January 20, 2019

Taking On Student Debt Is a Choice

“We have all heard the scary stories. Those poor university students have been forced to take on huge amounts of debt. Except for one thing: No one forced anyone to do anything. Students who take on debt are making an investment. They wouldn’t be making that investment unless they thought it would pay off for them.

First, let’s look at the facts. How much of a tab are university graduates running? Some 45 million Americans owe roughly one-and-half billion dollars in student debt, $600 million more than total U.S. credit card debt. But how big a debt load is that for students to carry? The average student loan recipient pays back the loan at a pace of $351 per month, covering both principal and interest – between the ages of 20 and 30. The median monthly student loan payment is $203 – again, until age 30. Compare that to taking out a mortgage to buy a home, at an average $1500 in principal and interest payments – over 30 years.

People look at the amount of debt students take on, compare it to the cost of their own education, and feel enormous sympathy. That’s understandable, when over the past 20 years the average cost of tuition fees at private universities is up over 160 percent, from just over $16,000 to just over $43,000 per year. But compare that economic cost to the enormous economic benefit.

Workers with less than a high school diploma earn a median of about $26,000 per year, with an unemployment rate of about 8 percent. Earnings for those with a high school diploma are higher, but still only a median of about $35,000 with an unemployment rate over 5 percent.”

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