With US $867 billion in US student debt outstanding, students may well wonder whether it’s worth investing in a college education.
According to a recent analysis from the Federal Reserve Bank of Kansas City, the median US borrower with student debt owed a bit less than $14,000 at the end of the first quarter of 2012. (The average borrower—skewed by a relatively small number of borrowers with huge debt loads—was more than $24,000.)
Plenty of US college graduates have felt burned in recent years as the unemployment rate for recent grads has skyrocketed. The good news is that’s changing. Moody’s Investors Services churned out this chart recently showing the downward trend in unemployment among just-minted college grads—which closely follows unemployment overall.
Moody’s tracks such rates because, for investors in securities backed by student loans, high joblessness is a key risk: More unemployed graduates = higher rates of default on the loans. And Moody’s analysts note that the 7.7% unemployment rate among recent grads at the end of 2012 was still much higher than the 5-6% rate that prevailed prior to the recession.
At any rate, recent US college grads would do well to keep in mind that their investment in education, like any long-term investment, can’t be judged on the first few years of returns. The evidence is pretty conclusive that college degrees lead to much better employment outcomes. In January the unemployment rate for college graduates of all ages in the US was 3.7%, compared to 8.1% for people who only finished high school.