Great Advice for Parents by Inceptia 2021

Your ability to repay debt affects your degree’s value Student loan debt is difficult to avoid and even more challenging to repay. College costs rose 117% from 1985-86 to 2018-19, according to federal data. Wages, meanwhile, didn’t keep pace, growing only 19% during the same period, according to the Federal Reserve Bank of St. Louis. However, loans are still the primary vehicle for families without wealth to obtain college degrees. In order to make your degree worth it, you have to earn enough to justify it. That means carrying debt that won’t put you underwater – a manageable student loan payment is around 10% of your discretionary after-tax income. To get the best return and be able to repay debt, graduation is crucial – many borrowers who default will have debt but no degree. “That’s the worst-case scenario – you’re incurring some of those costs but with very, very little benefit,” says Jonathan Rothwell, principal economist at Gallup. Demand for your major matters What you study in school will affect the type of job you can get, your earnings and your ability to repay debt. Average earnings at mid-career are highest among those who hold a bachelor’s degree in fields like science, technology, engineering and math, or STEM ($76,000), business ($67,000) and health ($65,000), according to a 2015 data report from Georgetown University’s Center for Education and the Workforce. The same report found the lowest median mid-career earnings among those whose bachelor’s degrees were in fields like arts, humanities and liberal arts ($51,000), as well as teaching and serving roles such as social work ($46,000). To estimate earnings, graduation rates, typical student debt loads and other factors at individual schools, use the Education Department’s College Scorecard tool. You can search and compare earnings as well as debt by fields of study. Where you live after graduation also matters Where you live after attaining your degree also affects its value, according to the results of a May 2020 study for the Thomas B. Fordham Institute, a conservative nonprofit think tank.

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