College Is An Important Decision

Students and graduates owe $1.73 trillion on student loans. That debt has been excluded from bankruptcy protection. So even if you declare bankruptcy you will owe that money until it is paid. However, little by little student debt is being “canceled.”

Parents and schools have not adequately prepared kids for the future. Wouldn’t the primary purpose of school be to make young adults wary of dubious claims? If there was fraud there should be jail time and restitution. Return on investment should be the first consideration before packing your limo for the ride to college.

The Department of Education just today canceled $415 million in student debt. Elizabeth Warren and Chuck Schumer have been begging the President to use “executive power” to cancel $50,000 of debt for every student on top of the $28 billion already “relieved.” I’ve heard nothing about reimbursing those students who paid their bills.

But here we are. College majors have led to careers in relevant fields only 27% of the time. That’s after $1.73 trillion was borrowed, supposedly with a goal in mind. Just think of the lives floundering about doing the wrong thing, not to mention the money not earned, the marriages postponed, opportunities ignored, and the families delayed. All this while digging a hole of debt, an average of $38,700 per student.

How many of these indebted students went to college because the first question in a social setting for high school seniors is, “Where are you going to college?” Or the fact that the certainty of school schedules and few decisions is not so scary as renting a place, finding a job, and budgeting. Student loans enable us to postpone adulthood.

They distort economic reality. An example of that distortion and its ill effects can be seen in affirmative action programs. A Duke University study found that black students taking advantage of admissions of students with lower test scores applied in a disproportionate amount of difficult subjects. At the end of the study period the exact same number of black and white students finished the program, showing that 41% of the privileged students had wasted their time because of the distorted incentives. They could have been making progress in subjects they were qualified for during the time it took to find out they were in over their heads.

A successful entrepreneur I know says today is an ideal time to get a good job and work your way up. Employers are starved for good help and will do anything, including financing your education, to hold on to you. There’s also the fact that boomers like me are retiring. That creates opportunities to fill those empty spots. They will open up sooner than we can imagine and an employee who doesn’t have to be trained in the ways of a business is more valuable than a green-horn with a piece of paper.

I know countless people who envy my time working different jobs in different places. They say they wish they had not gone straight to college and settled down at a time when their youth and health would have allowed them to explore and find their lifelong interests. If that niche led them to college their education would be more valued and better utilized. They could even have saved up some money for that education.

Along the same lines as the “for profit” colleges that over-promised is the study by Fidelity Investments that showed 1 in 4 parents and 38% of students believe college costs $5,000 or less today. For more on that concept check out the Big Dig in Boston or the F-35 fighter. Surprise!

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