Is a College Degree Worth Student Debt?

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DES MOINES, Iowa -- On average, more than 70 percent of graduates are leaving college and entering the workforce in debt.

Americans collectively owe more than $1.3 trillion in student loan debt -- a figure that's growing at a rate of nearly $3,000 per second.

A four-year degree sets up most graduates for the future but it also comes with a heavy burden of student loan debt.

“It's a little daunting at first, but just the knowledge that if I do get my degree I will have a secure career in the future,” said Phil Copeland, a Drake University freshman.

Most students understand a degree comes with a big bill, but is it worth the price tag?

“While it's sometimes hard to rationalize in the moment, it's a process. Everyone knows college is a process. So from the admissions perspective, you go the four years to get the degree, you get the degree to get to the job to get to those mid-career earnings,” said Kevin Maisto, a senior at Drake University.

The average debt for Iowa graduates is more than $29,000, which slightly higher than the national average. But an Iowa degree may have more value than in other states.

“At Drake, it's absolutely worth it. We can point to a lot of outside validation that the Drake education has value,” said Tom Delahunt, vice president of admissions and student financial planning at Drake University.

Delahunt has the numbers to back it up, and Iowa's state schools are not far behind.

According to the U.S. Department of Education, Drake University, the University of Iowa and Iowa State rank in the top four schools in the state with a big return on investment.

Eighty-percent of Drake grads earn more than those with a high school diploma with an average salary of around $55,0000. That's $20,000 more than the national average.

Iowa, Iowa State and the University of Northern Iowa all have above average numbers as well, with 76 percent of grads seeing a bigger paycheck post grad than if they skipped the degree.

“I think definitely it will be worth it. I know by the time I’m 30, the degree will have more than paid for itself,” Copeland said.

The cost of college is rising, about 5 percent each year, so being prepared is the first step according to Edward Jones financial planner Mike Shields.

“I'm seeing an increase in college debt amongst my friends, peers and amongst people I sit across the table with too," he said.

Shields says more than half of Americans don't know about 529 plans, but it's the best way to save for college.

“You can invest the money, you can get growth on your money that's going to keep up with inflation and keep up with rising college costs, and the growth is going to be tax-free if  you use it for college. And third, you get a state tax deduction for putting money in there.”

Shields says having a plan to pay back your student loan debt is also important. He recommends not living above your means, avoid deferring your loans and trying to pay a little bit extra each month.

“Even though costs have increased so much and debt is getting higher and higher, I would still say that going to college is worth it,” Shields said.

Experts and students agree. Doing your homework early will make an investment in higher education worth every penny.

“I absolutely think we have a more informed group of students who understand the burden that they're taking on and know it's going to set them up for life-long success,” Maisto said.

Difference between a high school diploma and a college degree over a lifetime

In our calculations, we used the average starting salary for a Drake University grad, the average starting salary for an ISU journalism grad and a high school grad starting out at $10 an hour.

We also made a few assumptions that a college degree costs $60,000 (half of which is paid for with a student loan) and that each grad would pay $17,000 in interest over the course of that loan.

We also assumed all three examples earned a 3-percent raise every year.

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After the first four years, the high school grad has earned a total of $87,000, while the college grads are $77,000 in debt when you add in the loan interest.

The Drake grad with an average starting salary finally catches up to the high school grad after five years of working, but it takes 20-years for the journalism grad.

Over a 40-year career, the Drake grad earns $1.8 million more than the high school grad. The journalism grad earns just $220,000 more.

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The numbers show how important it is to pick a degree with a high-paying potential.

According to 2015 report by Payscale, the highest paying majors with a Bachelor's degree include engineering and mathematics.