What is a College Degree Worth to a 45 year old Woman?

02 Jul What is a College Degree Worth to a 45 year old Woman?

A college degree may not be worth the cost of obtaining it for some students. College Recruiters selling the value of education aren’t telling the whole story. Despite decades of lip-service to affirmative action, earnings of college educated women remain a discouraging 61% of those of their male counterparts.

The reasons are complex, but most are beyond individual control. For women obtaining degrees later in life, this too often translates into worsened financial circumstances lasting for the entire remainder of their working lives, and an absolute inability to repay student loans.

You’ve no doubt seen the figures on sites such as this one, or on colorful posters displayed in College Admission Offices. According to a clever graph on the above mentioned website, 2004 US census statistics show the average annual earnings of high school graduates to be $28,645 and of those with a bachelor’s degree to be $51,554.

From this, the education industry arrives at a figure of something on the order of a million dollars for the lifetime value of a bachelor’s degree. That figure assumes that income increases or decreases over the lifetime of a worker in decades to come will closely resemble those of previous decades, and that a graduate has 40-plus years of working life ahead.

It also assumes that the worker is a white male. For women, the median income figures for 2004 are $30,741 and $15,519 respectively, or $608,000 over a 40-year working life, given the same assumptions. The historical figures for the wage differential for female college graduates (55.2% in 1985, 61.7% in 2004) do not suggest that relative earning power is increasing rapidly enough to make a significant difference in the future.

Women with advanced and professional degrees actually lost ground in the same period. It is also worth considering that a median-income high school graduate with dependents would qualify for poverty-program subsidies. Loss of eligibility at the higher income level dilutes the positive benefits of education.

What about a woman who is 45 at the time she obtains her degree? The same reasoning produces a lifetime value for the degree of $304,000. Is it realistic for a person in this position to borrow for an education, and if so, how much?

At first glance, it would not seem absurd to invest $100,000 to obtain a return of $304,000, though if one reflects that the cost of borrowing that money more than doubles the final cost, the numbers don’t look quite so attractive. Another very important variable, however, is whether the loan can be repaid at all.

$30,741 in annual salary translates into about $2000/month take home pay for a single person when all mandatory deductions have been subtracted, and only slightly more for a person with one dependent.

To repay $100,000 in student loans over 20 years, assuming no defaults or periods of deferment, would require payments of over $800/month. If she were eligible for a Federally-financed Income-Contingent repayment plan, the payment amount would be $347/month, and the amount owed would increase due to accumulated interest. If total indebtedness were $40,000, the ICRP amount would be $229.83; if $20,000, $139. The $152 monthly payment needed to fully amortize a $20,000 loan over 20 years is probably close to the maximum a frugal person making 60% of the national median income for a family of two can afford.

This is a fraction of the cost of obtaining a four year degree at a public institution. Unless a financial aid package includes grants to make up the difference, an older woman going back to school renders herself vulnerable to decades of bare bones living and financial stress and undermines any hope of a comfortable retirement.

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I was admitted to practice in 1978. I am certified as a Consumer Bankruptcy Specialist by the American Board of Certification. I regularly speak on tax and bankruptcy issues at state, regional and national conferences. Years of experience in practice before the Internal Revenue Service and Oregon Department of Revenue have given me the background to resolve a large variety of consumer tax issues.

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