Tuesday, September 28, 2010

College and Debt.

Here is a post that I shelved a while back:

Go over to Pink-Sheets to see a great blog post. Unfortunately, the posts are generally few and far between, enough so to make me look like a regular blogger. ;P Fortunatly, his write ups there are always incredibly insightful (add it to your reader!). This particular post, stands out to me, as I graduated from college in the past few years.

In the article, the issue of a new bubble forming is addressed. It is noted that inflation is going to come, rearing it's ugly head someplace, and that it is just a matter of time before we figure it out. The part that is most compelling, is where he talks of this guy named Glenn Reynolds, who wrote a piece on how higher education in the country is in a bubble. And how that is where a lot of inflation has occurred.

Here are some snippets:
A New York Times profile last week described Courtney Munna, a 26-year-old graduate of New York University with nearly $100,000 in student loan debt -- debt that her degree in Religious and Women's Studies did not equip her to repay. Payments on the debt are about $700 per month, equivalent to a respectable house payment, and a major bite on her monthly income of $2,300 as a photographer's assistant earning an hourly wage.
And, unlike a bad mortgage on an underwater house, Munna can't simply walk away from her student loans, which cannot be expunged in a bankruptcy. She's stuck in a financial trap.
First, it may actually make them more economically productive by teaching them skills valued in the workplace: Computer programming, nursing or engineering, say. (Religious and women's studies, not so much.)
Second, it may provide a credential that employers want, not because it represents actual skills, but because it's a weeding tool that doesn't produce civil-rights suits as, say, IQ tests might. A four-year college degree, even if its holder acquired no actual skills, at least indicates some ability to show up on time and perform as instructed.
And, third, a college degree -- at least an elite one -- may hook its holder up with a useful social network that can provide jobs and opportunities in the future. (This is more true if it's a degree from Yale than if it's one from Eastern Kentucky, but it's true everywhere to some degree).
Yet today's college education system seems to be in the business of selling parts two and three to a much greater degree than part one, along with selling the even-harder-to-quantify "college experience," which as often as not boils down to four (or more) years of partying.

Take it from a guy who has a worthless degree from a university in eastern Kentucky, who also definitely lived the college experience... This is article is totally right. I was fortunate enough to come out of school (after just over 5 years... eeek!) with a useless BA in General Studies. Being dissimilar to the subjects in the article, I was able to do so with no student loan debt. Simply put, I was lucky. Despite having 2 teachers for parents and being what most would consider solidly middle class, my family made it possible for me to go to school without loans, grants, financial aid, or scholarships. Not only that, but, they (in addition to my brother and sister in law) somehow succeeded in un-forcefully keeping me in school emotionally- I can't remember ever wanting to be in a cinder block institution of learning, let alone being excited to attend college... and believe me, my grades reflected it. The types of support that I received are the reasons that I am able to invest in stocks, have some rent houses, and able to occasionally write things on this blog that are on the verge of being 'not dumb'.

Throughout my college and post college years, I have seen many people take out loans for degrees that can not possibly pay enough to live the lifestyle that our country thinks a college grad deserves, save for any kind of retirement, and pay student loan debts; just as the article points out. Hell, if I took out loans for my degree, what would I do with it? Manage a store of general studies? I have yet to see a prospective employer look for a General Studies major; which is a similar story to a lot of other degrees out there. Often times, people will get degrees in subjects that they don't enjoy, or take jobs that they will hate, simply to pay for their debts. I know that if I had to lever up for school, I probably would have been burnt out quickly and been unhappy for the rest of my life.

From where I sit, the business of taking on debt for an uneconomical degree appears to be common place; people get degrees in things that they like and stimulate them intellectually, but also don't pay well. Hence, they will get to live in a cardboard box. There is even a sarcastically made facebook group devoted to this very idea. Additionally, this cycle seems to eventually lead to credit card debt. The stuff piles up from everything ranging from simple splurges to more necessary purchases; say, a busted car radiator, repair of an HVAC system, or medical bills.

I know that there are people out there with college bound kids that read this blog. If you are one of them and have kids that are thinking about taking out loans for school, I hope that you consider paying the tuition yourself, or even lending your kids the money out of pocket. Your kids may not give school their best effort and you may feel like you are wasting your money, but I can say with a great amount of certainty, that they will appreciate what you are doing for them (even if it is just state school). This will be especially true after they see the sort of cash flows that they generate, relative to those their peers- how is that for an investment related metaphor?

Maybe you would rather think of it as a call option on your kids' gratitude and appreciation. Maybe one day, they will have a blog and give you some of the credit that you deserve for putting up with their shit for so long. Maybe, they will end up being able to afford to have a job that doesn't make them want to kill people. Maybe they will end up living in the street. Who knows? Regardless, you won't hurt them by paying for their schooling. Still not sold? Here's a kicker: you drastically reduce the chance of them not moving back into your house after graduation...

Notice, I never said anything about people not working while in school... unless they are going to do something important, like curing cancer or something, then, they probably should devote their time to studying and research rather than working. :)

Disclosure: This is not advice of any kind. Always do your own research when thinking about doing something that I so much as thing about!

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