Despite issues with debt, Millennials see career value of continuing education.
The debate is hot these days as to whether the high price tag of a college degree is worth the debt that students often take on. In fact, a Wall Street Journal article released earlier this year reported that the Class of 2015 can look forward to paying back an average student loan bill of over $35,000.
However, in spite of the immense burden this amount of debt can present to a young professional right out of school, a data study by the credit monitoring experts at Credit Sesame reveals Millennials overwhelmingly still believe that investing in higher education is worth the cost and potential life delays that can result from taking on so much debt.
According to Credit Sesame’s survey results 71 percent of Millennials believe college is worth its price tag; that’s higher than the 68 percent of Gen Xers who responded positively to the same question. That’s even more interesting, given that 25 percent of Millennials attended a school where the tuition was $25,000 or higher, as opposed to just 6 percent of Gen X college grads.
Finding a more practical path forward
Due to the high cost of their education, Millennials seem to be focusing on practical degrees that will deliver the entry level income they need to be successful. One in three (33 percent) Millennials list income potential as a key factor when selecting a major. As a result, Millennials are in corporate fields like accounting, finance and business administration, as well as high-paying STEM careers, such as mechanical engineering and computer science. Liberal Arts majors like history, humanities and philosophy are becoming increasingly less popular.
Additionally, Millennials seem to be taking a practical approach to their path to a higher education. So while one in four are footing tuition bills over $25,000, on the other end of the spectrum 27 percent of Millennials have found schooling with tuition costs of less than $10,000 per year. However, this is getting more difficult to do as tuition costs increase each year. When Gen X was attending school, over half were able to find education for less than $10,000 per year.
Millennials are also relying more heavily on support from parents. Luckily parents of Millennials are often in a better situation to provide that support versus Gen X parents. Roughly 10 percent of Millennial parents make over $150,000 per year and 25 percent make over $110,000 per year – that’s compared to 3 percent and 4 percent of Gen X families in the same brackets, respectively.
Facing the financial burden with optimism
While student loan debt can create a significant financial burden – particularly on entry level incomes even in high-paying fields – Millennials show optimism about their ability to eliminate the debt so they can move forward in their lives. In fact, one in five (20 percent) believe graduating from college has been beneficial for their credit scores.
On the other hand, one third aren’t sure how their credit scores are impacted by student debt. This lack of understanding needs to be cleared up if Millennials want to ensure they’re not behind the eight ball when it comes to their ability to achieve a high credit score.
“Although credit scores don’t have an impact on your ability to qualify for federal student loans, those loans can have an impact on your credit score when you start to pay them off,” explains Gary Herman, President of Consolidated Credit. “Defaulting on student loan payments can cause significant damage to a person’s credit score. On the other hand, if the loans are repaid correctly, then eliminating student loan debt can be a great step in achieving a good credit score.”
Herman encourages young borrowers to make a plan to repay their student loans that works for the budget they have – even if the situation is tough with limited entry-level income.
“If you can’t afford to make the payments on your loans comfortably within your budget, then look into options for federal student loan consolidation. These programs often lower your payments simply by consolidating the debt and extending the time you have to pay it back without penalties or default. It makes student debt easier to manage, especially if you’re just starting out in your career.”
Additionally, Claire Tak from Credit Sesame encourages young borrowers to consider credit monitoring services as they work to achieve the good credit they will need to be successful over the next few years.
“The biggest advantage of credit monitoring is that you always stay on top of your score and can learn what factors affect your credit and how,” says Tak. “Young borrowers don’t have as high of a credit ‘mix’ as older borrowers (with a house, car, etc.), so it’s crucial for them to monitor their credit and learn how timely payments to their student loans, and other credit related moves affect their score.”