Getting A Degree?

How To Know Which Ones Can Pay Off And Which Ones Might Cost You

Is that associate’s degree worth it? A new study from The National Endowment for Financial Education (NEFE) and Ohio State University (OSU) shows maybe not, particularly if you’re borrowing to finance your way through.

The researchers took a look at the financial lives of a group of 30-year-old college grads — comparing how well two-year (or associate’s) degree holders were doing compared with four-year (or bachelor’s) degree holders. They found that those with associate’s degrees pay higher interest rates on their student loans, are more likely to default on those loans and tend to have more vehicle and credit card debt as well. What’s even more surprising? Those two year degree holders are potentially more vulnerable than people with no degree at all.

What’s going on here? People with associate’s degrees, typically community college students, have a different educational arc than kids who graduate high school and pack their bags for a four-year stint at a college or university. They’re often older. They commute. They work. And they pursue adult lives while they’re getting their education, which makes them, the researchers found, likelier to experience major life events, like marriage and child-bearing, around the same time they pursue an education. Those things get expensive and often result in stretching out the time it takes to get their degree. Indeed, only 39 percent of two-year students actually receive their degrees within six years of starting their education.

The other compounding factor is salaries. Mark Kantrowitz, the Publisher and VP of Research at explained that those who graduate with bachelor’s degrees typically have more debt, but they have the ability to attain higher-paying jobs, which is why they can more easily and more likely pay off their student loan debt.

So, is it still okay to go for that associate’s degree? Yes, say Kantrowitz and Rachel Dwyer, Ph.D and lead investigator in this study, but cautiously. Kantrowitz advises “shopping around” before deciding on where to pursue a degree. Community colleges often offer the same programs and degrees as universities, but for a smaller price. Next, see if there is a year-round program available so you can get your degree, and return to the workforce, as quickly as possible. (If you’re working while going to school, getting through in as few years as possible is the way to go.) And, if your field requires a certificate, make sure your program is preparing you to pass that test so you don’t have to spend time and money doing it yourself.

Come graduation day, your total debt should be lower than your incoming annual salary in order to pay your debt in 10-years, which, Kantrowitz says, is the ultimate goal. He warns to stay away from income-based repayment plans if at all possible. They’re attractive because you’ll be paying less monthly, but you’ll be in debt for much longer. “Borrow in moderation,” Kantrowitz advises, and ask your family if they have the means to help.

With Rebecca Cohen

Jean Chatzky

Jean Chatzky