Working Class Economist: The Underwater Degree

This feature could just as easily be on Now What? but today I want to cover Underwater Degrees. Most of you may have heard the term “Underwater Mortgage” used to describe houses that are in more mortgage debt than they will ever be worth. I’ve coined the phrase Underwater Degrees to refer to degrees that might cost you more to get than they can ever repay you in earnings.

The general idea that a four year college degree drastically increases your earnings was true about forty or fifty years ago, but today a bachelor’s degree is what a high school diploma might have been in the 60’s. It just makes you competitive for a job that might pay 35 to 50 grand a year, but it won’t guarantee you that. Certain degrees might actually cost you MORE to earn (if you’re borrowing the money) than they can hope to repay. I’ll just pick one low paying major, social work, and show you the math from there.

Let’s say your parents put aside little to no money for you to go to college but you decide—through student loans, credit cards, and Pell grants—to go anyway. Over the course of four to six years you are bled dry from tuition, text books, room and board, and the roughly 1500 little costs you can’t foresee when you start (from the 18 dozen associated with a car to the other 18 dozen associated with not having a car). I have known some to rack up as much as a hundred grand in debt BEFORE they graduate or go to grad school, where I have known some to rack up a quarter million in cumulative debt before finally becoming a doctor or lawyer.

The conventional wisdom college students have had in the past is that whatever debt they have will be insignificant over the long haul because of all that totally bitchin’ cash a new college grad is going to be showered with. The conventional wisdom will have you eating Ramon Noodles long after graduation. You’ll be looking at a degree hanging on a wall wondering where it all went wrong, your walk across the stage the financial equivalent of a death row march.

As this week’s Now What? points out times are tough for recent college grads, who might not even be aware of it while in the cozy bubble of college life. You cannot take for granted that you will get a job right out of the gate in an economic time when so many aren’t able to get them. Even supposedly “hot” majors like education or anything dealing in government work are experiencing a cold front due to proration and other cutbacks from state sectors on the brink of bankruptcy. At a time when they’re trying to keep tenured teachers from losing their jobs, the last thing they want to do is hire new ones.

One person’s answer I’ve talked about this problem with is to “Stay in college longer” which, let’s be honest, they were probably going to do anyway. Of course, 7 years of debt is even worse than 4 so I’m not sure how this is a much of a solution. The real solution is to not rack up such massive debt in the first place or ANY debt if you can absolutely avoid it. Even a student debt of 15,000 can take a looong time to pay off for a Communications major making 25 to 30 grand a year.