Student loan debt balances have grown more than 200% over the past decade, and increasing numbers of borrowers carry student loans into their 30s and 40s. What’s more, avoiding such debt isn’t easy, with far more college students taking out student loans (69%) than not (31%).
Given the financial burden on students today, Student Loan Hero wondered if college was still worth the sky-high costs that often go with it. Does a college degree lead to a higher net worth, or is it possible that — at least in the near term — not going to college could spell better financial health?
To answer this question, we examined recent Federal Reserve data on net worth, financial assets, and debt repayment to compare trends among college graduates, those with some college, and those with only a high school education.
- College graduates younger than 35 have a higher median net worth ($20,980) than high school graduates or those with some college education in the same age group, despite having significantly more debt.
- Those with just a high school education have a higher net worth ($10,275) than those with some college education but no degree ($7,200).
- Over the past two decades, however, the median net worth of under-35 college graduates and those with some college have fallen by about 47%. Those with only high school educations fell by a more modest percentage (nearly 10%) over the same period.
- The median total debt level of under-35 college graduates has grown 57% since 1998, hitting $64,000 in 2016 up from $40,870 in 1998. Those with some college saw median debt levels grow by about 4.5%, to $19,180 from $18,369.
College graduates have higher net worth (despite the debt)
Net worth refers to the value of all your assets (including savings, investments and property), minus your liabilities (such as credit card debt or student loans). Since many college graduates take on a lot of debt for school, you might expect them to have lower net worth than their counterparts with no student loans.
But according to the results of our study, college degrees lead to greater net worth, despite the debt that often comes with them. We found that under-35 college graduates have a higher median net worth than high school graduates or those with some college education.
Specifically, the graduates in this group had a median net worth of $20,980, while high school graduates clocked a median net worth of $10,275, and those with some college education but no degree came in last, at $7,200. College degrees tend to lead to high-paying jobs, according to Labor Department data, which in turn could contribute to the higher net worth enjoyed by those with a degree.
But their net worth is lower than it’s been in decades
While a college degree appears to be an asset when it comes to building net worth, today’s graduates are lagging behind previous generations when it comes to wealth.
Specifically, the net worth of graduates under 35 is nearly $51,000 lower than the $71,943 median net worth of the same segment in 2001. In fact, over the past two decades, the median net worth of under-35 college graduates and some college educated households has fallen by 47%.
While those with a high school education or some college education have lower net worths than college graduates do, the decline hasn’t been so dramatic. For instance, the net worth of individuals with a high school education fell only 10% over the last 20 years.
Having student loans with no degree can hurt net worth
Although a college degree usually involves debt, it seems to pay off with a higher-income job and a stronger net worth. But the same cannot be said for individuals who attend some college but leave before earning their degree.
Those with some college education had a lower net worth ($7,200) than those who hadn’t attended college at all ($10,275). This difference might be due in no small part to student loan borrowing — racking up loans but lacking the prospect of a well-paying job to pay them off.
Leaving college without a degree may cause debt repayment problems
Not only did those who left college before graduating have the lowest rates of net worth, but they tended to show higher rates of delinquency on their debt. Looking at data between 1989 and 2016, this group tended to miss payments on their debt more frequently than the other two groups.
In 2016, for instance, 28% of those with some college education had missed a payment in the previous year, as compared to 20% of high school graduates and 10% of college graduates. Missing payments can lead to default, which in turn can damage credit, making it even harder to improve your financial health.
High school graduates have less debt but lower net worth
Although high school graduates tended to have a lower net worth than those who went to college, they also usually had better financial health when it came to debt. In 2016, the median debt for high school graduates was $9,900, while for college graduates, it was more than six times higher at $64,000.
This gap has grown over the past 20 years, with median total debt levels of under-35 college graduates growing 57% since 1998. Those with some college saw median debt levels grow by 4% to $19,180, and those with only high school educations actually had slightly lower median debt than they did two decades ago.
While total debt is only one piece of the puzzle when it comes to financial health, owing less can make it easier to meet your savings goals.
Is college worth it? The data still says yes
With both the cost of college and the rate of student loan borrowing at all-time highs, it’s natural to question whether higher education is worth the costs.
According to the data, this financial investment does appear to have solid returns in the form of higher net worth and a stronger likelihood of keeping up with debt repayment.
At the same time, those who aren’t sure about college should proceed with caution, as leaving school before you earn your degree appears to cause even greater harm to your finances than not going to college in the first place. If this describes you, look into ways to manage your debt and boost your financial health.
This might involve going back to school to finish your degree or consolidating debt to simplify repayment. If your credit is subpar, look for strategies to improve it fast. And if you have student loans from your time at school, remember there are some banks that will approve you for student loan refinancing, even if you didn’t graduate.
Whatever steps you can take to get up to date with debt and increase your earnings will help you in both the short and long term, regardless of your education level.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.36% APR (with Auto Pay) to 7.82% APR (with Auto Pay). Variable rate loan rates range from 2.41% APR (with Auto Pay) to 6.99% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for SoFi.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.45% effective May 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.41% – 6.99%1||Undergrad & Graduate|
|2.41% – 7.89%2||Undergrad & Graduate|
|2.43% – 6.65%3||Undergrad & Graduate|
|2.38% – 6.81%4||Undergrad & Graduate|
|2.41% – 8.19%5||Undergrad & Graduate|
|2.60% – 9.60%6||Undergrad & Graduate|