Best Investment? A Post-Secondary Education
In today’s volatile and uncertain global economy, a college education is more important than ever for securing a successful financial future. Despite the high cost of tuition and other associated expenses, the returns on the investment in a post-secondary education or college degree are still significant.
To illustrate, we can compare the median income for US employees with a bachelor’s degree, which is more than $50,000 USD, versus the median income for US employees with only a high school diploma, at just $30,000 USD.
Achieving higher levels of income is just one reason to invest in a college or any post-secondary education. Other reasons include greater employment opportunities, lower rates of unemployment and a greater chance for employment stability. It should come as no surprise, then, that North Americans with a post-secondary degree tend to have more savings and a higher net worth when compared to those without a post-secondary education.
Importance of Investing in College Education
All of these factors underscore the importance of investing in a college education. While the cost of college can be daunting, the long-term benefits are well worth the investment. So if you’re considering furthering your education, be sure to factor in the potential financial returns. Because in the end, a college degree is one of the smartest investments you can make.
Why You Should Borrow to Invest in College Education
It’s no secret that a college education is an investment – one that can be worth millions of dollars over the course of a lifetime. But paying for college tuition and other associated costs can be a daunting task, especially when faced with mounting student loan debt.
Here are four reasons why you should borrow to invest in your post-secondary education:
1. It’s an investment in your future.
A college degree is one of the best investments you can make in your future. According to data from the National Association of Colleges and Employers, the median starting salary for a college graduate is $50,000 USD, compared to just $32,000 USD for someone with only a high school diploma.
2. You’ll earn more money over your lifetime.
In addition to a higher starting salary, college graduates also tend to earn more money over the course of their careers. A recent study by the Georgetown University Center on Education and the Workforce found that the average college graduate earns $1 million USD more than someone with just a high school diploma.
3. You’ll be more likely to find a job.
Not only do college graduates earn more money, but they are also more likely to find a job. A recent report by the Bureau of Labor Statistics found that the unemployment rate for college graduates was just 2.5%, compared to 5.6% for those with only a high school diploma.
4. You’ll have more job opportunities.
In addition to finding a job more easily, college graduates also have more job opportunities. A study by the Pew Research Center found that over the course of their careers, college graduates are more likely to move up the ranks and hold positions of greater responsibility.
Although borrowing money to invest in your college education can be a wise decision, it’s important to remember that you need to be responsible with your loans. Make sure to research your options and choose a loan that fits your needs and budget. And be sure to stick to a repayment plan that you can afford.
With careful planning, borrowing money to invest in your college education can be a smart decision that will pay off for years to come.
How to Afford a Post-Secondary Education
Despite the importance of completing a college degree, many are reluctant to invest in post-secondary education. The main reason is the high cost of tuition—particularly for ivy-league or high-demand universities and colleges.
The good news is there are various strategies to help you in your decision to invest in a college education. Here are five strategies.
#1: Apply for Scholarships
One of the easiest ways to fund your post-secondary education is to apply for scholarships.
According to data collected by Education Data Initiative, scholarships and grants typically cover $7,500 USD of post-secondary costs per student, per year.
The key to using scholarships and bursaries to help fund your education is to start researching and applying for these financial awards early.
One good reason to start researching and applying for scholarships early is that some awards require work to apply. For instance, long essay scholarships will require applicants to submit a 500-word (or more) essay. Given the stress of finishing high school and applying for college or university, this requirement will often narrow the list of applicants—and increase your chances of being funded.
Another good strategy is to apply for many scholarships and awards in the sub-$1,000 categories. While many students will fight to win the lucrative Rhodes Scholarship or the Gates Cambridge Scholarship, far fewer compete for the $500 bursary from the local credit union or the regional Realtor’s association. You should. While many of the most popular financial scholarships will attract intense competition, many of the smaller or more regional or specific awards may get few (if any) applicants. Apply for 10 scholarships with an award amount of $500 and before you know it you could have $5,000 to put towards your university costs.
#2: Use Tax-Advantaged Education Savings Funds, such as an RESP
The Registered Education Savings Plan is a tax-advantaged account that allows the parents of a child to set aside money for the child’s post-secondary education. While contributions do not trigger tax savings, the funds can be withdrawn from the RESP to help pay for any education-related costs associated with full-time or part-time studies at a qualifying post-secondary institution.
When the funds are withdrawn, they are attributed to the child attending college or university and taxed at their (presumably) lower tax rate.
The best part is that money contributed to the RESP triggers grants and bursaries from federal and provincial governments, which helps boost the amount saved in the education fund.
#3: Apply for Student Loans
According to data collected by Education Data Initiative, 84% of students use financial aid to pay for their college education.
Student loans are a relatively cost-effective way to pay for the costs of post-secondary education. Depending on where you live and the type of lender that provides the student loan, you can also benefit from tax savings.
For instance, interest isn’t charged or collected on Canadian federal government student loans until six months after the student graduates from the university program. Plus, any interest paid by the graduating student can be used as a tax deduction to offset earned income. The idea is the student loan was an investment in higher education—and, in Canada, taxpayers can deduct interest paid on investment loans.
Keep in mind, that not all student loans work this way. Student loans from banks will typically start collecting interest as soon as the loan money is provided to the student, but students can keep the debt from adding up by making interest-only payments on the loan during their school years. Also, interest paid on bank and credit union student loans cannot be used as a tax deduction.
To be sure of the pros and cons of any student financing be sure to talk to your college or university’s student services department and read all documentation regarding the loan before signing any documents.
#4: Work Part-Time & Start to Save Early
Working part-time just before and while attending college is a great way to help pay for a college education. A part-time job during the school year and over the summer can help generate a few extra thousand each year—and dramatically cut down on the overall debt required by the student to pay for a college education.
#5: Parents Can Lend a Hand
Parents end up providing the lion’s share of college funds. According to Education Data Initiative, parent contributions work out to just over $11,860 USD per year.
While many parents will help their child pay for post-secondary schooling using an RESP, still others may end up helping with allowances, no-interest loans and gifts.
Final Thoughts
Though the cost of a college education is high, the investment is worth it. A college degree provides access to better-paying jobs, and those with a college degree earn more, on average than those without. A college degree is also an important investment in one’s future, as it can lead to a higher earning potential and a more secure financial future.
