by Dr. Boyce Watkins In the last few years, the cost of college has gotten out of control and student loan debt has skyrocketed along with it. Outstanding student loan balances have risen to $956 billion, which is a 4.6% increase over the previous quarter. Also notable is that student loan debt, unlike credit card debt and mortgages, cannot be discharged in the event of a bankruptcy. The government is arguably doing a good thing by increasing the availability of student loans. But increased availability of these loans leads to rapid increases in university spending, largely because many students can afford to pay a tuition bill that might not have been affordable otherwise. The same thing happened in the housing market just a few years ago, since increased availability of financing is an easy path to inflation. I went to college myself and left school with more debt than some small countries. I don’t regret the loans, because my education is the most valuable asset I own (I went to school for 12 years after I finished high school, and it made me a better, more determined man). At the same time, I can think of ways I might have been able to keep the costs down. So, here are a few tips to parents and students on how to get educated without breaking your financial back for the next 20 years: 1) Do you have to attend a private or out of state university? I argue that the answer is “no.” Knowledge is pretty much the same, whether you’re getting it from an elite private school or a community college. What does vary, however, are the quality of the students and the quality of the connections you have after graduation. One of my kids attended Columbia University in New York on an athletic scholarship and she has doors opened to her that she might not have had otherwise. But if the university does not have a name that will give you a huge advantage in the job market, you might be better off sending yourself or your child to the flagship university in your home state. 2) Don’t be afraid of debt if necessary: Most of the greatest companies in history were founded with debt. Debt is not a horrible thing by itself. Actually, it’s the irresponsible use of debt that gets people into trouble. The worst thing I’ve ever seen is a person passing up on the chance to go to college because they don’t want to owe any money. This means that rather than seeing an increase in compensation and quality of life that can be used to repay the debt, the person would rather be poor, uneducated and debt free. That never made much sense to me. 3) Let your kids pay at least some of their own loans: If you’re a parent over the age of 40, you’re going to be retiring soon. Even worse, you’re going to need a lot of money to maintain the lifestyle to which you are becoming accustomed. Your child, on the other hand, will be hitting his/her peak earning years right when you’re headed to your financial sunset. Does it really make sense that you’re paying their student loans? No, it does not. Not only does it lighten your load to allow your child to take on some of the financial burden, it might make him/her appreciate their education more. College students should not only have a full load of classes, but I also recommend them getting a part-time job. Working not only fills up idle time that might be spent next to a beer bottle, it also builds character, time management skills and a sense of responsibility. Don’t morph your child into a welfare recipient, give them a chance to grow up. 4) Online classes can be better than going back to school: The greatest university in the history of the world is called Google.com. I encourage everyone to use it. When I want to learn something new, I don’t sign up for a physical class. Instead, I find an online class on the topic, Google the concept repeatedly, or pay $10 to learn about the topic from one of the many experts on Youtube. Universities are no longer a necessity when you’re seeking to expand your base of knowledge. If you’re trying to get a new skill on the other hand, there are several online classes that can give you certifications you might be seeking out. Nearly everyone should go to college or at least learn some kind of marketable skill. But the goal of education should be at least three fold: 1) To gain a skill that you can use to make a living, 2) To become an intellectually liberated human being and 3) To find your way to financial, spiritual and psychological independence. So, if you’re only learning in order to work for someone else, then you’re already designing yourself to be a high paid slave. The lack of ability to think freely or determine the source of true economic independence only makes you a cog in the wheel of a capitalist machine of oppression. Even some of the highest paid people I know hate their jobs and hate their lives, in large part because they were never trained to seek out an existence that is more meaningful than the kind of car you drive. That empty feeling you have every night while sitting in your living room might be your true destiny calling you from an alternative universe. Education (not just going to school) gives you the ability to know the difference and also helps you to determine the path you are destined to travel. Don’t let a little debt, or fear, keep you on the sidelines. Teach your children to do the same. Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of the book, “Everything You Ever Wanted to Know about College.” To have Dr. Boyce commentary delivered to your email, please click here.
Dr. Boyce: Thoughts about Sending Your Kids (or Yourself) to College and Dealing with the Cost
In the last few years, the cost of college has gotten out of control and student loan debt has skyrocketed along with it. Outstanding student loan balances have risen to $956 billion, which is a 4.6% increase over the previous quarter. Also notable is that student loan debt, unlike credit card debt and mortgages, cannot be discharged in the event of a bankruptcy.
The government is arguably doing a good thing by increasing the availability of student loans. But increased availability of these loans leads to rapid increases in university spending, largely because many students can afford to pay a tuition bill that might not have been affordable otherwise. The same thing happened in the housing market just a few years ago, since increased availability of financing is an easy path to inflation.