Although a college education might open doors to rewarding careers, it may be out of reach financially for certain individuals. Over the course of the 2019-2020 school year, out-of-state students at four-year public institutions will spend an average of $38,330 for tuition, fees, lodging, and board. The average cost of undergraduate education at a private nonprofit institution was $49,870.
Increases in college tuition have been linked to a rise in the number of students who decide not to continue their education. College Atlas reports that 70% of Americans will enroll in a four-year institution of higher learning, but only 66% will earn a diploma, and 30% of freshmen will not make it through the academic year. According to a poll by LendEDU, over 55% of students had trouble locating the funds necessary to pay for education, and 51% dropped out of school due to financial concerns.
College dropout rates may be much higher for students who are the first in their families to attend college. Most first-generation college students from low-income backgrounds do not graduate. Leaving school early can have devastating effects on a student's bank account, both immediately and in the future.
The Impact on Earning Potential
Whether or not you pursue further education can play a major role in deciding the kind of work you do. Education beyond high school is typically required for better-paying jobs. One important cost of being a college dropout is that they may be forced into lower-paying positions without having higher education.
The average annual salary for a high school dropout is $21,000 less than that of a college graduate. According to the Economic Policy Institute, the median hourly wage for a worker in 2019 was $34.63, while the median hourly wage for a worker with a graduate degree was $45.07, both figures being estimates. The average hourly pay for employees with some college degree was $20.97. Those are significant gaps that, over the course of working life, can amount to a lot of extra cash.
Think about the following fictitious examples of Jack and Jill: Jack started off making $41.58 an hour after completing his bachelor's and master's degrees. Jack earns $83,160 annually based on a 40-hour work week and two weeks of vacation. This is before deductions for things like taxes, health insurance, and retirement savings. Without including pay increases, he has made little over $3.3 million throughout his 40-year career.
After two years of university, Jill decided to leave and start a profession where she would earn $19.41 an hour. Using the same 50-week yearly calculation, Jill would earn $38,820 before tax, coverage, and retirement, whereas Jack would earn $54,340. If she worked for 40 years, she would make little more than $1.5 million.
When your salary is lower, it might be more difficult to save for important life events like emergencies, retirement, or the education of your own children. Dropping out of school with financial obligations is an additional obstacle.
College Dropouts Find It Difficult to Avoid Student Loans
Taking out debts to pay for education is never a good option, and dropping out of school while still saddled with loan payments may be devastating. LendEDU reports that the typical college dropout owes $13,929 in student loans. In addition, 53 percent are not making any payments at all, and 46.5 percent of dropout borrowers are already in default.
Two main problems might arise from dropping out and being unable to keep up with student loan payments:
- The addition of interest and late fees
- Negatively affects one's credit
The principal amount of a student loan may increase over time due to interest and late fines. A former college dropout student may find that paying down their student loans is a more difficult task than they had imagined.
Both federal and private student loan defaults can have a negative impact on a borrower's credit score because of negative credit reporting. Your FICO credit score is largely based on your payment history, so if you default on your student loans, it might have a severe effect on your score.
You may have a harder time being accepted for large purchases or loans if your credit score is lower. It's possible that even if you do get accepted, you'll be charged a significantly greater interest rate than you might have been offered if your credit were better. 8 Over time, the added interest might make borrowing quite costly.
Stay Out of the Dropout Rate
If you can avoid dropping out of school due to financial concerns, do so. Think long and hard about whether or not the money spent on college is worth it compared to the money you could make right out of high school. Here are some suggestions that may encourage you to keep studying and save you from the cost of being a college dropout.
Think carefully about the kind of degree you wish to pursue:
Determine in advance the classes you'll need to attend and set a manageable schedule for you.
Don't take on more debt than you need to, and stick to a strict budget:
Find strategies to lessen the burden of paying for colleges, such as work-study programs, scholarships, grants, and part-time employment.
Time management and setting limits:
You should prioritize your education above all else, but remember to leave room in your schedule for socializing.
Form a network of helpful people, including family, classmates, and teachers:
When you're feeling like giving up, having individuals around you who can offer encouragement and guidance might help you keep going.
If you feel like you need a break, you should take one:
It may help to take a semester off or take fewer classes to relieve some stress. However, if your enrollment drops below half-time, you may no longer be eligible for federal financial aid.
