College graduates earn more, but is the cost of student debt worth it?
College graduates will leave school this month with a degree — and in many cases, tens of thousands of dollars in debt. Even though studies show they’ll earn about $22,000 more than their peers with just a high school diploma, is the expense worth it?
Smart, an online magazine that focuses on education issues, recently interviewed 800 graduates over the past 10 years. Among the discoveries:
Half of this group said they had less than $5,000 in their savings account, leaving little room for emergency expenses they might encounter. In addition to not having a strong savings or emergency account, 43% of respondents said they often or always live paycheck to paycheck.
In the face of frequent financial uncertainty, as many seem to be in this survey group, investing money for retirement is probably not on the priority list. In fact, when asked how much money they had contributed to their 401(k) or other retirement plans, 15% of respondents said they hadn’t even set one up. . Another 13% report that they have less than $1,000 in their retirement savings.
Some recent college graduates also struggle with high levels of credit card debt. When asked an approximate amount owed on credit cards, one in five respondents said they had $20,000 or more in credit card debt, while 10% said they owed more than $40,000. Similarly, and likely due to their credit card debt, about 21% of recent college graduates incurred more than $20,000 in medical debt during the pandemic, while 13% reported having more than $40,000 in debt. medical due to the pandemic.
Three-quarters of survey respondents still have to repay their student loans, and more than a third owe more than $20,000. Of this group, 56% said it would be somewhat or very difficult for them to resume paying their federal student loans, and only 14% said they had still made payments during the loan pause of the past two years.
“While a college degree undoubtedly opens up job opportunities with higher earning potential, it does not mean that graduates are assured of a stable financial future,” the report concludes. “In fact, many of our survey respondents reported an alarming lack of savings and high credit card debt, and it would appear that the impending restart of federal loan repayments, if and when it happens, will not will only put more pressure on this group of recent university graduates.