When I was in High School and college, the advice I got about student loan debt was that it’s good. It’s better than credit card debt, it’ll help build your credit, and without at least a BA you’re going to wind up working at McDonald’s your whole life (I think my father’s favorite warning was: “Repeat after me…do you want fries with that?”).
For the past two years I’ve made it my personal mission to convince High School seniors not to take student loans, or at least, not to take sixty thousand dollars worth of student loans. Student loans are, from a personal freedom perspective, the third worse type of debt you could have. Number one is a debt to the IRS (who said, We’re from the government and we’re here to help?). The second worse type of debt is to the mob. The third is student loans, because student loans are actually government loans, which is why they are comfortable giving an 18 year old $80k for a degree in the Philosophy of Underwater Fire Prevention.
Ask yourself…if a normal (nongovernmental) lender were to be approached by an 18 year old with no job, no assets, no references besides maybe a guidance counselor and a geometry teacher, and they had a good idea for an investment, do you think that lender would hand over $80k to that kid? Not a chance. So why would the government hand over that same amount, even for a degree that has zero value in the marketplace? Because these people want you dependent on them. Their jobs depend on it. If you were independent, you’d need them less, and there’d be less of them employed. This is also the disincentive for colleges to price tuition reasonably. The loans are guaranteed, the kids are lined up to come, so why not charge as much as you’d like?
Credit card debt isn’t good. I’m not saying it is. It’s terrible. But let’s say you rack up $50k on your credit card. You’re not going to be able to pay that off – people that put $50k on credit are not the type of people who can pay $50k at double digit interest. But a credit card company can settle with you for pennies on the dollar. A mortgage lender can foreclose on you and, while it’s horrible, you will no longer be responsible for that debt. Similar scenario with that $30k car you should have never bought. Student loans aren’t like that. You will pay them back. I’m only half kidding when I say they’ll send a SWAT team after you if you miss too many payments. I’m not kidding at all when I say they’ll garnish your wages if you stop paying for too long. You can’t discharge them through bankruptcy. You can discharge them through payment or death. Ask a Social Studies teacher about the concept of “share cropping.” It’s voluntary slavery.
Here’s why you really have to be careful. An unscientific review of my local colleges and Universities puts the tuition between $6,500 a year to $50,000 a year, with several schools around thirty a year. As described above, financial aid is extremely easy to get regardless of your current or future ability to repay, and everyone says you should get a degree. Let’s say a decent school accepted you, but their tuition is $30k a year (without room and board). Let’s say you don’t live on campus. I never took common core math, so I still know that thirty grand times four years is $120k. If you decide to live on campus, figure $180k. I bought a house for that amount. If you graduate at 22 then you will be paying somewhere between $1,000 and $1,500 every single month until you are 37 years old. I have no idea what kind of job you’re going to get with the degree you’re going for, but the median income in the US is around $50k a year. I don’t think most college graduates make that much right off the rip, but let’s say you do. $50k is around four thousand bucks a month. You’re paying, minimum, a quarter of your gross to your student loans. That’s where you get frustrated and go to graduate school, and make your problems worse.
Here’s another way to look at it. If you graduate at 22, and you make $50k a year, and your salary never once increases, and you put one fifth of that salary into your 401k, and you retire at 65, you’ll have around $2.5 million. If you start that process at age 37, after your student loans are paid off, and do everything else exactly the same, you’ll have around $845k. Less than one million, or $2.5 million?
If I were in class right now, they would be quieter than they’ve ever been, until one desperate soul would raise a heavy arm and sigh, “But what do you want us to do? We have to go to college!”
Yes and no. Many jobs that used to not require academic credentials now do (unfortunately, in my opinion), and there are some things that are just good to learn in a college setting, surrounded by experts and like-minded people. I’m not against going to college. I’m not even necessarily for going to college strictly to gain value in the marketplace. Go get your Underwater Fire Preventionist Certificate. But do it smart. Here’s how.
First, decide why you’re going to college, and whether it’s necessary to reach your personal goals. This is the most important step. If you are going because mommy and daddy and guidance counselor and google all say you must and besides you really don’t know what else to do with yourself, then that’s a stupid flippin’ reason to drop that kind of money and it’s likely to end badly. From where I’m sitting, there are two good reasons to go to college. One, to add value to yourself in the field you desire, whether that means a certificate that allows you to do something (teachers, doctors, lawyers, nurses, accountants, etc.) or just the kind of pedigree your people are looking for. Two, as a means of self-exploration or the exploration of an interest in which you’d want to surround yourself with like-minded people. The most obvious example of that would be the arts. Whatever the reason for going is, make sure you have one. School should serve you, not the other way around.
Second, scour the internet and talk to admissions or your guidance counselors about free money. Grants and scholarships. I’m not an expert, but there’s some for everyone. Do some legwork.
Third, figure out cheap alternatives to college credit like CLEP or AP exams, especially for classes that you’d rather not take. Make sure the last school you plan to attend will accept these things.
Fourth, and this isn’t fancy, but it’s effective; get a job and pay with cash. If you make $10 an hour and work 20 hours a week for 52 weeks, you made about $10k that year. Our local community college costs four thousand a year, our local state university costs $6,500 a year. In four years time you would have made $40k and spent $21k on college tuition (by the way…if you do 2 years at community and 2 years at University, you walk away with the same degree as the person who did University for four years, but cheaper). You may want to get a beer and pizza every now and then, so the money is going to be tight, but be creative and work out the math. Work more. Save more. Live at home. Have roommates. Surround yourself with people who are doing the same thing.