In 2003, only two colleges charged more than $40,000 a year for tuition, fees, and room and board; by 2009, 224 were above that mark. The total amount of outstanding student loan debt is now more than $1 trillion.
That’s from this NY Times article. The simple fact is that in the future the smart and the rich will attend college, and if you’re poor or middle class and attend college, you’ll be saddled with tens (if not hundreds) of thousands of dollars of student loan debt – the only debt that the US government won’t allow you to discharge in bankruptcy. Wonder why the government wants every kid to attend college? Because you can’t discharge that debt – you’re on the hook whether you can afford it or not. So we all need to attend college, and a good one, and incur plenty of debt doing it. I didn’t buy it – I turned down the Ivy League and went to a state school, and still ended up with a six figure career.
I’ve written about this before. I do not plan to pay for my childrens’ college education. They will have to be smart enough to get scholarships, or they’ll have to work their way through college, or they can start a business right out of high school. I don’t plan to indebt myself a quarter million to send them to a private school – a waste of money in my opinion – or allow them to indebt themselves, either. That may sound cruel, but I think it’s far crueler to allow your 18-year-old – who doesn’t understand the world or personal finance – to go into a quarter million dollar debt for their English degree from Harvard.
There are exceptions, of course. If you want to go into debt at Harvard to study government or finance and you’re going to leverage that into a job at Goldman Sachs, sigh, fine, have at it. If you want to work your way through school to get a social work degree and you need an extra $10K to cover tuition, OK, that’s fine. But if you want to study Sanskrit at Brown, and you’re my kid, good luck.
Here’s a simple rule of thumb: don’t take out more in student loans than you can make (reasonably) in your first year out of school. If you’re in education, and you plan to make $30K in your first year as a teacher: don’t incur more than $30K in debt for school. That may not sound like much, but after you pay for housing, food, insurance, and on and on, you’re going to be chipping away at that $30K per year for a decade. And if you decide in the interim to get married and buy a house? Forget about making headway against that loan. Kids? Paying it off at 50.
Generation X had a mixed bag: some paid, some earned, and some coasted on their college scholarships. Many Gen Yers coasted. Many Gen Xers – or whatever they are called – are counting on coasting, and will be shocked to find out their parents don’t have the money to let them coast. Here’s hoping the Millenials – which include, I guess, my own kids, or whatever their generation will be called – will realize that they need to be smart and win scholarships, or be hard workers and sludge through community college and state college, or else will need to forge a college-less path through life. I won’t encourage either of them to incur massive amounts of debt to get a low-earning degree; they’ll be better off starting a business or working as freelancers. And you know what? Motivated, talented people will always succeed, degree or not; and unmotivated, untalented people will always fail, even if they go to $100K/year schools.