The Long-term Investment of Student Debt
The rising cost of higher education along with student loans are valuable investments for long-term success in the professional world.
By Anabel Bannon
The rising cost of higher education poses many questions about the long-term payoff of a college education for students that rely on financial aid and loans.
In recent decades, the total cost of student debt has reached $1.3 trillion nationally, which can be directly associated with the major spike in tuition prices.
Some experts attribute this explosion to the upsurge in faculty salaries and upgraded amenities such as athletic facilitates and dorm rooms; however, three-quarters of the rising cost of education is due to the lack of state financial support for public institutions (fivethirtyeight.com).
Private schools have also experienced tuition increases. Research indicates that federal student aid may be partially to blame because some institutions raise tuition prices with intentions of receiving as much extra government funded money as possible.
Faron Cajthamal, vice president of consumer banking at J.P. Morgan Chase Bank, says that higher education costs have far exceeded inflation rates for several reasons, including expensive major capital construction projects and government backed loans.
“The availability of government loans and grants have enabled universities to increase tuition with the confidence that students will be able to repay it, and many schools invest in big enhancement projects in an effort to sell themselves to future students and increase alumni involvement,” Cajthamal said.
In most instances, when loans are taken out for a degree path with a high demand for job prospects, the cost is worth the long-term professional benefits.
“Professional degrees including nursing or fields in science and engineering usually find employment quickly and often time jobs in those areas include some type of loan forgiveness or repayment assistance,” said Cajthamal. “If loans are more liberal arts oriented, the degrees may limit students in terms of making money directly out of college, meaning that they will spend most of their working life repaying the loans.”
Michael Restiano, a finance writer for the Huffington Post and recent college graduate, has firsthand experience with repaying student loans. The first step to successfully begin the repayment process is to become intimately familiar with the details of student loans, said Restiano. Following that, it is a matter of picking either a long-term or short-term payment plan and taking into account what type of sacrifices need to be made in order to reach the end goal.
“It will likely require some immediate sacrifices, such as living at home to put extra money toward double payments in order to have a freer lifestyle in the future,” said Restiano. “Despite what the financial gurus tell you, there is no right answer for paying off debt; take a hard, objective look at your finances, your lifestyle, projected income over the years, and make a call.”
While there is evidence to support that taking out student loans provides a long-term payoff, they are not necessarily the right option for everyone.
“I work with people who have never attended college and they are amazingly talented at what they do and that is what makes them valuable to employers,” Restiano said. “In the private sector at least, once you’re a few years out of college, people care about where you worked before and what skills you can bring to their organization.”
While higher education’s value may be declining on the whole, Restiano does not think that we will see the bubble burst for a few years.
Current college students who rely on financial aid begin to feel the pressures of debt as they approach graduation. Toni Burke, a senior studying elementary education at the University of Alabama, said she will begin repaying her loans in the months following her graduation.
Burke is an out-of-state student, and while she did not have to take out loans for the full amount of her tuition, she has relied on financial aid for the last four years of college.
“As an out-of-state student and with the already very high cost of education, I knew that I would have to deal with higher student loans after college, but I think making certain lifestyle choices or financial sacrifices in order to save money is the most important factor in repaying any debt,” Burke said. “I know that I will not necessarily have the same financial freedom that I do now, but I know how to budget and save money and will have the support of my family along the way.”
Pursuing a higher education is a huge decision for students who are considering making the financial investment of attending college, and for out-of-state students seeking a degree, the stakes are even higher. The pressure of having a large amount of debt at such a young age is a lot of pressure for students; it makes receiving a higher education seem increasingly inaccessible for those who deserve it, but cannot afford it.
Fortunately, most people agree that short-term debt is worth the long-term investment if you create responsible financial habits early and do your research.
“Having a college education is such a valuable asset in life, it’s something that will never lose value,” said Burke. “If taking out loans is the only way for you to get that experience, you will see the payoff one day even if it is not immediate.”