of the financial adversity I faced for many years. That said, I think it’s important for anyone who has experienced the burden of a lot of debt – specifically student loan debt – to speak up. Both to warn college students who haven’t yet signed their promissory notes and to call attention to ballooning education costs and loose lending standards.

Broke, Busted & Disgusted is a documentary that hopes to address the student loan crisis and offers solutions that are pro-education, but anti-debt. (Money Under 30 kicked in a bit.)

You can watch the trailer below and, finally decide for yourself, if student loans are the right move for you.

Read more:

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About the author

David Weliver
Total Articles: 306
David Weliver is the founder of Money Under 30. He's a cited authority on personal finance and the unique money issues he faced during his first two decades as an adult. He lives in Maine with his wife and two children.