Is College Still a Worthwhile Investment?

Given the economic downturn's legacy of student loan debt and joblessness, is college still a good investment for most U.S. students and their families?

The answer is both "yes" and "of course it is, what's wrong with you?"

Unless a student is either gifted enough to start a business at a young age or skilled enough in a trade to avoid a traditional college education, the overwhelming majority of both graduates and their parents say the investment is worthwhile. Though Bankrate.com found that only 73% of U.S. workers consider college to be a good investment, 88% of the youngest in that demographic -- ages 18 to 25 -- supports that sentiment. Nearly 90% of college graduates say their education was worth the cost, which is only surprising considering what they've paid in recent years.

"Making an investment in higher education can lead to greater opportunities with larger income potential," says Steve Pounds, Bankrate.com's personal finance analyst. "However, with the current tuition prices people need to mindful of the return on their investment and making sure they can manage any debt incurred."

As student loan and financial advice site Edvisors.com notes, last year the average student loan debt for a graduate who just received a bachelor's degree was $35,051. That debt was carried by 70.9% of all graduates. That's up from $12,759 two decades ago, when just 54% of all students graduated with debt.

According to the Federal Reserve Bank of New York, total student loan debt reached $1.26 trillion by the end of June. That's up $69 billion from a year earlier and is the second largest pile of U.S. consumer debt behind mortgage debt (at $8.36 trillion, up $246 billion from a year ago). More than one in ten (11.1%) student loans are past due. That's a worse delinquency rate than even that of credit card bills, of which 7.2% are past due.

As students have discovered, it's a lot easier to pay off that debt when you have a job. Though the Bureau of Labor Statistics puts the current unemployment rate at 4.9%, that jumps to 9% for people ages 20 to 24 -- or roughly the age of most recent college graduates. Only 70.7% of people that age are an active part of the workforce, compared to nearly 81% of those between 25 and 54.

Despite all of those post-recession obstacles, it's still more costly to forgo college than to get a degree and pay off your debts. According to a 2014 study by Pew Research Center, those who graduated with bachelor's degrees or better saw their unemployment rate drop to 2.5% compared to 4.4% for those with some college education or an associate's degree or 5.2% for high school graduates. More than 70% of those with bachelor's degrees or better are employed, compared to 54% to 64% of those without said degrees. Perhaps most importantly, the median annual income of college graduates ranged from $57,200 for those with a bachelor's degree to $85,228 for those with professional degrees. That's compared to $37,436 for high school graduates and roughly $40,000 for those with some college or an associate's degree.

It's the key reason why, as HSBC Group discovered, 60) of parents would be willing to go into debt to fund their child's college education. With 98% of U.S. parents looking to send their kids to college, costs are key. Roughly 60% percent of parents say that paying for their child's education makes it more difficult to keep up with other financial commitments, but they consider student loan debt than long-term savings (40%), credit card repayment (37%), and retirement savings (37%). As a result, U.S. parents spend an average of $14,678 a year to fund their child's college education, or almost double the global average of $7,631. Even at that, students are stuck paying 37% of college costs, second only to students in Canada (39%) and well more than their contemporaries in Egypt (less than 1%), India (1%), Hong Kong (4%) and Singapore (5%).

Unfortunately, that bootstrapping mentality has made generations of alumni hostile toward the idea of today's students having it easier than they did. Roughly 40% say a person with student debt should be required to make payments until it's paid off in full. The majority, however, support some form of leniency after a graduate has paid their debt for 10 years (35%), 15 years (9%), 20 years (5%) or 25 years (1%).

In fact, with the cost of college education rising and younger generations witnessing firsthand the effects of the debt involved, 62% of Americans say they support making college tuition free to anyone. Millennials (ages 18-34, 79%) are most supportive of offering free tuition for all, though a solid majority (64%) of Generation X supports that move as well. Unfortunately, 51% of Baby Boomers aren't on board with that plan and want to stick the younger generations with debt that they themselves never bore.

That said, they're not completely opposed to the idea. Among those against free tuition, a relatively small portion (26%) say they'd be O.K. with offering free tuition for families making $50,000 a year or less. Since it's an election year, we'll note that 81% of Democrats and 67% of Independents support free tuition, but just 33% of Republicans would go for it. For now, loans and that contribution from mom and dad are about the best support that someone considering college can get without scholarship money.

"The financial sacrifices that parents are willing to make to fund their children's education are proof of the unquestioning support they will give to help them achieve their ambitions," says Charlie Nunn, HSBC group's global head of wealth management. "However, parents need to make sure that this financial investment is not made to the detriment of their own future wellbeing."

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

More from Debt Management

The Best 3 Strategies for Millennials to Pay Off Outrageous Student Loans

The Best 3 Strategies for Millennials to Pay Off Outrageous Student Loans

To Easily Get Out of Credit Card Fees and Charges - Just Ask the Right Question

To Easily Get Out of Credit Card Fees and Charges - Just Ask the Right Question

How to Calculate Your Net Worth and Pin Down Your Financial Health

How to Calculate Your Net Worth and Pin Down Your Financial Health

Five Signs You're Getting a Raw Deal From Your Financial Adviser

Five Signs You're Getting a Raw Deal From Your Financial Adviser

How to Protect Yourself and Your Family From Long-Term Care Insurance Scams

How to Protect Yourself and Your Family From Long-Term Care Insurance Scams