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Is student debt worth it?

Published: November 29, 2022
A series of slightly worn books piled on top of each other

1.7 trillion dollars. That is the amount of student debt in America today.

The question we’re asking is whether taking on that student debt is a good idea in the first place. Does it pay off? Is college the only route to a secure financial future, or are there alternative pathways?

The student debt crisis in numbers

  • After adjusting for currency inflation, college tuition has increased 747.8% since 1963.

  • Around 7% of student loan borrowers are now more than $100,000 in debt.

  • Accounting correctly for both human capital and the effect of subsidies in student lending plans, almost a third of all student debt is owed by the wealthiest 20 percent of households and only 8 percent by the bottom 20 percent. Across-the-board student loan forgiveness is regressively measured by income, family affluence, educational attainment, and wealth.

  • About 92% of all student debts are federal student loans; the remaining amount is private student loans. 

  • The student loan debt crisis is not just a problem for the young. At the end of 2020, borrowers 50 and older owed about 22 percent of that amount, or $336.1 billion — more than a five-fold increase from 2004.

  • College dropout rates indicate that up to 32.9% of undergraduates do not complete their degree program. Those individuals are still affected by student loan debt.

Why is there a student debt crisis?

Graduates with a bachelor degree earn more than non-graduates on average. That difference in earnings cancels out debt for most graduates on average. And the more school a person takes, the more debt they get into, the more they earn. On average.

However, according to AFT, “Nearly 1 in 4 federal borrowers are in default or struggling to stay current on their loans. When they fall behind on their payments, the consequences are dire: negative credit reports, wage garnishment, and diminished options to cure defaulted loans.” 

This means that those who fall behind end up in an increasingly precarious feedback loop. Bad credit reduces options. Mortgages move further out of reach. In distress, many make poor short-term decisions, such as payday loans, to make ends meet. All the while their student debt accrues interest. Soon enough, there’s interest on the interest. 

Why are a quarter of student loan borrowers defaulting on their loans, despite the fact graduates earn more money than those who didn’t go to university? The Student Debt Crisis Center (SDCC) has gathered more than 80,000 stories of people struggling with student debt

The problem is that not all borrowers are in the same circumstances, so looking at them as a whole doesn’t help. Phrases like “on average” paper over all those for whom getting into student debt doesn’t pay off. Consider the difference between graduates that:

  • Study law vs study English literature

  • Live in high cost of living areas vs low cost of living

  • Have families to support vs live independently

  • Understand how to manage their finances vs those who have never learned how

  • Have financial support from parents vs those who don’t

  • Those who go on to grad school vs who that don’t

If you study law, you are more likely to eventually earn high salaries than if you studied English lit. If your career requires grad school, you may have to take more debt. If you live in San Francisco after graduating, your cost of living is higher than if you live in Dayton, Ohio. Perhaps you have a young family, or wider family to support? Though, even here, it gets complicated. People who take out more student debt are less likely to default on their loans. That’s the lawyers, doctors and architects who either go to grad school or who do longer degrees and therefore need more loans to cover their extended period of study.

While all those factors impact a person’s ability to pay down student debt faster and avoid interest, all of them assume that they actually graduated. Unfortunately, not all those who have student loans graduate—they have the debt without necessarily accessing the bump in earnings. Some studies estimate that up to 40% of those with student loans did not graduate (though even knowing how many student debt holders didn’t graduate is almost impossible to figure out, which is worrying in itself). This group is 4 times as likely to default on loan payments than those who finished a degree, while they make an average of 32.6% less income than bachelor's degree holders.

For those who do finish a degree, the returns on higher education are not what they once were. 

The net cost of attendance for four-year public colleges went from $17,500 in 2006 to $20,210 in 2016. While the cost of higher education has ballooned, wages have not kept up with the increases in tuition. Many recent college graduates state they are not even able to afford the standard 10-year repayment timeline. It takes graduates 17 years on average to pay off education debt. And that's if they're lucky, as retiree statistics show that in 2016, 9.6 percent of families headed by someone age 50-plus carried student loan debt, with the average amount owed more than tripling to $33,053. Research from the federal reserve putting puts average monthly student loan repayments at $393.

