Future engineers, doctors, and lawyers must earn advanced post-secondary degrees that can cost hundreds of thousands of dollars. While taking out a student loan can pay off in the form of higher income, this is not always the case.
According to a new study by Dr. Andrew Gillen, an economist at the Texas Public Policy Foundation, a liberal arts doctorate has the lowest potential to pay off. These graduates are responsible for paying almost $ 200,000 in student loan debt with a salary of just $ 40,000.
Dr. Gillen compiled data from the Department of Education to estimate the amount of federal graduate student debt accumulated based on their field of study. Unsurprisingly, some of the largest debt balances were with post-secondary graduates in medical fields like dentistry ($ 138,857), medicine ($ 179,553).) and optometry ($ 178,870).
But among the study programs that almost guarantee a well-paying career, there are some other graduate degrees that come at a surprisingly high price point: alternative medicine ($ 230,103), dispute resolution ($ 135,844).) and the liberal arts ($ 199,115), for example.
What I think is really a huge and shameful thing that higher education has been doing to students for years, is selling everyone the idea that university is a golden ticket to the middle class.
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While a college degree can open doors to more advanced fields, it’s important for students to understand the implications of a high amount of student loan debt. Taking on six-figure debt for a degree in a relatively low-paying field can be “disastrous” for graduates, Dr. Gillen added.
If you’re struggling to pay off high college debt, consider your student loan repayment options, such as private student loan refinancing. You can compare student loan refinance rates without impacting your credit score on Credible.
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What is the average debt of a student loan?
The average student loan debt per borrower depends on the type of degree they have. The average amount of debt that students incur to obtain a bachelor’s degree is $ 23,000, compared to $ 144,000 for a professional degree.
The overall cost of student debt also depends on the academic field. The most expensive program of study is a doctorate in pharmaceutical sciences, leaving graduates with a federal student loan debt worth $ 271,378. This career path is more likely to pay off, however, with a median salary of $ 119,806.
In contrast, a master’s degree in accounting leaves students with a student loan debt worth $ 28,341 on a salary of $ 60,311. A bachelor’s degree in computer science costs just $ 17,052 but pays off quickly with a median salary of $ 69,338.
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Dr Gillen said one of the most important lessons from the study is the high number of debts borrowers owe to earn graduate degrees.
“At the undergraduate level, we have limits on how many students students can take out, but what they have done is largely a limitation of over-indebtedness at the undergraduate level,” he said. declared. “At the level of higher education, over-indebtedness is really worrying.
Federal student loan limits for undergraduates are $ 31,000 for dependent students and $ 57,500 for independent students. But PLUS loans for graduate students do not have the same borrowing limits, which makes it easier to get overindebted when earning a post-secondary degree. Additionally, PLUS loans have the highest interest rate of any federal loan, at 6.28%.
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How To Reduce Student Loan Debt
Student loan expenses can be a costly burden on your budget, preventing you from taking financial steps such as saving for retirement and buying a home. But there are ways to pay off your student loan debt faster, and even save money while doing it. Here are some moves to consider.
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Refinance when interest rates are low
Refinancing a student loan is when you take out a new student loan with better terms to pay off your current loans. Qualifying for a lower interest rate on student loans can help you lower your monthly payments, get out of debt faster, and save money over the life of the loan.
With student loan refinancing rates nearing all-time low, now is the time to refinance your student loan debt. Well-qualified borrowers who refinanced to a shorter loan term using Credible have been able to pay off their debts years faster and save nearly $ 17,000 over time.
If you have federal student loans, keep in mind that refinancing with a private lender means you will lose federal benefits such as COVID-19 deferral, income-based repayment plans., and student loan exemption programs.
You can read more about refinancing student loans and compare interest rates on Credible.
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Sign up for automatic payments
Setting up direct deposit on your student loans ensures that you never miss a payment, but there is an added benefit to signing up for automatic payments. Many lenders offer an automatic payment discount in the form of a lower interest rate, which can help you save even more money while you pay off your debt.
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Pay more than the minimum to reduce interest charges
Paying off your student loan is the minimum amount you owe, but you may be able to save thousands of dollars and pay off debt faster if you can afford to make more than the minimum payment. Use Credible’s student loan repayment calculator to see how faster repayment of your loans can save you money over the life of the loan.
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