Knowledge is Power

                  - Sir Francis Bacon

 

It’s no secret that some people make very enviable salaries without having a degree.  It’s also no secret that many people who do have degrees are struggling. 

Nevertheless, these days getting a degree has become fashionable.  More importantly, they’re required in order to get hired for many positions - even those that technically don’t require one.  I have relatives in chinuch and they needed a degree to be a rebbe in a yeshiva.  

Getting a BA entails a great deal of work, and a master’s and Ph.D. even more.  They also are very expensive.  Are they worth the effort?  Are they worth the price?  These are very real questions and should be considered carefully before embarking on a career.  Some statistics and details will help clarify this point.  

Over the past decade, the cost of a university education has risen three times faster than other school-related expenses, according to Nitro College.  “Most students finance at least some of that cost by taking out a student loan,” it adds. The premise is that a student loan is a kind of investment that will pay off in the form of higher earnings over the long term.

At the end of 2020, student loans exceeded $1.7 trillion, according to firstrepublic.com. Nearly 1 in 8 Americans - more than 45 million people - has one.  The average loan is $37,172, and the monthly payments are nearly $400/month.  They have become so prevalent that they affect the overall economy

Much of this money is owed by young people who have just completed their education.  However, a high percentage is owed by borrowers who have been out of school for years - and in a surprisingly high number of cases, for decades.  

The Standard Repayment Plan for these loans divides the amount owed into 120 payments, so in theory they will be repaid in just 10 years.  But those who do so are the fortunate few.  In reality, it takes most borrowers twice as long to finish paying off their student loans, and in some cases even more than that. 

But this doesn’t deter anyone from taking one.  In the third quarter of 2018, Americans owed $840 billion on their credit cards and $1.21 trillion in auto loans.  But student loan debt has mushroomed higher than either of these and now is second only to mortgages. 

And the amount borrowed on these loans continues to spiral rapidly.  According to Nitro, even when adjusting the numbers for inflation, the cost of tuition and room and board has more than doubled since 1971.  At the same time, tuition charged by many colleges and universities also is increasing. 

 

The Hard Part

Getting a student loan is not always easy, but the really difficult part is paying it back.  And people who are late or delinquent in making their monthly payments can get into a financial mess.  Nerdwallet.com describes some of the problems they face.

*When a payment is 30 days overdue a late fee will likely be charged.

*When a payment is 90 days overdue a report of the late payment will be sent to credit bureaus and remain there for seven years.  This can lower someone’s credit score by as much as 100 points - making it much harder to get a credit card, rent an apartment, or even get a cell phone plan. 

*When a payment is 270 days overdue the student loan will go into default; this could result in additional penalties like collection costs, and possibly lead to wage garnishment and tax refund seizure.

 

Fascination Vs. Salary

The reason most people fall behind on their student (and other) loans is because they are unable to make the required payments.  There are people who genuinely want to learn more about subjects that interest them for the sake of knowledge.  Having a career in a field that fascinates them is a higher priority than having a high-paying job doing boring work.

Unfortunately, finding jobs in certain fields has become very difficult, and finding one that also pays a respectable wage is becoming even more of a challenge, according to an analysis by The Wall Street Journal.  There are countless stories of people who have learned this the hard way, and one of them follows. 

“Z” earned a master’s degree in film from Columbia in 2018, and even now, when looking back, praises the quality of the program.  However, the skills he acquired have not translated into high income.  “Z” has been earning between $30,000 - $50,000 as a Hollywood assistant, but this includes related work he does in video production and photography.  The worst part of his situation is that the balance left on his grad school loan is nearly $300,000; at his current rate of payments, “Z” will be locked into paying off this debt for decades.

And he has plenty of company.  The Journal further reports that recent film program graduates of Columbia University who took out federal student loans had a median debt of $181,000.  Yet two years after earning their master’s degrees, half were making less than $30,000 a year.  It must be pointed out that the problem of paying off student loans is not limited to people who study film and is not limited to graduates of Columbia; it cuts across the arts and the sciences and in all regions of the country.

According to The Journal, NYU grads with a master’s in publishing borrowed a median $116,000 - but two years after graduating they had an annual median income of $42,000.  At Northwestern University, half of those who earned degrees in speech-language pathology had borrowed $148,000 or more, and the graduates had a median income of $60,000 two years later.  Graduates of the University of Southern California’s marriage and family counseling program had borrowed a median $124,000 and half earned $50,000 or less.

Not all that long ago, positions in certain fields offered high entry-level salaries as well as opportunities for growth and job security.  But economies change and so does the job market.  Fields including pharmacy, law, architecture, and positions that required an MBA now have or recently have had a surplus of candidates compared to the jobs available.  Some of the people who prepared for a career in them may have had difficulty finding one, may have had to settle for a surprisingly low salary, or in some cases, may have been forced into completely different industries.

What is clear is that having a degree does not guarantee getting a high-paying job, and many of the people who thought it does are learning this lesson the hard way.  And they will be burdened by student loan debt for many years.

The question of whether one should go into debt to get a degree should be made in consultation with job counselors and others who could offer career advice; speaking with your rabbi is also advisable, as making a career decision presents a wide range of considerations.      

Years ago, a comedian told an anecdote about two friends meeting.  “How’s it going?” one asks. “Good,” is the reply.  “I have three sons.  One is a doctor, the other a lawyer, and the third an accountant.  I’m a shoemaker and I support all of them.” 

This anecdote is an exaggeration, but the point it makes is well worth considering by everyone thinking about their future.

 Sources: bankrate.com; educationdata.org; firstrepublic.com; nerdwallet.com; wsj.com


Gerald Harris is a financial and feature writer. Gerald can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. 

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