A while back, Kevin at Financially poor had an article about the decision on whether or not to go to college. I’ve been thinking about this since I read The Total Money Makeover about a week or two ago (yes, it was the first time I read it). Dave Ramsey make a lot of points in his book, but one that does not get nearly enough press or praise is the one saying people don’t NEED to go to college. It’s unfortunate that this point gets little to no press, but I’m not that surprised.
Ever since I was a little kid, all I heard was “you’re going to college, you’re going to college” and there was to be no questioning the decision. I can’t really argue with the logic, either. Both of my parents lives were greatly enhanced by the fact that they went to college, and they wanted the same for me. Disclaimer: I would like to make it clear that I have no problems with college or attending college, I have a problem with the blind faith that people put into it. That being said, it’s not a cure-all, nor a guaranteed ticket to a better existence. It can be, but like everything, you need to be careful with it.
Recently in many major news outlets, there have been articles talking to students who have insanely high debt loads because of college. There is this one from the New York Times talks about a girl who got herself 100k in the hole from going to college and is continuing to defer her loans (while interest piles up) because she’s in night school. There’s also this one, also from the Times, about a man who is 400k in student loan debt and aspiring to be a lawyer. After passing the bar exam, he was denied admission to the New York Bar because of his debt level. As if this is some sort of competition, there’s this story from the Wall Street Journal about a Doctor in Ohio (who is 41) and owes almost 550k total off of an original debt of 250k.
These sort of debt levels are absurd, and when are parents are saying “you’re going to college, you’re going to college” is this really what they had in mind? Owing some bank thousands of dollars before you’ve gotten a job? This is the part of the college decision that I don’t think many people are thinking about. Are they are taking out loans to give themselves a better future, or are they really sacrificing their future by taking on crushing debt levels?
Many people view student loan debt as “good debt” because it is an investment backed by your potential (in other words, your future earnings). History and other people tell us that while we may start out at a lower salary, as we continue to advance in our career, our salary will go nowhere but up (sounds like a bubble, doesn’t it?). Given this seemingly guaranteed future return on this investment, it makes some sense to borrow against it. Unfortunately, the reality is different. For some people, a guaranteed salary increase is in the cards (I’m thinking accountants and those lucky enough to get into the federal system) and will make the initial debt load bearable. For others (I hate to pick on you, theatre/creative writing grads) securing a job is not a given, much less an ever increasing salary, but the same debt load is taken on by each student.
However, there is something fundamentally different about student loan debt than other types of debt. Student loan debt is very rarely discharged, no matter the circumstances. In fact, according to the Federal Student Aid Website (here) these are the main reasons that you can qualify for student loan discharge:
- Death
- If you become totally and permanently disabled after taking out the loan
Well, that’s nice of them, isn’t it? They are willing to let you off the hook if you’re dead or permanently disabled. It makes sense, if you think about it. The is in effect a secured loan, and it’s secured by your ability to work and earn money. You have to be alive and able to do work and earn an income. You cant do either of those things if you’re dead.
In my mind, the potential debt level that some take on is not the right thing to do, and could be stunting the growth of our generation (We won’t know for sure for 10-15 years). Many live at home (like this kid) and are unable to purchase a home of their own until much later in life than their parents did. Even at my age (mid twenties), my parents were married with 1 kid and were nearing buying a home of their own (or had already done so). I’m none of those things, partially because I was in school longer, partially because times have changed, but also partially because my debt level was equal to greater than my first year’s starting salary!
Is the extremely high (and rising) cost of college worth it?
Would you do something different?
Are the Millenials stunting their growth, or will it not matter because we are transitioning to a more “mobile” society where people wont want to buy homes?
What do you think? Leave some answers in the comments.
{ 4 comments }
