Student Debt: Is College Worth It?

Upbeat music plays throughout.

Narrator: There's no avoiding the truth: Higher education is expensive.

On-screen text: Source: The Education Initiative

On-screen text: Percentage of enrolled students who borrowed

Narrator: 83% of college students in 2021 had federal student loan debt.

On-screen text: Average federal student loan debt (per student) at graduation for class of 2021

Narrator: The average amount for students graduating with a bachelor's degree in 2021 was $31,100, and tuition keeps rising. This raises the question: Is college worth the cost?

Education is about more than money, but we're only going to focus on the actual financials of college.

It can be one of the most valuable investments you can make, but you've got to do a cost-benefit analysis.

This means comparing the costs of higher education, things like tuition, fees, living expenses, and the cost of borrowing, to your potential future earning power.

Here are three major factors to consider when you're determining the value of education: the type of degree, the school, and the career path.

The type of degree you receive can have a profound effect on your future earning potential.

On-screen text: Source: The College Payoff: Education, Occupation, Lifetime Earnings, Georgetown University Center on Education and the Workforce

Animation: Two bars show the potential median earnings of someone with a high school diploma ($1,304,000) compared to the potential earnings of someone with a bachelor's degree ($2,268,000).

Narrator: According to one major study, the median earnings over a 40-year career for someone with a bachelor's degree was around a million dollars more than someone with just a high school diploma.

On-screen text: Source: The College Payoff: Education, Occupation, Lifetime Earnings, Georgetown University Center on Education and the Workforce

Narrator: But traditional four-year degrees aren't the only form of higher education. Even a two-year degree could lead to an extra $400,000 in earnings over a 40-year career.

There's another path you might've forgotten about: trade school.

Trade schools prepare students for careers like plumbing or flying an airplane, and they tend to be much cheaper than college. They often skip the general education classes and focus instead on job and skills-based training.

Employment prospects could be bright.

On-screen text: Source: Angi, 2021 Skilled Trades in America Report

Narrator: Skilled laborers are older than the average worker, and more than a quarter are within 10 years of retirement.

If you've already got a bachelor's degree, you've got several opportunities for further education.

On-screen text: Source: The College Payoff: Education, Occupation, Lifetime Earnings, Georgetown University Center on Education and the Workforce

Narrator: Some graduate programs may be more expensive, but if they'll vastly improve your earning potential—like law school or medical school—consider the long-term benefits versus the cost.

But you may want to be a little more critical in a cost-benefit analysis for graduate school because it's not required for most professions. In addition to the cost of the degree itself, consider the earnings lost during the years you may spend studying instead of working.

On-screen text: Source: The College Payoff: Education, Occupation, Lifetime Earnings, Georgetown University Center on Education and the Workforce

Animation: Chart shows the median lifetime earnings by degree type: Law and medical degrees with $3,648,000; doctorate degree with $3,252,000; master's degree with $2,671,000; bachelor's degree with $2,268,000; associates degree with $1,727,000; and a high school diploma with $1,304,000.

Narrator: Law and medical schools might require expensive student loans, but the JD and the MD have the highest earning power improvement of any degree.

On-screen text: Source: The College Payoff: Education, Occupation, Lifetime Earnings, Georgetown University Center on Education and the Workforce

Animation: Two bars show the median earnings of $2,268,000 with a bachelor's degree compared to $3,648,000 with a law or medical degree.

Narrator: Over the course of a 40-year career, a medical or law degree could lead to an extra $1.4 million dollars over just a bachelor's degree.

On-screen text: Source: Federal Student Aid, U.S. Department of Education

On-screen text: Subsidized loan interest rate with an APR of 3.7% and graduate loan interest rate with an APR of 6.2%

Narrator: But be careful about taking out loans at this level because graduate loans can carry higher interest rates than subsidized undergraduate loans.

In addition to the degree type, consider the school and its value. For example, state schools and community colleges are often less expensive than private or for-profit schools, though the long-term return on investment may be higher from a school that offers bachelor's degrees.

Finally, consider your field of study and intended career.

Going into significant debt for a degree with little earning power could lead to years of financial struggle. It can impact the value your degree has from a particular school. You should also look at things like where past students have landed after graduating and what their earnings have looked like. Many colleges have this information available to prospective students.

Ultimately, education is a very personal decision. College debt can be worth it, but it all depends on your unique situation. Take a good look at what you want to study and where you'll be able to get the best education for that field; then determine your tolerance for debt.

On-screen text: [Schwab logo] Own your tomorrow^®