With all this in mind, it’s important to remember that measuring wealth in earnings alone does not provide a clear picture of a person’s ability to build wealth. Financial security also depends on assets, usually whether a person owns a home or not. So even if a university graduate eventually begins earning more than a high school graduate, the delay in being able to afford a house may set them back, as house prices are almost always dramatically increasing over time. 

There’s an obvious question then: Is it possible to access a high earning career without going to college, so that a young person can find financial stability earlier in their life?

Is higher education the only way to access a high-earning career?

There are some high-earning vocations where college is non-negotiable, careers such as law, medicine, architecture. These are old industries, and higher education qualifications are built into the fabric of their career ladders, with years of expertise-building required before a person is deemed knowledgeable enough to make critical decisions.

But there are many high-earning careers where higher education isn’t essential. It’s cliche to say, but the world has changed a lot in a few decades. With that change comes new ways of working—and new ways for people entering the workforce to build skills and prove their hireability. 

We live in a digital age. The pace by which we’ve arrived in this age has taken society by surprise. The internet has created vast numbers of jobs that didn’t exist 30 years ago. In this new world, “makers”, primed with the drive to learn and do-it-themselves and with others, can thrive.

Notably, some of the top companies in the world are run by people who didn’t go to college. These people may be the exception rather than the rule, but the way they’ve driven digital industries forwards has opened the gates for others.

There’s a belief among many leaders in industries such as cybersecurity or web design that, though a degree in computer science can help, traditional qualifications aren’t really necessary. What is necessary are the “soft skills” that make someone an impactful worker. Can a person see a project through? Know how to keep learning? Innovate? Collaborate?

Importantly: Can they code? A person can learn to code in many ways in 2022. There are coding camps and free or affordable online courses, Raspberry Pi, YouTube channels and many online code-sharing resources, such as Stack Overflow and GitHub.

Resources such as Cyber Seek can even help students explore cybersecurity demand in their area, revealing local opportunities that could mean money saved instead of relocating. Cyber Seek also provides a run down of the certifications needed to follow pretty much any pathway in cybersecurity.

Universities are no longer the gatekeepers to the knowledge needed to access the modern, high-earning but non-traditional job market. Unless young people want to work in a career where a degree is essential, a bachelor degree is not by any means essential.

In fact, the study that showed that the more school a person takes, the more they earn on average also shows that “[A]t least one quarter of high school graduates earn more than an associate’s degree holder”, showing that there is a large area of overlap in income levels.

Lifetime earnings by education level show areas of overlap where many with a lower level of education earn more than their more highly educated peers. Source: The College Payoff report by the Georgetown University Center on Education and the Workforce.Lifetime earnings by education level show areas of overlap where many with a lower level of education earn more than their more highly educated peers. Source: The College Payoff report by the Georgetown University Center on Education and the Workforce.

Significantly, schools and State and Federal Governments have started to understand the importance of delivering these skills to students. But more on that later …

Is focusing on the financial and career prospects of higher education missing part of the appeal? What about the “college experience” we’re told so much about?

Is higher education the only way to gain the “college experience”?

For lots of young people, college means moving away from home, meeting new friends, learning to live independently. It’s a fresh start and a first step into adulthood and a career. Many people look back on college as “the best years of their life.”

Viewed alternatively, college is just “High School […] with binge drinking,” according to famed marketer Seth Godin (this is a not unfounded opinion either, as the National Institute on Alcohol Abuse and Alcoholism (NIAAA) in the US states that college students drink more than their non-college attending peers).

Nobody tells you that college is more important than ads for college do. Why? Because colleges are a business. 4 year colleges spend a lot of money on “student services”, which include things such as Freshers’ events, marketing and tutors.

Source: National Center for Education Statistics

And yet, higher education basically works the same as it always has. It’s mostly still listening to a professor in a lecture hall give a presentation. And yes, that can be an amazing experience (depending on the professor), but is it really justified by the ever-increasing price of tuition?

This method of learning also doesn’t work for many students. And, despite the money spent on providing “student services”, we still have that high student dropout rate. If students aren’t keeping up with their program, options are limited. There’s very little checking in with students. And while mentorship is available in the form of academic network building, only students with the drive and know-how to seek it out will benefit from it.

According to, the top 5 reasons students drop out are:

  1. Financial reasons

  2. Lack of preparedness to cope with academic demands

  3. Lack of personal discipline

  4. Unhappiness or dissatisfaction

  5. Personal reasons such as family responsibilities

Many of these problems have the same root cause: traditional education does not prepare young people for life after High School. 

