Student Loans are the New Indentured Servitude(business.theatlantic.com)
business.theatlantic.com
Student Loans are the New Indentured Servitude
http://business.theatlantic.com/2009/10/student_loans_and_payback_time.php
28 comments
> is it fair to ask "children, 17, 18 or 19 years old, to try and assess how much of a student loan debt burden they can handle
I don't know about you, but I discussed that question off and on throughout high school with my parents while deciding where to apply for college. It's not like it was a surprise one morning where I had to decide with no time to prepare or ask someone more experienced about.
I don't know about you, but I discussed that question off and on throughout high school with my parents while deciding where to apply for college. It's not like it was a surprise one morning where I had to decide with no time to prepare or ask someone more experienced about.
The borrower is SLAVE to the lender. This statement has been true since the creation of the floating rock. Our grandparents knew this. That's a big reason why they are the "greatest generation". They live by this creed and thus prospered. We ignore it so we pay...and pay....and pay.
There are two issues I have with our system.of education 1) who said that college was all that important 2) why is there a necessity to jump from high school directly to college. The apprenticeship model works ten times better. In my opinion an aspiring lawyer would do much better if he just got a job working at a law firm. By working his way up he/she would gain valuable experience, hands on training, and here it comes MAKE MONEY. Even if he worked for peanuts the experience alone would be worth more than a college or university could ever teach. I would bet any amount of money that, after the same eight years the apprentice would have spent in some pampered cocoon of a college/university, he/she would be a better lawyer than 99% of Yale or Harvard graduates who at most may have done an internship. The same goes for doctors. Even still, if the individual wanted the college experience let him have a year or two to learn how the world works. It's not doing any of these teenagers any good to go from the sheltered atmosphere of mom and dad's to that big and expensive procrastination of true life we call college. By experiencing life and understanding the value of a dollar, individuals will be better prepared to make proper financial decisions. Furthermore, by waiting a few years and not throwing people (in there most immature and naive stage in life) you avoid the ignorance and stupidity that is college life.
If an individual decides to seek their higher learning from one of our countries institutions the first lesson taught should always be: the borrower is slave to the lender.
There are two issues I have with our system.of education 1) who said that college was all that important 2) why is there a necessity to jump from high school directly to college. The apprenticeship model works ten times better. In my opinion an aspiring lawyer would do much better if he just got a job working at a law firm. By working his way up he/she would gain valuable experience, hands on training, and here it comes MAKE MONEY. Even if he worked for peanuts the experience alone would be worth more than a college or university could ever teach. I would bet any amount of money that, after the same eight years the apprentice would have spent in some pampered cocoon of a college/university, he/she would be a better lawyer than 99% of Yale or Harvard graduates who at most may have done an internship. The same goes for doctors. Even still, if the individual wanted the college experience let him have a year or two to learn how the world works. It's not doing any of these teenagers any good to go from the sheltered atmosphere of mom and dad's to that big and expensive procrastination of true life we call college. By experiencing life and understanding the value of a dollar, individuals will be better prepared to make proper financial decisions. Furthermore, by waiting a few years and not throwing people (in there most immature and naive stage in life) you avoid the ignorance and stupidity that is college life.
If an individual decides to seek their higher learning from one of our countries institutions the first lesson taught should always be: the borrower is slave to the lender.
Well I tried this approach with my IT career. I avoided the high cost college fees by relying on commercial programming courses and my work experience (started on help desks and now I'm an independant software development consultant). I also avoided big student loans (though I did end up with about 10k owing) and basically continued to work part time or fulltime since high school graduation.
So I did pretty much exactly what you suggested but heres my problem. I wonder about the path I didn't take and the kind of interesting work I could be having now if i paid the money and went to a top tier CS college. What kind of interesting research work or product development work could I be doing now, if I had invested in a first class education?
Don't get me wrong, I'm not doing badly...but I wonder about the jobs I have the talent for and interest in but not the educational background...many doors are shut to me now because of a decision I made to forego college 15 years ago.
Don't get me wrong, I'm not doing badly...but I wonder about the jobs I have the talent for and interest in but not the educational background...many doors are shut to me now because of a decision I made to forego college 15 years ago.
A big problem here are the schools. A lot of degrees are just not worth the money and a lot of schools essentially trick students into getting into enormous amounts of debt based on unrealistic expectations for their careers.
