Read what the article's commenters have to say, particularly if you are a high school student contemplating college. A parent. Or, someone who cares about debt and the next generation.
My suggestion – unless you have the dough saved up in your bank account (or other hard asset) to cover a college education or qualify for FASFA interest-free and grace period (with hesitation) following graduation or have a scholastic grant – DO NOT take out a federal government loan. Other and better options exist.
Consider financing through your local credit union, using a home equity loan that you know you can afford. Deal with a single person. Or, work-study. Even if it takes you years. Life lasts a long time these days. You don't need to rush. You go to school to learn.
We need to think carefully about our sons and daughters beginning their young adult lives in financial debt – no matter the much hyped and advertised benefits – from a moral perspective. Remember the federal government's home ownership push. After all, our politicians have already bound and gagged them with un-reimbursable pension and medical and ancillary debt, obligation and liability.
Our three sons attended a respected community college in Upstate NY, where we lived. Two have graduated and are working in their chosen professions, not without difficulty in these times. They began life without student debt because it was a family saving's goal before they were born. Both say, the school that they will contribute financially to, if they make it, will be OCC.
The article is no surprise to me. It hurts to read that a student does not know their loan amount. I know why. If they don't receive regular statements, how could they know?
And, they don't.
My job, as our household's Chief Financial Officer (CFO), was to plan, pay attention and follow-up on mistakes. Banks and the Government do not consistently send statements, even annual ones. Sorry, it is true. Maybe because of the banking debacle. Don't know.
If you receive a statement, do not put it in a pile. Plan on it being wrong. Read it. Please! Then, immediately start calling until corrections have been made.
Can you imagine not receiving a credit card or mortgage statement each month? You'd lose track of your liability. That's the point, folks. Before long you will owe more than you ever knew. Immoral? It is.
Multiple accessories to the crime and the compliant can be found in the offices of our higher institutions. Again, I am sorry, professors. I love you, but it is the truth. Institutions need paying bodies, sitting in seats, occupying dorm rooms. Revenue to offset expenses. College is a non-profit BUSINESS. Where the money comes from is not their problem, responsibility, or job. Eventually this bubble will burst. See Watts Wacker's The Visionary's Hand Book
(2000).Sound familiar?
Banks were so incompetent, in my case, that they could not even properly receive and record reimbursed loans to the correct account of the correct son. You read that right. Three sons, different names and social security numbers. I spent hours working with English-speaking, Indian call centers.
What I give the Student Loan Center credit for is ... hiring Americans who speak and understand the English language, and they try ... even though I had to keep appealing for a supervisor on every single call that I made. Trench, it is easy name to pronounce and spell.
To make matters worse, only my sons' community college invoices were correct. Routinely, I called their 4-year to challenge the inflated amounts. What I ask myself is, if a student does not receive the right bill, does not know the amount they are borrowing, how much extra are they unknowingly paying and burdening their futures with? Could be an anomaly. Trust by verify.
FASFA agents urge students (I am an eyewitness.) to fill out their applications and manage their college expenses by themselves. BS. Are you kidding? Most kids can barely manage their allowances, because we've taken care of them for all of their lives. See The Trophy Kids
. They have had zero financial education in school. (Best recommendation of Rich Dad.) Only what a two-working-parent-mortgage-paying household had time to provide. Now, we launch them into $20- $100,000 in debt management! (MedSchool's former cost in 1970s?!) What a tragic joke.My personal case study is no anomaly. Expressions in this article are probably far worse than I know.
If you have a recent credit check report, you will notice that it shows your current statement's balance. In these times, many pay that off each month, if they can. Counting cash, where possible. Saving.
Student loan debt grows in the absence of high paying jobs to facilitate and instant lump sum payback. Doesn't this make student loans more comparable to home mortgages? Answer. Yes.
How many of us would have purchased a house, taken out a mortgage, assuming its value would decline with wear-and-tear? What amount would we have been willing to pay and borrow? How long might we have rented and saved?
Well, in fact, our parents assumed the worst. Their first houses were much smaller. They never expected the coming appreciation. They added on, as needed. The fortunate and alive are now paying for the grandkids' college educations.
For over 50 years, with economic growth and prosperity always right around the corner, we witnessed phenomenal home appreciation, at least equivalent to passbook savings account rates, and we borrowed.
Only three years ago, college graduates were recruited, while still in school. Paying off a student loan probably did not look so bad. How suddenly the climate changed.
We want to believe violent economic upturn is seconds away. Is it? Let's check today's market. Would you bet your life on it? How about in six months? Two years?
