Exploring the value of costly education.college

Would you invest upwards of $20,000 in something if you weren’t sure it would pay off in the end? Would you spend four years putting yourself into extreme debt when you could have spent those years working? Does taking out a loan with insane interest rates make sense when you aren’t even sure when you will be able to start paying the loans off?

Herein lies the gut-wrenching question that prospective students at any level of their education ask: Is it all worth it?

There is no easy answer to this question — every person comes with a different set of circumstances that dictate what is right and wrong for them. And so many times, even after their decision has been made, it is still impossible to say if it was the right one.

The Numbers

A Pew Research Center study released in 2011 showed that average college tuition and fees have tripled since 1980-81, and that takes inflation into consideration. Knowing this, the following information regarding loans makes a lot more sense: A September 2012 Pew study stated that one in five households owe student loan debt and that the average public, four-year college graduate will be about $23,000 in debt by the time they receive their bachelor’s degree.

According to the same study, 52 percent of degree recipients took out student loans in 1996, increasing to 60 percent in 2008. The amount of money students borrow also has grown. In 1996, the average amount owed was $17,000; for today’s graduates, the average is $23,000.

Despite these bleak numbers, Pew reports that college enrollment has increased. So, even while emerging from a recession and facing ever-rising tuition, people continue pursuing higher education.

Pew speculates that the increase in college students is partly driven by the enrollment numbers at community colleges. Their report on community colleges says that “enrollments have long been considered somewhat countercyclical; that is, they tend to rise as the economy worsens” because of their more manageable price tag.

James-SawyerHDSHT (2)Dr. James Sawyer, vice president and provost of the learning unit at Macomb Community College, said the college has seen a “recent uptick in what I would call the more skilled trades-related programs, but I think that’s driven more by demand than issues regarding student loans and affordability — there’s just a greater need in the industry for these types of folks at the moment.”

He added, “When you start talking about student loans, that’s an issue for us as well, but community colleges are great schools for kids worried about loans because we are cheaper than the typical four-year degree school.”

What Does This Mean For Students?

Four local bachelor-degree holders — two who decided to pursue a graduate degree and two who decided against it for the time being — offer their thoughts.

Rachel Ellentuck, 22, of West Bloomfield graduated from Michigan State University this past spring with a degree in social work and will be attending the University of Michigan School of Social Work in the fall to pursue her master’s degree.

“I had a huge debate about deciding whether or not to go to grad school,” she said. “Obviously, I want to get a good job, but I just wondered if it would be worth it.

“At the end of the day, I decided to get a higher degree so I can ultimately get the job I want — which is to work as a therapist. There were a lot of entry-level positions, but I know I’ll want to do more and work in different positions and not be limited.”

TelemusCapital_063 KelliEllentuck said she was “incredibly lucky” because she did not take on any debt for her undergraduate studies.

“My parents gave me the Michigan Education Trust Fund program, so I didn’t owe anything,” she said. “But for grad school, I am definitely taking out loans. I will owe at least $33,000 for my master’s, which I don’t like, of course, but I have to do it for the job I want.”

The other student who will be attending graduate school is Hannah Katcoff, 23, of West Orange, N.J. The Brandeis University grad double-majored in economics and health: science, society and policy. Katcoff currently attends the U-M School of Public Health and is pursuing her master’s degree in public health/epidemiology.

She said a main reason why she is attending grad school is her program is an applied program, meaning it’s very skill-based. “I didn’t have the skills I needed to succeed in the field when I graduated from undergrad, so I needed to learn them,” she said.

Does that mean she did not find her undergraduate experience worthwhile?

“I thought undergrad was really valuable because I had no idea what I wanted to do when I first started at Brandeis,” she said. “When I graduated, I had a much better idea of what I wanted, so now I’m going to grad school to further my knowledge and develop those skills I discovered I needed.”

Like Ellentuck, Katcoff earned her bachelor’s degree without accruing any debt. “I was incredibly fortunate my parents paid for my undergraduate education,” she said. She declined to say the amount of loans she was taking out for her master’s. “I think eventually getting my master’s will be worth it, and I’ll have to be frugal in my first years out of school. I think a good reason for going to grad school is to increase potential earnings, so I’ll be making more money, hopefully.”

Ellentuck and Katcoff see the benefit of earning a higher degree because of the potential to get a higher-paying job. But what about those students who decide paying the extra money and taking the extra time to get a higher degree is not worth it, either just for the time being or for good?