I think a solution will be for the government to be more selective in which student loans it guarantees. I.e., the government should honestly survey the types of degrees that are needed for the economy and only provide loan guarantees for those degrees and for institutions that have shown they can train people properly in those degrees. If schools want to provide other degrees they can but they would have to rely on the free market.
Also, bankruptcy law should be changed to allow people to discharge their student loans in bankruptcy. I think that if a person shows (i) hardship and (ii) that they are not using their education in any way or form, they should be able to discharge their loan provided that their loan will be reinstated if they start using their education.
I think a solution will be for the government to be more selective in which student loans it guarantees. I.e., the government should honestly survey the types of degrees that are needed for the economy and only provide loan guarantees for those degrees and for institutions that have shown they can train people properly in those degrees. If schools want to provide other degrees they can but they would have to rely on the free market.
Also, bankruptcy law should be changed to allow people to discharge their student loans in bankruptcy. I think that if a person shows (i) hardship and (ii) that they are not using their education in any way or form, they should be able to discharge their loan provided that their loan will be reinstated if they start using their education.
Be very careful what you wish for in the last point.
Anything that makes students loans less "guaranteed" will make them much less available. Right now, the only way to "game the system" is to die. If you allow someone to take $250K of student loan debt and then just piss off and do something that "doesn't use that education" and have it discharged, think about how much harder it will be for some other middle class kid to get a student loan to pursue their dream.
ObDisclaimer: My student loans are long ago paid off, partly because I prostituted myself to ROTC to pay for 80% of MIT or so. Still, I'd have hated to be unable to attend MIT (my dream since age 11) because student loans were unavailable because the repayment guarantee became only as good as a routine personal loan.
Anything that makes students loans less "guaranteed" will make them much less available. Right now, the only way to "game the system" is to die. If you allow someone to take $250K of student loan debt and then just piss off and do something that "doesn't use that education" and have it discharged, think about how much harder it will be for some other middle class kid to get a student loan to pursue their dream.
ObDisclaimer: My student loans are long ago paid off, partly because I prostituted myself to ROTC to pay for 80% of MIT or so. Still, I'd have hated to be unable to attend MIT (my dream since age 11) because student loans were unavailable because the repayment guarantee became only as good as a routine personal loan.
Milton Friedman's solution was interesting. Basically VCs fund your education in exchange for a certain percentage of your income over an agreed upon period. Similar to how VCs invest in your company in exchange for a fraction of ownership.
http://www.schoolchoices.org/roo/fried1.htm
http://www.schoolchoices.org/roo/fried1.htm
The government already takes a certain percentage of our income; and the more you make, the more they take. It follows logically that they should pay for our education.
Of course, as with healthcare, the rest of the world figured this out a long time ago.
Of course, as with healthcare, the rest of the world figured this out a long time ago.
The problem is that an individual school does not get rewarded based on how well it educates the students (except perhaps for private colleges who make money from alumnae donations). Ideally, you're education tax dollars would forever go back to the school that educated you. That way the school would have an incentive to train you well.
This incentive does not exist today, either. To even hope to stay financially solvent enough to remain in existence, universities have to direct their resources towards research, not teaching. Having researchers teaching classes annoys the researchers and the students. But since it's the only way the system can work, it is tolerated.
There is no money to be made in teaching.
There is no money to be made in teaching.
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Maybe that would be an improvement, but it sounds far from ideal. In today's world, the school would then have an incentive to send its students to Wall Street and fuel even more financialization.
So a VC gets your income, instead of the bank from which you got your loan, under the current system? Doesn't sound like it would be much different from how it works today, in practice.
The key is that in an 'equity' based program, the most successful graduates pay for the mediocre ones by having a higher salary to pay dividends on, whereas in a debt based system the integrity of the system is ensured by squeezing every last drop out of the least successful graduates.
the problem is that the value of a college degree has plummeted. 20 years ago, it was a guaranteed way to get a high paying job, now it's just another checkbox that doesn't separate you from anyone else.
Paying $60-200K for a checkbox is hardly worth it, when majority of college students(outside the hard sciences), will end up working in the same jobs they would have gotten w/o a degree.
Paying $60-200K for a checkbox is hardly worth it, when majority of college students(outside the hard sciences), will end up working in the same jobs they would have gotten w/o a degree.
I agree completely - the costs of college vs. the benefits don't line up anymore. It pisses me off to no end that young people mortgage their lives for a piece of paper that's worth very little. Employers have always cared more about actual productive skills, but the credential has been hard-coded into enough HR screens that it makes sense to check the box as quickly and inexpensively as possible. (Assuming you want a job, of course - if you're starting your own business, it doesn't matter at all.)