Running down hill is much easier than going uphill.
The word uttered by many economists and thinkers is austerity. Do you see it in colleges and universities? Check out your old school.
Green space is less. Building space more. New parking structures built and full. Expensive. Noise, much more. Food ... usually better.
Your school is bulging at the seams with students and much more glamorous than when you went. It is a McMansion. Who is paying for this? Well, it was built during good times. Corporations, wealthy donors paid the freight. Paid in cash. If that's true, good for your school. Both a tangible and intangible investment in the future. If they borrowed funds and need more students to make the pay-off ... cramming them into dorms, forcing them to stay on-campus ... eat the food ... what do you think?
If we have the housing-mortgage industry to exam as our forecaster, we will see foreclosures on student loans, massively. Their bailout will not come. Yet, reality, no one is purchasing educated and skilled labor, at least within our borders, at annual rates sufficient to cover the growth rate of college tuition and expenses. Which is higher than healthcare expense rate growth, we are told from time to time.
Competition for any job is intense. And, wages? They are not higher folks. I paid my interns $10 an hour in the 1980s. Now, they'd be begging to work for free for the experience and I could hire a call center in India to do the same work for a $1 an hour. Would not change my behavior one bit, if it was today.
Things will turn around. We're holding our breaths.
Who owns most mortgages, primarily? Fannie Mae and Freddie Mac and their state-of-affairs is bleak. And, their paper? China, Saudia Arabia ...
Who holds student loans? Sallie Mae. This year the government recently eliminated banks as the middlemen. Now, as a college student, what's your interest rate? North of 9%. The fixed rate for 30-year home mortgages is what, 4% plus points?!
We owe the government for shelter and advanced education. What's next? Food! Healthcare? Auto?
My postings devolve into past experience and realizations. They amount to a clarion call to reality. I care about what happens to your children, not just my own. There is nothing wide-eyed about it. Honest-speak. And, I want to be challenged if my vision is off.
Here's one observation.
The former Soviet Union. Everything was driven by the State. You could not do anything without a stamp from a bureaucrat working for the state. This was true even after the Wall fell. Recall, I was over there. Witnessed how that society and suffering worked in-person.
On my first voyage in 1992, it was so crushingly obvious, that my fear on the plane home, after a mere three weeks, across five times zones, was that the America was heading to the Soviet Union, while the new Russia had entered our Wild, Wild West. All the signs were plainly visible that long ago: America's unending legislation, regulation of behaviors, construction, lifestyles at all levels of government ... federal, state and local.
Look at the tremendous growth in every State Capitol and DC. How and why?
Has America borrowed the blueprint for socialism? Have we imperceptibly been building our own version, cinderblock-by-cinderblock. Again, why?
You want examples? Think of the opposite.
In what year were no new laws enacted or regulations promulgated. Not speaking of annual appropriations' bills. There for the public good go us, right? Protect and defend us from ourselves? Establish fines for bad behavior. Obviously, you're thinking, we missed the home mortgage industry, banking, use of derivatives.
The drivers? Government-lobby. A lobbyist and bureaucrat and politician made sure to bring home the bacon. Think about it. How many politicians bragged about getting federal or state, or floating bonds to free capital to do projects for the benefit of the communities? Many secondary jobs, working for academia, economic and community development, have one goal: Raise money from government. And, where do they get it from?
Borrowing against the future and the day's argument ... raising taxes and fees to pay for it all.
RAISING TAXES ... on the so-called rich ... we might as well say, PENALIZING people who SAVED and INVEST ... and they do because they are FINANCIALLY EDUCATED from birth. Damn it.
Not one new private sector job will be created that your graduating son and daughter needs to begin their lives. Not if our small business owners cash-out, pick up and move from NYC to Belize, where inexpensive, quality medical care exists in neighboring Costa Rica, they don't! It's happening right now. NYC can not cut government fast enough to make up from lost revenue. Well, those leaving are selfish ... uhhh ... philanthropes. Yep, that's right. Save on taxes, donate more.
The piper has arrived. The day of reckoning has come. There is no innocent party to be found. The central figure is always government, who WE are supposed to be.
We owe them for housing. We owe them for education. We owe them taxes on cigarettes to pay for ... non-smoking ad campaigns and child medical care. It's bad but do it. Think about that one. Who benefitted? Who was hurt? Lotteries. That's really helped public education and promoted more bad behavior. Who benefitted and who was hurt? Hint, hint ... not the wealthy. All polices that further buried the youthful aspirant.
