Debt and College go together like a Horse and Carriage
In my last article I talked about the difference between good debt and bad debt. One of the biggest causes of bad debt is college debt. You may be thinking, “how can that be bad debt”. I need it so that I can get a good job.
Well, let’s think about that for a second. How many of your friends are using their chosen degree to earn an income. Did it really make a difference to them finding a job? In my own personal experience I like to ask the Gen Y’s at the local cell phone store or the local starbucks, “did you go to college?” . Almost always I get an answer of yes and the program they studied. Did they really need to get a college / university degree to get the job?
Certification Programs
A mentor of mine with 5 degrees says that college / university does serve a purpose. If you are chasing a profession that requires certification, then a college is the best place to ensure that standards are met. Examples of this are Medical Doctors, engineers, architects, and nurses. These are honorable professions and require specific training in order to prevent people being hurt. So if you do have a degree in these certified professions, kudos to you. By our definition, you still have bad college debt – it is not tied to an asset that is putting money into your pocket. I will admit that in this case, it is required in order for you to be able to demand the income needed to pay it back.
The Cost of College Debt
That leaves us every other degree program at a college. If you believe that going to college/university will guarantee you a job when you graduate, you have been misled. As a matter of fact, I would almost say you have been lied to. Let’s do the math. In America students have borrowed $1.3 Trillion to go to college. The average graduate in the Class of 2016 has $37,122 of college debt. So the average student graduates with this much debt and what do they have at the end of their 4 years in college? A piece of paper with the school’s stamp and their name on it. That’s a very expensive piece of paper. There is no guarantee of a job. The college marketing machine gives you the perception that you HAVE to get a degree to get a job but in reality there is no correlation between the two.
What is the average cost of college?
Let’s do the math:
$37,122 Dollars of Debt.
The average college grad in a none professional degree makes about $36,000 per year.
The standard repayment schedule of the loan is 10 years at 6% per year.
Your payment will be $412.13 per month for 120 Months. You will pay $12,333.64 in interest, and a total amount of $49,455.64.
If you allow of income taxes you have to pay monthly, you will be paying out over 10% of your take home pay monthly for 10 years – Ouch!
In the end, I am not saying “don’t go to college”. I am saying you need to understand why you are going. University is an expensive place if you don’t know why you are there. If you are going to college because you have a goal and it is the part of the path to achieve it, such as becoming a doctor or a lawyer, then go for it. If you are going to college because your friends are going and you’re not sure what you want to do, well that’s expensive.
We are inundated with the college marketing machine that tells you to go to school, get good grades so that you can attend a good college to get a good job. It’s just not true anymore. Don’t fall for it…
Until next time,
Wealthy and Free Academy