So, while High Schoolers are told that they must go to college to succeed, they are not equipped with skills to thrive there if they do go, and have no guarantees of making it to graduation. If they do graduate, they potentially have decades of debt burdening their financial future, especially if their degree doesn’t naturally lead to a high-earning field. The same is true for those who don’t go to college: they have to navigate the working world without the experience necessary to thrive.

What can be done to give young people the skills they need to prepare for their career, and take control of their lives once they finish school?

Teaching young people how to take control of their career before college

Young people need a better understanding of their career choices and the skills needed to navigate either college or to take a vocational pathway, such as networking, mentorship, and collaboration.

There are learning frameworks available that are designed to help young people better prepare for the future. They exist outside of the school day—and, thankfully, School Districts are beginning to adopt them—and the Government is providing ample funding for schools to take advantage of.

These learning frameworks include:

  • Career and technical education (CTE): 

  • Work-based learning (WBL)

  • Problem-based learning (PBL)

All three approaches are designed to challenge students in a different way to traditional learning.

Career and technical education (CTE)

CTE courses are designed to help engage young people in vocational, higher-earning careers while still in secondary education (i.e., before they have to commit to college). CTE is encouraged from the top level of Government, with an entire division of the U.S. Department of Education, the Division of Academic and Technical Education (DATE), responsible for dispensing grants and offering resources to help School Districts run CTE programs.

Work-based learning (WBL)

WBL is about experiencing what it’s like to work in a particular field. Students are given the opportunity to work on the kinds of challenges they would face in the workplace. This not only offers a more hands-on approach to learning, it also lets students “test drive” that career before committing to further education. Does this work excite their interest? Is this a job they feel they would enjoy doing as a career? It’s also a great thing for employers to invest in: they can help train future candidates to help fill skills gaps.
Read more about why students need WBL here.

Work-based learning framework. Source: Perkins Collaborative Research Center

Problem-based learning (PBL)

PBL is about letting students solve real-world problems in groups, using collaboration, critical thinking and ingenuity to find solutions. In PBL frameworks, students are encouraged to present their findings to peers to showcase and communicate their understanding. 

Combined, CTE, WBL and PBL offer young people the opportunity to develop skills that will help them regardless of whether they go to higher education or seek vocational work out of High School. And, by offering students exposure to the type of work and problem solving involved in certain industries, High Schoolers can experience what work in those industries is like before committing to university.

Each framework is designed to help develop those “experiences” promised by college (minus the partying), with the addition of careful guidance from trained professionals. Meeting peers, critical thinking, developing communication, presentation and project skills are all part of the teaching. Programs are usually run in collaboration with companies, giving High Schoolers their first opportunity to develop a professional network and to seek the help of mentors, all under the caring encouragement of program teaching assistants.

This doesn’t mean that young people don’t need to go to college. It means they have the skills to navigate it when they arrive, if they choose to. And for those who don’t, they gain the “soft skills” that higher education offers without paying the price of entry.

So is student debt worth it? It’s complicated … but we should be prepping young people better

While we aren’t aware of any evidence that these learning frameworks change the likelihood of a student completing a bachelor degree or dropping out, making them better prepared for independent learning, problem solving, and a sense that they are in control of their career outcomes has to be a good thing. And research does show increased and lasting academic performance in elementary students exposed to PBL.

Perhaps through CTE, WBL and PBL, High Schoolers may even see a route to high-earning careers that don’t require higher education. This could enable young people to enter the job market earlier than graduates, and begin saving money without the burden of student debt and the worry of defaulting hanging over them. They could buy a house earlier, and have longer for their savings to compound. 

There’s no clear cut answer as to whether student debt is worth it—unless students drop out, in which case it definitely is not worth it. The pathway through higher education to being debt free is a murky one. But helping young people to be more informed of their career choices and financial outcomes, allowing some to enter high earning careers without a degree, and better preparing those who enroll in higher education with the skills to navigate it, can help us keep that level of student from reaching 2 trillion dollars, and keep more people out of the tragic cycle of debt defaulting.

No-one should be burdened by debt on the promise of a false future.

Learn more about pathways to high-earning careers