Students are offered college tuition loans guaranteed by the
Federal government. Some students have anywhere from 150k to 300K in
loans. If the student pays it off in 10
years, that’s about $1,820 to $3,640 a month for 10 years. When they graduate, they will need an 80 to
100K beginning wage job. If they can’t find one, there will be 12 to 24k of
interest accrual each year that payments aren’t made. This interest turns into
principle when added to the loan, so a 150k amortized over 7 years at 8 percent
with no payments made turns into $257,000.
And if we calculate the same for 300K, you get a new loan amount of
$514,000. If you are unable to find a
job, just the monthly maintenance to keep the loan amount from increasing is
$960 a month on the 150K loan—double that for the $300K loan.
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Now picture how the economics work for an institution of
higher learning. They need students that
can afford a 2 to 4 year degree. They
are not promising jobs, they are promising an education to get you a better job
(this is the most important sentence, and nobody really comprehends it-- a
college degree does not mean more pay, it implies it). With a lot of two year schools, the education
received wouldn’t buy a cup of coffee, but the dollars the student spent are
real. The school needs students, and a
lot of ”would be students” don’t have the dollars to attend. Here is where the school will offer services,
free of charge, to help you finance your education with them.
Don’t be surprised to read about the divorced mother of two
who signs up for the 2 year dental technician course for $12,000, graduates only to find out she can’t get a
job with her new training. She still has the 2 kids and now in addition, 12K in
school debts. If she’s flipping hamburgers,
her hours will probably be cut because of Obamacare, and her wages will be
garnished to pay off the student loan. FYI,
that trade school is still turning out dental technicians by the 100's
---financing is in place for your future degree.
Our youth has been told
that a college education
guarantees a better paying job. Students
with large student loans will have to look at the bottom line before they
accept a job—it might not pay all the bills.
There is always the chance your girlfriend will have just as much debt
as you do. 20 years ago, the consensus was
a person with a college degree would earn a half million more than the
guy without one (I sure hope that amount
has increased somewhat).
The choice for a graduating senior in High School is
obvious; flip hamburgers, or get that college loan and go to college. The real
irony, is that you get the loan, and the education, and then you learn how to
flip hamburgers for the rest of your life.
Not every college degree is in demand. Plus you might not want to work
in Butte Montana or in Detroit Michigan.
The student debt bubble could be deflated if Congress would
allow students to file for bankruptcy on the ridiculous amounts loaned to
them. It’s a noble gesture to offer
everyone the money to pursue a college education. It’s insanity to think that
most will have the opportunity let alone the desire to pay it back. The underwriters of these loans are turning
our kids into indentured servants. If you can’t afford something you do
without---what if the government offered guaranteed loans on lottery ticket
purchases? I'd love to have sold the guy
that thought up the student loan program a toll bridge or two.
We saw how free money caused a real estate bubble. When that bubble collapsed, bankruptcy was a
way out of a bad mistake. Right now, the
student loan bubble is fueling the economy ---1 trillion dollars’ worth of
consumption so far and Congress is still pumping air into it. Can we count on
these college grads to be consumers when they graduate? Will they be too busy paying back their loans
or fighting to keep their wages from being
garnished?
Everyone at the age of 20 has dreams of success and wealth.
The rest of the world will play on those dreams, they are a vulnerability. Two
kids a wife and a house payment are a reality,
and there isn’t much room for a large educational loan. The more bills you have, the less you sleep
at night. A college education could become your worst nightmare. We can be very sincere when we say; “The road to hell is paved with good
intensions.” Another 10 years of these
super fantastic student loans, and one will
need a Master's Degree to get a job cleaning toilets or a PhD to flip
hamburgers.
As a post script, you can always move to Australia and
forget about the debt. Being broke and having a new start will work miracles on
your state of mind and you'll sleep a lot better. Now might be the time to
invest in surfing posters about Australia and New Zealand for the dorm
room. However, it wouldn't surprise me
to see them distributed free of charge, with a visa application for the Down
Under, printed on the back side. No "go figure" on this one, we saw
it coming and did nothing.
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