Before You Sign Up For This Semester’s Student Loans…

This Week’s Courier Herald Column:

Students this week are returning to school.  Summer no longer lasts until the week after Labor Day.  In Georgia, most students will spend the majority of August in classrooms.  Traffic will begin to be heavier on local roads, but the upside is that it will be a lot easier to get a good spot on your favorite beach for those considering a late summer trip out of town.

It is not just K-12 students returning to campus.  College students are moving into dormitories this week as well.  Their arrival should coincide with the signing of new compromise legislation that slows the rate of increase for student loans.  That said, the money is far from free.

Many of the programs available now contain variable interest rates.  This, combined with the fact that student loans are now the second largest portion of Americans’ consumer debt with total outstanding obligations surpassing $1 Trillion, and concerns over a bubble and individual’s ability to repay these notes should be addressed.

For students needing to receive these loans in order to pursue a higher education degree, their first lesson should be how to calculate a return on investment.  Too many are borrowing money for the sake of “learning”, which when pressed, means for too many a break from joining the adult world with adult responsibilities for 4-6 years.

Students should avail themselves to see the job placement rates and average annual starting salaries for the degrees which they are seeking from the schools they are attending.  They then should be asked to create a pro-forma budget for housing in the area which they plan to live, transportation expenses, other living expenses, and then see how much the repayment on their loans which they have amassed will cut into their discretionary income.

This exercise should not be voluntary.  It should be required at the beginning of each term that a student applies for additional student loans.  This would not only reinforce the cost of the mounting debt, but also demonstrate how delaying degrees by changing majors or dropping classes is not only putting off the inevitable, but raising its price tag as well.

Students should also understand that certain majors carry more risk in finding employment than others.  According to a recent Georgetown University study, those majoring in Architecture, Anthropology, and Political Science have an unemployment rate two to three times higher than those with degrees in Nursing, Early Childhood Education, or Chemistry.

And then, there’s the unpleasant thought of bankruptcy for those unable to pay all of the debts and living expenses for those unable to find work or those who remain underemployed.  Students should also be aware that their student loans cannot be discharged by bankruptcy.  Thus, post-graduate financial problems are mostly high living expenses and student loan debt combined with a low starting salary, bankruptcy will not help alleviate the situation.  A second job may be the only option.

Students entering college today need to make a careful assessment of what their finances are now – and what they are likely to be for the five to ten years after graduation.  While there is great temptation to “experience” all that college has to offer, there needs to be more sober reflection on how this will be paid for.  If a second job will eventually be required to pay off the debts accumulated during this time of self-exploration, then perhaps it is better if this second job is taken while the student is still living a student’s lifestyle in order to thwart accumulating this debt in the first place.  It will also look good on a resume to prospective employers.

Every student will face a different situation, and how that student faces the financial realities of life are ultimately up to them.  We have perhaps reached a point where borrowing money for college is too easy, with the long term consequences of these early financial decisions not adequately explained or understood.

If we actually cared about this generation of college students, we wouldn’t be throwing loan applications for unlimited credit lines at them any more than we would hand them bottles of whiskey and car keys and tell them to go have a good time.  Instead, we would emphasize that there is a great opportunity before them, but their own decisions and actions have consequences.

College is an awesome time to learn a lot.  It should not be the time to learn long term financial consequences the hard way.

11 comments

  1. Max Power says:

    If we really cared about them we would guarantee each student with the ability and desire of going to college a 4 year degree free of charge.

    • seenbetrdayz says:

      And then when you have everyone running around with a Bachelor’s Degree, what exactly would be the point?

      Hell, we’ve devalued associate degrees to the point where it’s pretty much taken for granted that you need one to be a cashier at McDonalds.

    • KingRichard says:

      People will have to pay for this free education, if not students, then taxpayers. Our educators at these fine institutions will not work for free…

  2. greencracker says:

    Kids, don’t get into debt to go to school. Those debts chain you to whatever job you may get.

    Sure, you may think Emory or Harvard or whatnot will place you better in life than GSU or UGA or Tech … but really all that’s already been decided by who your parents are and where they’re connected.

    Getting a regular kid to go hundreds of thousands of dollars into debt for a fancy-branded degree is a scam. Don’t fall for it. Let the trust fund babies rack up those six-figure bills.

  3. gcp says:

    There are many alternatives in Ga. other than relying on the federal government to finance one’s higher education unfortunately in today’s society individuals run first to the federal government much like they do in most other major aspects of life such as health care, food, housing, child care…..

  4. saltycracker says:

    The federal government has no business guaranteeing easy money for student loans.
    Asking the young to think it through……..really ?

  5. George Chidi says:

    “According to a recent Georgetown University study, those majoring in Architecture, Anthropology, and Political Science have an unemployment rate two to three times higher than those with degrees in Nursing, Early Childhood Education, or Chemistry.”

    … today.

    A journalism degree looked pretty sound after Watergate in the 70s. Today, not so much. Telecom went crazy in the 90s before collapsing spectacularly at the end. A computer engineering or computer science degree looked like a sure winner in the late ’90s, and then the world discovered Bangalore. Law degrees didn’t look all that iffy until the early ’00s. MBAs looked lovely right until 2008 or so. (Silly me.)

    Meanwhile those international relations degrees that seemed so pie-in-the-sky and fluffy 20 years ago are really paying off, thanks to globalization. Language skills look hot right now. We’ll see how long before instant computer translation puts that skill out to pasture. Mining and petroleum engineering are crazy-hot, and that will last right until the commodity bubble bursts, then they’ll all be out of a job again, just like half the construction industry.

    Resilience. Education should provide resilience and flexibility to ride the economic storms and adapt. That used to be the function of a liberal arts education, now derided as less than useless. It’s very wise to consider the long-term consequences of debt when funding an education. Be careful about career advice that has a short-term focus as well.

    • KingRichard says:

      That is sound advice George and I would add that one should do a reasonable amount of self discovery on their vocation choice before hopping off to college. Have some form of a plan and a goal of college. This should include the unemployment rate in the field of study along with the demand of the degree in general along with the average starting salary.

      4 Keys to Success to life
      Get as much education as you feel you need to be successful in life – this varies.
      Do not have children until married.
      You should get some amount of pleasure from the work you do in life.
      Stay Married.

      Do these 4 things and your success rate of achieving goals of life, liberty and the pursuit of property (happiness) is nearly certain.

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