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Student Loan Debt: good move or bad

Student loans are a very hot topic these days. The Biden Administration might be the first in history to forgive student loans (they have already forgiven some). That is simply conjecturing at this point, but common conjecture for sure.

Simply Google "student loan debt" and you get a list of articles related to canceled debt, delaying payments, and student loan forgiveness. While President Biden has canceled $1.5B in debt so far that pales in comparison to the $1.6T (that's trillion with a "T") in debt still outstanding.

To determine whether or not student loan debt is good debt or bad debt you should look at the cost of your education vs future earning potential and that can be complicated. Thank goodness the team here at The Saving Dude love to make the complicated just a bit easier to understand.

Student loan debt: good move or bad?

To get us started we need to determine what outcomes are possible for someone after they graduate high school.

  1. They get a job and start their career

  2. They take a gap year, then go to college

  3. They start at a community college

  4. They start at a technical college

  5. They start their own business

  6. They go to a 4-year school

  7. Something else I haven't thought of (if there is some other path you want me to break down please add it to the comments below)

Next, let's use some data from the U.S. Bureau of Labor Statistics, this is the most reliable source I can find. Here is a snipet:

In the third quarter of 2019, full-time workers age 25 and older had median weekly earnings of $975. Those without a high school diploma had median weekly earnings of $606, compared with $749 for high school graduates (no college), and $874 for workers with some college or an associate degree. Workers with a bachelor's degree (and no additional degree) had median weekly earnings of $1,281. Workers with an advanced degree (master's, professional, and doctoral degrees) had median weekly earnings of $1,559 in the third quarter of 2019.

So what the heck does this mean? As I read this I summarize as follows, as you attain a higher level of education your weekly earnings increase. That summary doesn't tell us the full picture. What does a $143 difference per week between those without a high school diploma, and those with, mean over the course of one's life. The average lifespan in the US is currently 77.8 years (as of 2020 data).

The data above is based on someone starting their career at 25, the average American retires at 64, so, on average, we work 39 years.

39 years x 52 weeks = 2,028 working week

2,028 x $143 = $290,004 in earnings over your career

This first calculation is the difference between having a high school diploma and not. This is not an illustration of whether a college degree is worth the cost, but it does lay the groundwork for each subsequent calculation and education level. It also illustrates the vast difference in earning power for those with a high school diploma and those without (on average).

Now, all we have to do is take the difference in $$s earned per working week times the number of working weeks, 2,028.

High School diploma vs Some college/Associates:

$874 - $749 = $253,500

Some college/Associates vs Bachelor's degree:

$1,281 - $874 = $825,396

Bachelor's degree vs Advanced degree:

$1,559 - $1,281 = $563,784

As you can see, the largest jump is between some college/associates vs bachelor's degree. The jump gets even larger between high school diploma and bachelor's degree ($253,500 + $825,396 = $1,078,896). A critical component of this portion of the equation is ensuring you are making more money with your bachelor's degree than you could have made with a high school diploma. Your career earnings can vary greatly based on the major you choose or the career you find yourself in after college.

To get a sense of where you might land vs "average" for earnings after earning your bachelor's degree go check out Payscale . For example, if you choose to get a degree in Addictions Counseling you will make approximately $800/week. This is well below the $874/week and just above the $749 for those with a high school diploma. If you borrow $50,000 at a 4% interest rate you are nearly breaking even vs those with a high school diploma. On top of that, you have lost 4 years of earnings while you were acquiring your degree.

It is critical that if you are interested in going to college that you balance your potential earnings vs the amount of money you need to borrow in order to obtain that degree.

Now let's dive into the other side of this equation, the amount of money you borrow. The average amount of debt for a bachelor's degree among the class of 2019 was $28,950. If you borrowed and received an MBA, you have $66,300 in debt on average. SmartAsset has an awesome student loan debt calculator. For those who graduated in 2019 with an average amount of student loan debt, they will end up paying $35,583 after interest.

Summary: Good move if done correctly

Borrowing money to get a college degree can be a fruitful endeavor, but you need to ensure you have a clear understanding of your future earning potential vs the amount of money you borrow.

All-in-all borrowing money for college can be a very smart decision. If you or someone you know is trying to determine whether or not they should borrow money to get a college degree and they have questions submit those in the comments below, email me at, or hit me up on our social channels.

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