When you’re thinking about whether to go to college, your future earning potential can have a big impact on your decision. While you’ve probably heard that a college degree can help you earn more over time, you may not realize how significant the difference can be.
Researchers at Georgetown University’s Center on Education and the Workforce found that bachelor’s degree holders earn 84% more than those with just a high school diploma, and a bachelor’s degree is worth a staggering $2.8 million over a lifetime.
But did you know that the type of school you attend can affect your income, too? Here’s what you can expect in terms of average salary by degree level and college type.
Average salary by degree level
While you may need to borrow money to pay for school, the investment can be well worth it. Research has consistently shown that earning postsecondary degrees results in higher incomes. To show you just how much your degree can pay off, we looked up the typical salaries for each degree level.
The National Center for Education Statistics’ report on the annual earnings of 25 to 34-year-olds who worked full-time listed the median salaries rather than the average. The organization used the median because outliers — meaning those who earn very high or very low incomes — can influence the mean, and the results wouldn’t reflect the typical values. Using the median rather than the average gives a more accurate depiction of expected salaries. This is the median income for the following degree levels:
- Less than high school completion: $27,900
- High school diploma: $34,900
- Some college, no degree: $36,300
- Associate’s degree: $40,000
- Bachelor’s degree: $54,700
- Master’s or higher degree: $65,000
Those who went to community college and got an associate’s degree earned 14% more than those with a high school diploma. But get a bachelor’s degree, and you earn 36% more than someone with an associate’s degree.
What salary to expect by school type
Not all degrees and schools are the same. Where you go to school can affect your earning potential as well.
Georgetown University’s Center on Education and the Workforce attempted to create a resource that would compare how degrees from different schools would pay off over the long-term. In its report, “A First Try at ROI: Ranking 4,500 Colleges”, the organization breaks down how much debt students take on relative to their earnings after graduating from public, non-profit, and private universities. The report looked at the median 10-year earnings of graduates, meaning the typical salary 10 years after getting their degrees:
- Public university: $33,000
- Private non-profit: $41,000
- Private for-profit: $25,000
Private non-profit schools had the highest 10-year earnings. However, these schools tend to have the highest total cost of attendance as well, so you need to keep in mind what financial aid is available to see if it’s an affordable option for you.
How to repay federal or private student loans
If you’re like most students, you’ll have to take out money to finance your education. Your student loan balance may even exceed your salary; the average student loan borrower has $29,650 in debt. If that’s the case for you, here are five ways to pay off your student loans faster
1. Sign up for automatic payments
Whether you have federal or private student loans, it’s a good idea to sign up for automatic payments. Not only does enrolling in autopay prevent you from missing payments, but most lenders offer an interest rate discount when you enroll in autopay. You could reduce your interest rate by 0.25%, allowing you to save hundreds during your repayment term.
2. Make extra payments
If possible, pay more than the minimum payment each month. Increasing your monthly payment by as little as $20 per month can help you save a significant amount of money over time, cutting down on the interest that accrues on your loan.
For example, let’s say you had $30,000 in student loans at 6% interest. With a 10-year term, your minimum payment would be $333 per month. If you increased your payment by $20 and paid $353 per month toward your loans, you’d pay off your loans nine months early. And you’d save $812 in interest charges.
3. Use your windfalls
If you receive any unexpected cash, such as a bonus from work or a tax refund from the IRS, use that money to pay down your debt. Since you weren’t counting on that money for your bills, it can make a big dent in your loan balance without hurting your lifestyle.
4. Tackle the highest-interest debt first
You’ll likely take out several loans to pay for school. When deciding which loans to focus on, make extra payments toward the loan with the highest interest rate first. By tackling the highest interest rate, you’ll save the most money over the life of your debt.
5. Refinance your debt
Student loan refinancing can be an incredibly effective strategy for managing your debt. When you refinance, you consolidate your loans by taking out a loan from a private lender. The new loan has a different interest rate than your old ones, with a new term and minimum monthly payment. With good credit and steady income, you may qualify for a lower interest rate and better term than you had before.
While there are some drawbacks to refinancing, especially if you have federal loans, there are many reasons to refinance your loans: you can save money, pay off your debt faster, and even reduce your monthly payment.
For example, if you had $30,000 in student loans at 6% interest and refinanced them, you could qualify for an eight-year loan at 4% interest. You’d have a slightly higher monthly payment, but you’d pay off your loans two years earlier. And you’d save $4,862 in interest charges.
|Original Loan||Refinanced Loan|
|Loan Term||10 Years||8 Years|
|Total Interest Paid||$9,967||$5,105|
If you think that refinancing sounds right for you, use Purefy’s Compare Rates tool to get quotes from top refinancing lenders without affecting your credit score.
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