Challenges of a Career Student
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The following is a contribution from Syed at Broke Professional. If you would like to contribute to Frugal Rules, please contact us.
It’s no surprise that student loan debt is rising across the country. The total level of student loan debt in America recently topped $1 trillion and recent figures show that the average student loan debt for seniors completing their undergraduate degree is $29,400. But the debt doesn’t stop there for those pursuing a Master’s degree or beyond.
Sad to say, I will be doing a hearty jig when my student loan debt reaches $29,400. Though I’m blessed that my career as an optometrist easily allows me to take care of my student loan payments and then some, not everyone can say the same.
Scary Statistics for a Career Student
A recent report published by USA Today says that about 40% of the $1 trillion in student loan debt comes from financed masters and professional degrees. The same report also says that the average student loan debt for graduate students is $57,600. I can say from my own experience that many of my classmates in Optometry School had student loan debt well into the $200,000’s.
Students pursuing a graduate school program take on a big financial risk in taking out student loans for grad school, especially if they are going into a field without high income potential. That’s because most graduate school programs don’t have the state and federal support of favorable grants and loans that undergraduate programs have.
They make obtaining federal financial assistance incredibly easy, as all students have to do is visit their school’s admissions office and fill out a Free Application for Federal Student Aid form. Students will then wait for their award amount to be determined by the government. This form ensures that students receive the maximum amount of financial assistance for which they are eligible and this amount often includes scholarships and grants. Obviously, students have to come up with some method of paying for their schooling and this federal financial assistance program is the easiest way to receive funding.
There are rarely “full ride” scholarships given to those in graduate or professional school programs. And tuition for graduate programs is simply higher than undergraduate programs. Students really have to look at the risk and reward for pursing more education.
The Problem of Time When it Comes to Student Loans
While student loan debt is a huge problem facing graduate students, it’s not the only one. Another problem is time. Let’s take the example of a law school graduate. He completes his undergraduate program four years after high school at the age of 22. He would like to apply to law school but having some experience in the field or a Master’s degree really helps your chances so he decides to pursue a Master’s degree and complete an internship at a law firm which takes three years.
He then applies to law school and is accepted at the age of 25. He completes law school in three years but it takes some time to complete his licensing exams and find a great job, which after many interviews with different firms, he finally does at the age of 30. The problem is that while he’s been pursuing the education he needs to achieve his career goals, his student loans have been accruing interest for eight years.
While many of his peers are well into their careers, he is just starting his and is saddled with lots of student loan debt (student debt from a good law school tallies up to around $150,000). While people won’t shed many tears for lawyers, time is not on their side. Compound interest is a powerful thing, and it has been working AGAINST our lawyer all this time in the form of student loan interest accrual on top of the fact that he hasn’t been able to invest money and have compound interest work for him.
A successful lawyer or doctor will be able to shift the numbers in their favor after some time, but it’s not easy. It will take a combination of smart investing and being diligent in paying back those student loans (which is what I’m currently doing).
Success Comes Down to Making Hard Choices
That’s why students need to think long and hard about pursuing a professional degree. The cost of an advanced degree demands that students and professionals alike think deeply, rationally and strategically about whether more education is a wise investment. If you can’t see a good probability of earning enough to make back all the interest, loan amount, time and lost investing opportunity, additional education, at least from a university, might not be the best option for you.
Try to think about your education decision in those terms and do a risk/rewards analysis to determine if pursuing more education is worth the time and money it will cost you. Realize you can be successful without a college degree. After all, just look at Bill Gates. He’s anything but a career student. In fact, he’s a Harvard drop out.
What’s your opinion on higher education? Have you thought about going back for an advanced degree? Have you weighed the costs? Is it worth it? If so, why? If not, why not?
Syed is an optometrist who runs a personal finance blog over at TheBrokeProfessional.com. He enjoys writing about many financial topics such as student loans, credit cards and planning for retirement. He focuses on helping new grads navigate the world of personal finance. He has a beautiful wife and a son who he hopes won’t end up with 7 figures of student loan debt. He is also a die-hard New York Giants and Knicks fan.
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