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Yamonte Cooper

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Is Education Loan Debt Really a Return on Investment (ROI)?

for-proft-collegesOnce again it is the time of year when graduates across the country proudly don their caps and gowns and march across the stage to pomp and circumstance to receive their hard earned degrees. These degrees are then followed up by the first student loan bills, which will require hard earned cash to pay back. Upon seeing the real amount of debt that was accumulated during their studies, this is also the time when the question of return on investment (ROI) begins to materialize for many students.

We do hear the stories about those who are promoted, given a significant pay raise, or hired into a highly influential (and paying) position due to their advanced degree. However, is this really the norm, as we often do not hear from those who were not able to take advantage or easily find such opportunities? Are those silent individuals hiding out in shame or guilt due to their student loan debt?

In our research on how graduate students make decisions about incurring student loan debt, ROI emerged as one of the prevalent themes. Participants viewed obtaining their graduate degree as a necessary process in their professional mobility. In addition, it appeared that the participants felt that the only option for advancement or to change a career was to enroll in graduate school and the result of incurring student loan debt would be worth their investment.

Breaking down the topics of career mobility, networking, and institutional prestige helped us to further define ROI for graduate students as not only a monetary but also a personal value. In the process of outlining these topics, we were able to begin to establish the foundation to accurately assess if graduate students are in fact making fully-informed decisions for a guaranteed return or are they taking a gamble?

  • Career Mobility was a significant motivating factor for master’s degree students. Ninety-eight percent of the research participants indicated career mobility as an explanation for pursuing a graduate degree. Further, career mobility played an integral role in the decision of students to pursue a graduate degree. Participant after participant described how important their graduate degree was to their ability to be promoted and/or provide professional opportunities. Seventy-four percent of the participants were incurring debt to fund their graduate degree program. Career mobility was an important factor that influenced students’ willingness to take student loans. In addition, their responses indicated their belief that their graduate degree would provide them with the necessary tools to be promoted.
  • Networking also played a role in the decision-making process of students, as they weighed the immediate and long-term opportunities that the university’s network would provide. Approximately 25% of participants spoke of future outcomes that would result from networking at their university. Students had positive perceptions of networks and equated them with future earning potential, personal contacts leading to education camaraderie, future employment, and professional mentorship. Students believed that networking opportunities enhanced their educational experiences and future possibilities. In addition, students shared their expectations and knowledge about the university’s network and described the potential outcomes that would result from the student’s affiliation with the university.
  • Institutional Prestige or an institution of higher education’s reputation was also instrumental in the decision-making process of graduate students. Thirty-four percent of all respondents identified institutional prestige as a factor in their decision-making process with institutional prestige being a more significant factor in decision-making for 46% of private school students compared to only 6% of public school students. Cost effectiveness and proximity to their current residence were more likely to be mentioned by students at public institutions as a priority rather than institutional prestige.

Delving a little deeper we found that institutional prestige is subjective and dynamic. The respondents discussed it within various contexts, such as the previously mentioned topics of career mobility and networking. The school’s impressiveness to others, rankings, and program specific factors were also mentioned as standards of institutional prestige.

Fifty percent of the respondents, who all were enrolled at the same private institution, spoke of institutional prestige in relation to its impressiveness to others (i.e., how others would perceive them). The respondents from the public universities did not mention this variable.

Correspondingly, when searching for the “best” programs, students said they often turn to national rankings to guide their decision-making. Thirty-nine percent of students who spoke of institutional prestige stated that their school’s rank played a role in their decision-making. These students believed that attending a high-ranking school would pay off in the future justifying the price tag of the school.

The overall question as to whether student loan debt really provides a ROI needs to be further studied.

Our research did connect the ROI of graduate loan debt to the perceptions of career mobility, networking opportunities, and institutional prestige. However, these could be constructs promoted by higher learning institutions and employers as the participants did not mention or provide a guarantee by their educational institution that the master’s degree they obtain will provide career opportunities or advancement.

Thus far, the conclusion can only be drawn that the student’s decisions to take on debt are based on their individual perceptions of ROI but not a guaranteed ROI. Perhaps a follow-up study on the participating students in fives years would be able to shed a more accurate light on these perceptions.

About the author

Yamonte Cooper is a career and academic counselor with over 16 years experience in counseling and teaching; he was  recently honored with a Fulbright Scholarship in Germany. He received a Doctor of Education (Ed.D.) degree from USC.

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