We have become the slaves of the best system in the world and our braggadocio. The system is now the State. We might as well give everyone cheap vodka and cigarrettes, tax them a pinch to pay the minimum finance charges, to keep the crowds docile and in-line.
Irregardless, we have students who are taught to get a good job, they must have a 4-year plus degree, beyond high school education. Plainly, this is true, according to the statistics. Problem is, there are only so many opening positions and, in many instances, the pre-requisite is Tier 1 schools, high GPA, and the additional separator, 1-2 years of experience.
How do we get out of this direction?
Whatever we do, it is going to hurt. Change pains. It spells C ... U ... T ... government expenses and overhead and BENEFITS. Here's an idea. You want your job? Would you take 50% less pay, pay for your benefits or no job?
Independent, privately held businesses do this every single day of their lives ... Why? To keep going and adjust to the marketplace. And, government ... what sacrifice does it make for us? Public service? A very good deal for average federal pay of $119k a year and no threat of lay-off. A monopoly, no? And, we private sector people, we're not servants of the same public?
We have already started. Students can see their way to affording community college. Their ranks have swollen in anticipation. Trades are back. The market is responding. First college that I ever saw use technology and their classrooms intelligently was Ohio University (1995).
Community colleges recognize the value of hiring people with real-world experience to teach students. Think of a lawyer teaching a speech class. Think of an ESPN audio freelancer teaching video and sound recording and editing.
They are doing what they teach. Not studying how to do it. Not writing about how to do it. Ouch. I am sorry, but it is true.
The value of studying something in a narrow, Marina Trench depth is research, discovery, creating insights that might languish long into the future is impractical by its nature.
What of the value of shaping a young brain? Yes, research suggests that testing and developing rote memory is valuable, but our problem is we have created a lifelong mortgage to pay for it. Does that make sense?
Well, it should be free, a college professor might argue. Denmark-free. Socialism and 50+% tax rates make sense. All individual worry removed and ... centralized. Works for them. The happiest people in the world. Why? They expect the least from life. We should all just read, study, write, think, talk, as I am doing here.
Not in America. We escaped central government control, remember? So, why have we been heading in the opposite direction, step-by-step, inch-by-inch?
Fear. We're are afraid of it. We like our risks under control. Insurance. We have shorted the connection between individual risk and individual degrees of freedom. Choices.
Can we get skills without a four year college education? Of course. (UPDATE 10/13/11: If you have read this far, please read and give your son or daughter The Education of Millionaires: It's Not What You Think and It's Not Too Late by 32 year old, Michael Ellsberg. He offers terrific insights and resources.)
Young people are the software generation. Give them a tool. A data processing chip. A program. Don't tell them how to use it, and they will figure it out faster than we can think about how we are going to approach the apparatus.
Let's give their brains some credit and consider letting them ... homeschool themselves ... they will anyway.
Guidance, mentors, tutors ... our generations abounds in them, but we are stuck on our own model which says 4-year classroom.
Lifelong learning is more than a slogan. In a rapidly advancing society, you must do it.
My brother is a diesel mechanic. He's got skills. Without them, we don't have trucks. No trucks, no logistics. No logistics, we can't get food from the San Joaquin Vally to a kitchen tabletop on Little Deer Isle, Maine. Try it.
He takes on-line classes, gets certified to keep his skills in demand. Until all is automated and travelling over a vacuum tube network, this is how life continues.
MIT, even, is offering programs on-line.
Is there a threat to 4- year institutions? There is. They have to use facilities and space more wisely, flatten their organizations to fewer assistant-to-the-assistant positions because they are the dreaded overhead that business knows to keep in perspective. Even overhead has to produce value. Maybe more value to justify itself.
Somehow, we must create an unbreakable bond between the professor and the practitioner. Each must accept the value of the other much more pervasively than we now see. The communication gap is tremendous, political (our divergent views), and the fact that we speak different languages and operate on different time scales (study to death v. decisiveness and move on).
If we can somehow free up the connections, we can find economies that drive tuition and fees down, because we're using on-line technology, limiting overhead, and shifting the financial burden on our students to production-line, life cycle.
I scare myself when I write this stuff, because we have untapped capacity out there. Unfortunatety, we are stuck.
To wrap the morning up. We are obviously "digging ourselves in," as Kruschev promised us over 50 years ago.
So, let's take this USA Today article on student college debt as one more sign, "We don't want to walk this dog anymore." And, DO SOMETHING!
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