I'm in the midst of writing a series on my blog about getting college credentials as quickly / inexpensively as possible. Part 1 (http://personalmba.com/hacking-higher-education-clep/) covers testing out of college via CLEP examination. Part 2, which will be published tomorrow AM, covers how to graduate from Harvard without being accepted for ~25% the cost of a standard Harvard undergrad degree. Happy to post it on HN if anyone finds this stuff useful.
I'm in the midst of writing a series on my blog about getting college credentials as quickly / inexpensively as possible. Part 1 (http://personalmba.com/hacking-higher-education-clep/) covers testing out of college via CLEP examination. Part 2, which will be published tomorrow AM, covers how to graduate from Harvard without being accepted for ~25% the cost of a standard Harvard undergrad degree. Happy to post it on HN if anyone finds this stuff useful.
That was a very interesting article and brought up a couple of tools I wasn't aware of. I'm unsure of your intended audience, so take this with a grain of salt: your writing style tends to be verbose and you could do without much of the introduction.
That said, I'll be looking forward to part 2!
That said, I'll be looking forward to part 2!
Thanks - glad you found it useful! The intro was there because writing about degrees is a departure from my normal topics. (I write predominately about business principles and self-education.) Didn't want my audience to think I went completely off the deep end. :-)
"20 years ago, it was a guaranteed way to get a high paying job"
On what planet was that? I was broke most of my 20s.
On what planet was that? I was broke most of my 20s.
Now we are currently asking children, 17, 18 or 19 years old, to try and assess how much of a student loan debt burden they can handle vis-a-vis their future income over their entire lives.
19-year-olds are children? We let them go to war and get killed. We can let them go into debt.
19-year-olds are children? We let them go to war and get killed. We can let them go into debt.
I've been considering this issue a lot lately since I have a kid and hope to have more in the next few years. I'm planning on saving for their future in such a way that leaves things flexible just in case college isn't the best option when they are adults. I will do pretty much anything to convince them not to go into debt for school unless they are going into an engineering field or something that we can clearly see how they will make it up and pay off that debt quickly. I'm planning on starting this lesson early with the hope that when it comes time they already are able to make an informed decision without me having to get worked up about it :)
26K of debt for a 2 year degree is on the high end. Tuition will run around $2500-$4000 per semester if you are in-state, you're still living at home so living expenses are minimal, and the coursework is not so difficult that you can't hold down a part time job at the same time.
So I'd have to say that the self-assessment of "Years ago, I lived for now. It was so stupid," probably has some truth to it.
So I'd have to say that the self-assessment of "Years ago, I lived for now. It was so stupid," probably has some truth to it.
Tip: Go to community college for the first two years of required classes that nobody cares about at prices that are almost as good as free. Most locals have a nice reciprocity system between the community college system and a local state school, often even sharing professors. Get an A.S. or A.A., transfer to the state university, first two years are done! If your GPA was stellar, get grants to cover the rest of tuition. Entire 4 year B.S. or B.A., books included, should be had for less than $18k minus grants and scholarships.
If they got loans for that amount, that's not really a big deal either. If the first job outside of school pays $60k, they can live OK and still pay that amount off in a year or two.
Why this simple formula escapes so many is a fantastic mystery.
If they got loans for that amount, that's not really a big deal either. If the first job outside of school pays $60k, they can live OK and still pay that amount off in a year or two.
Why this simple formula escapes so many is a fantastic mystery.
If not for credentialism, this would quickly be recognized as the shitty deal that it is and far, far fewer people would go to today's colleges. They would instead learn through apprenticeships and other methods. In fact, there are some signs of this happening already, despite the continued credence given to credentials.
I've known people who had larger student loans 2-3 years after graduating than at graduation. Interest is really a killer for many people.
It's not hard to imagine YC issuing an RFS about this.
Student debt, you are officially on notice.
Student debt, you are officially on notice.
1) is it fair to ask "children, 17, 18 or 19 years old, to try and assess how much of a student loan debt burden they can handle vis-a-vis their future income over their entire lives"?
2) "people under indentured servitude had the job waiting for them"; students do not.
3) Obviously, after living a lifestyle one cannot afford for several years, it will take more than several years to pay off the debt.
Student loans are not indentured servitude; living above your means is.