Chris Atkinson, 23, of Detroit, made the choice to not go to grad school directly after graduating from Western Michigan University with a degree in computer science, but he does plan on getting a graduate degree in the future.

“Seeing that undergrad gave me a financial burden of $31,000 worth of loans to pay off, it seemed fiscally irresponsible to go straight to grad school,” he said. “I also wanted to see what the industry was like before deciding to move forward with a graduate degree in the field.”

Both Ellentuck and Katcoff said that they needed a graduate degree to hold a meaningful position in their respective fields, but the same is not true for Atkinson.

“I’m fairly lucky in that I went into a field that has a high demand right now,” he said. “When I started looking for jobs, I found there were plenty of opportunities for me despite not having industry experience.”

Regarding the value of his undergraduate experience, Atkinson said, “It’s tough to say if it was worth it. The experience of going to college itself was good for me. I grew a lot as a person, and I learned a lot in classes. At the same time, that’s a lot of money, and a lot of the stuff I learned I could have learned on my own.

“But most companies these days are looking for a four-year degree, so because of that I feel I wouldn’t have had the opportunities to get the jobs I wanted if I hadn’t gone to college.”

Another Brandeis grad, Fiona Lockyer of Philadelphia, decided she did not want to attend grad school after graduating from Brandeis as a politics major and environmental science and French double-minor. Like Atkinson, she wanted to gain more work experience before investing in another degree.

“But then I graduated from Brandeis and looked for jobs and saw how awful it was to find a job, and realized I could never afford to get a graduate degree,” she said.

She expressed discontent with her post-graduate situation, saying, “I don’t have a problem with my degree, but I do have a problem with how far up the ladder I’ll have to go before I can start using my brain. Entry-level is so boring, and there’s nothing hard to do. Undergrad didn’t prepare me to be a worker bee.”

Lockyer doubts the value of her degree. “Well, I’m not getting a chance to apply it, so what is the value? I got a job [as a conflicts researcher at a law firm], so I guess it’s worth something, but to be in debt for another 10 years? I don’t know. And I was lucky, I had a tuition scholarship, but I still have some loans to pay back.”

Looking to the future, Lockyer said, “I’m putting away money to get some certifications without having to go to grad school. I’m trying to think creatively and really penny-pinch now and think ahead. It’d be easier if I was making more, but I’m doing what I can. I knew it would be hard, but I didn’t know it would be this hard.”

The Scoop On Student Loans

Early this month, Congress allowed student loan rates to double. As of press time, the Senate was able to reach a long-awaited deal. According to the proposal, students will have lower interest rates through the 2015 academic year and then things will change: Interest rates will be linked to the markets, but there will be caps holding rates from climbing above 8.25 percent for undergraduates, 9.5 percent for graduates, and 10.5 percent for parents.

But what does that all mean?

Kelli Saperstein, 34, of Detroit, who works as a wealth adviser at Telemus Capital, shed some light on student loans. She offered a plan of attack for students considering taking out loans: Look for scholarships, grants and work-study options first, then consider taking out a loan from a family member, then look into federal loans and, finally, consider private loans.

“As you go through the process, you need to have an action plan for how you think you’ll pay it off,” she said. “You need to have your arms around this before you start taking out the loans — you can’t have the opinion that you’ll just deal with it in four years. It’s better to be educated and have a plan and then be in a better situation when you get out of school.”

Saperstein emphasized the importance of being realistic when it comes to figuring out if you will actually be able to pay off your loans.

“Make sure you consider the potential future earnings you’ll get in return for the education you will receive, and be honest and serious with yourself about how long it will take to pay it back,” she said.

And once you graduate and need to start paying off the loans, Saperstein suggested a few ways to make the process easier.

“First, look at all the types of loans you have, get a sense of the interest rates, and immediately set up automatic payment for the loans to come from your bank account,” she advised. “If you set up automatic payments, that can lower your interest rate sometimes, and also you know that your payments will be on time — it’s just easier.

“You need to be aware; you need to take things into your own hands and be knowledgeable. Loans are a fact of life, and many people have student loans. You’re investing in yourself and in your education, so be smart about it and do your homework.”

The Bottom Line

The bottom line is that there is no bottom line. The answer to the question of “is college worth it?” is different for each individual.

Some go into undergrad knowing exactly what they want to study and what they want to do with their lives, but others go into college wanting to figure something out about themselves. If you’re considering taking out loans to further your education, you need to ask: How valuable will this education be and do I think it will be worth it?

The bottom line? Only you can answer that question, and there are no wrong answers.