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If youíre like me, youíre parents told you that you need to get good grades in high school, you have to go to college, and you then get a good job. Itís so simple, right?
Well, maybe it used to be that simple in the 1980s, but it really isnít that simple anymore. In fact, going to college is probably one of the toughest choices that an 18 year old high school graduate has to make. Your entire financial future relies on this single decision.
The choice is this: do you want to be poor or not? This is why picking the right degree and college program matter.
College is the New High SchoolThe bottom line is that college is the new high school. I remember my freshman year at college Ė I was so unprepared for the college educational experience. I truly felt like my high school let me down, even though I was a straight A student. I couldnít imagine going into the real world workplace with just a high school education Ė I would not have been successful.
And the earnings prove it. According to the National Institute for Education Statistics, high school graduates had a median income by the time they were 35 of only $29,950 vs. $44,970 for college graduates. That means that you get 50% more income just by graduating college.
But Itís Not Just Going to CollegeÖThe problem with showing people these charts, though, is that they suddenly assume that going to college will make you more money. Itís not just about going to college! You have to remember that going to college costs money, and going to high school does not.
According to The College Board, the average cost of college for an in-state public college was $22,261 for 2013. If you want to go to a private college, the cost is $43,289.
So, to increase your income roughly $15,000 per year, youíll have to shell out roughly $80,000 over 4 years. Thatís not cheap Ė and that means, for most students, that youíll have to take out student loans.
The Trouble with Student LoansThat leads us to the trouble with student loans. At 18, youíre suddenly faced with a decision about your financial future Ė should you borrow $80,000 or not?
This isnít a simple question, but to answer it, the student needs to look at what they are borrowing against. If youíre getting a car loan, the car is collateral. If you donít pay your car loan, the bank repossesses your car.
With a student loan, the loan is borrowed against your future earnings. If you donít pay your student loan, the government will garnish your wages, take your tax return, and reduce your Social Security.
So, when doing the calculation about whether you should get a student loan or not, you need to consider how much money youíll make when you graduate.
This Is Why Picking the Right Degree MattersItís actually not so much about the degree as it is what you want to do with your degree and how much itís going to cost you. Just look at this survey from the National Association of Colleges and Employers:
As you can see, you will make substantially more going into engineering than you will going into the humanities. But at the same time, this shouldn't crush your dreams Ė you just need to frame your education financial decisions around this.
Making Smart Education Decisions Based on FinancesIf you want to become a teacher, donít let this stop you. Instead, look at the cheapest educational route you can take to become a teacher Ė community college, possibly followed by 2 years at an in-state school in a credential program. This could get you a teaching credential for around $20,000. Based on the salary chart above, the debt you would have to take is completely affordable.
Plus, for many teachers, you could qualify for a variety of student loan forgiveness programs, which could help you get rid of your debt faster!
The wrong way to approach your education is this: You want to become a teacher, but you want to go to a prestigious private university. You then pay $160,000 for your education to go and get a job that only pays $38,000 per year. Even with the student loan forgiveness programs available, the debt youíll face is not affordable, and youíll struggle for your entire adult life to meet other goals Ė like buying a house and raising a family.
Your Degree MattersThis isnít about being a downer. This is about facing and conquering the reality of life. Chances are, you aspire to more in life than working Ė you want to travel, buy a home, raise a family, buy a new car every 5 years. And the trouble is, these things all cost money.
If you burden yourself with student loan debt early in life, you trap yourself. Student loans are a helpful tool for paying for your education. But they must be used responsibly, and that means taking a truthful look at what your life will be when you graduate.
Donít compromise your dreams Ė just explore the path it will take to get there. And remember, you want to work to live, not live to work.
What are your thoughts on college costs, and planning your educational finances ahead of time? Are you burdened by student loans?
This is a guest post written by Robert Farrington from The College Investor. He helps young adults and college students get off on the right financial footing.
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