Saturday, June 1, 2013

America's Financial Monster

       During the year 2010 the average cost for attending a public college for 4 years was $27,967 per year. The total four year schooling equals $111,868. Attending a private college for the same 4 years cost $40,476 per year. This figure totals a whopping $161,904. Both totals surmount the amount of money I borrowed to purchase my first home and we are talking about a 30 year mortgage. These tuition amounts are expected to be paid off within mostly ten years. The average annual graduate program tuition ranges between $1500 to $50,000, an investment one could probably make toward  3 or more family automobiles or a brand new home or two. Many of these ten year student loans can stretch to over 15 years or more depending upon one's ability to pay. Making and keeping ahead of one's student loan payments can be extremely challenging as applied interest rates which are in most cases at least 6.8% can tag an extra $1180 per year on let's say a ten year $30,000 loan. If one encounters financial difficulties while trying to pay off his or her loan adding various deferments and forbearance options will lengthen the life of the loan forcing the individual to pay even more in interest and fees. Now imagine the student paying of the $50,000 loan or the ones that total over 160 grand. Imagine the amount of interest that person is paying. Consider the amount of people currently unemployed, underemployed, the ones still trying to manage their finances while living paycheck to paycheck. Imagine being a newly wed just graduating out of college, having to support spouse, child, pay for a house, a car or two, food, gas, school, so on. One looks at the figures and immediately responds: "no wonder why this country is 12 trillion dollars in debt."
       Many college students are at least $19,000 in debt. Many rely solely on student loans to pay for their school. Some of these same students use a portion of their loans to pay for their own household bills. Some of these students will focus on a full school load while working at least 30 hours a week. These same students are pushing back the purchasing of a new home or even moving into an apartment because of student debt. These students are living paycheck to paycheck. 45% of recent grads are still living at home with mom and dad. I personally know a few of them. Compare this number with a 24% high school unemployment rate. I understand that much of society don't look upon high school graduates as high achievers but one has to give the high school grad an advantage. He or she does not have to pay back Bank of America $30,000 plus interest.
       Yes, I know, believe me I hear it all the time. There is great value in a good education. An educated person will receive back ten folds. And yes in someways that is true. But after looking at the real figures, one has to admit that it's just not that simple. Yes, there are doctors, attorneys, teachers, professors, engineers, etc. making good money and taking great care of themselves and families as well. On the flip side there are also doctors, attorneys, teachers, professors, engineers, etc. who are desperately trying to stay afloat while paying off huge school debt. I personally know some of these folks. The truth is college is a very tricky decision that can turn into a lifelong curse if not decided with great care and wisdom. Another truth that some will deny is that many of these people who are $20,000 or in some cases even $50,000 plus in debt, may have been better of not attending college at all.
       College for many people and much of society has become a status symbol instead of what was its intended purpose which is to help someone obtain gainful employment. Young people and adults are not looking at their future with the idea of what they can do that will enable them to take care of themselves and their family. A lot of them attend school for the purpose of looking good or appearing busy in front of family and peers. Before even thinking of investing theirs and others time and money they need to ask themselves some very practical questions like: What do they themselves enjoy doing and how can they make their interest into a career that is profitable? 
       Many schools with their salespeople's highly crafted stories of pride, charisma, fun, and convenience have approached  potential new students as consumers. Unfortunately, once the fish bites the bait and is finished being reeled into the awaiting net, these same salespeople have already gone on their way looking for the next person(s) ready to bite. This same fish who was previously contacted often and treated as if he or she is number one priority is now regarded as a "has been". He or she can be at the local pub washing dishes for all the college employees and their salespeople care. Much of these same people end up spending years dealing with collection agencies. Such attitudes causes a great concern amongst past, current, and future students and is a great reason why many changes need to be made in the world of high education.
       With the amount of student debt growing higher and higher changes in the college atmosphere is likely inevitable. The student loan debt is hardly mentioned by the media but is a tremendous problem, a giant monster hiding within America's closet. The fact is most of the money used to payback student loans is money that would have been used to purchase homes, buy cars, travel, take long vacations, upgrade one's life but this money is continuously being dumped into the greedy hands of the likes of Bank of America, Wells Fargo Bank and their comrades who never seem to make enough. Besides 911 and the wars in Iraq and Afghanistan this monster could be the main underlying problem for the number of businesses that have recently crashed and the number of homes that have depreciated and been abandoned. Reality is there is only a few people making surplus money in this country and even they do not make enough to buy and take care of all the value depleted properties America has available. Correcting this problem is not easy. Greed is a terrible, difficult problem to deal with but when one considers the nations current and past social problems such as slavery, poverty, women's rights, and ethnic discrimination several attempts will be made to deal with it one way or another.
       Now is a time for colleges and universities to begin thinking about their current way of doing business. Likely some presidents of certain schools will have to cut down their salaries by some tens or maybe even hundreds of thousands. Many college professors will be forced to reduce some of their high salaries. Some big time college football and basketball coaches may need to have their pay docked by a couple million dollars here and there. Less money should be applied to big time sports stadiums and instead be sent to tuition assistance programs. If the leaders and manipulators of big time college sports can not reduce the millions involved with their huge programs then they may have to let go of the "amateur" tag handed down their programs and simply call it what it is: "a collection of monopolized businesses" (this is another future article). Yes, some long standing traditions will lose some of their glamor and some millionaires will make a few less millions but at least there would be a chance to end some of the financial chaos dragging down higher education. But then that word again, "greed, comes along to combat good business sense. And one wonders why this country is 12 trillion dollars in debt.
       The fact of the matter is that the college debt is way to high and will very likely never be paid entirely. The United States has become drunk with the passion of borrowing Peter to never pay Paul. Borrowing money has become a convenience that has created laziness and a lack of creativity, for who needs to be creative when one can simply take out a ten thousand dollar loan for an education which one may or may not make a decent living with. But just like the sequestration cuts hit this country hard with the government being forced to slash some of its programs, America will be forced to make some tough decisions with higher education and student loans. Very possibly many of these loans will just have to be forgiven as these college students grow older and are aging past the prime periods when they are supposed to be their most productive. The big banks will likely just have to take a hit as they did with failed mortgages and insurance programs rocked by the numerous Acts of God that have pounded the homes and properties of Americans in forms of hurricanes, tornadoes, floods, snowstorms, you name it.
       In the near future as the debt grows higher and the cost of education continues its rise people will likely tire of paying the high costs. Some folks will have to make the tough decision. Unless the cost of attending higher education changes into a cost that is more reasonable, people will be forced to turn to alternatives. Very likely somebody or bodies will come up with another pathway or two to success. As they say "the world is changing". A hundred years ago very few people attended universities. In fall 2012, 21.6 million students were expected to attend college compared to around 15.4 million students in fall of 2000. This is an increase of nearly 30 percent. As more international people living in America attend college and more people attend colleges from overseas the number of students with undergrads and even graduate degrees will sky rocket. Just like any other commodity the greater the surplus the more likely the value will decrease. In other words how many college educated people does the world need?
       The world will have to find a way for people to be able to make a living without having to invest more than their life savings. Right now someone is probably figuring it out. College is a good thing but the achievement does not have to rule the world. Higher education does not have to be the end all, the "make it or break it" in someone's life. It is people who place such enormously high emphasis in these type of titles. It is very likely all in the mind. There is a way that someone can learn to be a surgeon without having to borrow tens of thousands of dollars. There is a way for a person to learn to become a great attorney without having to pay Bank of America back 100 plus grand. There is a way. Someone just needs to have the courage, or maybe even the generosity to share that idea with the world.