The Psychological Effects of Loan Debt

Paying for College
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For medicine, all US medical schools (except perhaps some for-profit ones) are effectively elite; while ranking may matter, it does not matter that much. And medical school admissions are not particularly sensitive to undergraduate school ranking (for four year schools; some of them look down on taking courses at community colleges). Most of those admitted to medical school get only one admission, so they have no choice with respect to ranking or (typically very high) cost and debt.

Law employment is very law school ranking sensitive (see https://www.lstreports.com/national/ ), but law school admissions is mostly based on LSAT and undergraduate GPA, rather than undergraduate school ranking (see http://schools.lawschoolnumbers.com/ ). Law school is also typically high cost and debt.

In terms of “advanced technology”, engineering employment is less school ranking sensitive than many other areas; computing can vary by employer. What ranking sensitivity there is tends to be based on in-major ranking, and is moderated by other factors (e.g. local/regional school preference).

But the areas of employment that are generally seen as most school ranking sensitive are ones that you did not name, such as management consulting and investment banking, though these are less strongly associated with particular majors.

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Probably not a good use of time for some students who know or can quickly learn that on their own, so a test-out option should be offered. Also, the prerequisite for such a course probably needs to be a match course where one learns exponential functions, since that helps understanding stuff like compound interest.

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@ucbalumnus

For “some” students, perhaps, most all of them would benefit from this. I think if you feel that this wouldn’t be an insanely valuable class, then you aren’t living in typical America, where 95% of the kids (and adults) don’t understand finance, debt, retirement, compounding interest/returns, credit scores, and so forth.

I would rank this class as more important than ANYTHING currently offered in High School. Stuff like Calculus or Biology or Poetry can be learned later, and would be severely less important in most people’s lives than understanding finances.

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Why do you think it would take a whole year to cover that material, as opposed to exercises your daughter did in some other class as you mentioned in reply #18? Seems like a stretch to even fill up a semester with that, at least at the high school level (as opposed to finance courses in college that require various college math, statistics, and/or economics prerequisites).

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@ucbalumnus I guess we could just agree to disagree. In my eyes, one of the biggest issues in this country is the large majority of the country entirely failing to understand finances. Predatory lending is off the charts, and people usually find out how the system works after they have already been screwed. Worse still, hardly anyone is saving for retirement - and while some of that is due to low income, most of it is due to lack of understanding the basics.

Perhaps people who grew up in financially savvy families who taught this information don’t see the big deal here. Most, however, have parents like mine - who didn’t understand that stuff.

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It looks like you are trying to find more disagreement than there exists. I do not actually disagree that personal finance would be a useful topic to cover in high school. The only disagreement is that I do not believe that it should take a year long high school course to cover that material, and that some students may learn it on their own enough that there should be a test-out option.

But also note that it should have a math prerequisite of algebra 2 or whatever math course covers exponential functions.

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“I am of the opinion that HS students are on the whole poor judges of the affect of indebtedness.”

Also, evolution has not wired teenage brains to value delayed gratification. In fact, evolution has wired teenage brains to have a steep discount rate of the future.

I’m also of the opinion that finance (personal and more) should be a required class for a year for everyone.

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personal finance IS a required one-semester course in NJ
and making Algenra II a prerequisite is non-sensical. The kid who plans on being a hairdresser or HVAC tech and enrolls in the schools voc-tech program also needs a course in personal finance. Algebra, and nothing else, is required for graduation, and some kids don’t go farther in math than they have to. They can still understand the concepts. When my son was 4, we realized that he could do “football math”. That is, if you asked him “what is 14 and 7? he would panic and start guessing- 17? 23? But if you said “The Jets have 14 points and then they score again. What is the score now? A calm would come over him and he would say, “Well, a touchdown would give them 20, and 21 with the extra point. Or they could go for a two point conversion and have 22. But if they only kicked a field goal, it would be 17”
Financial Math works something like that. Algebra II is too abstract for some kids to care about, but put it in terms of dollars and cents and they get it.

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How do they explain compound interest without even the most basic knowledge of exponential functions? Or do they teach exponential functions in that course?

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@HankCT

Do you really believe this: “Go to a weak/cheap school, and hamstring your chances at success”?

Maybe you’re talking about really bad schools, but there are many affordable schools which are not weak.

If attending a state school for engineering is going to hamstring someone, I don’t think it’s the credentials that are the problem.

Some examples in technology, for undergraduate degrees:

Nadella: University of Wisconsin
Sundarajan: IIT (regional, I don’t know the city but it was not Mumbai or Delhi)
Brian Stevens, CTO of Google: University of New Hampshire
Shane Wall, CTO of HP, Oregon State
Steve Chen, CTO of YouTube, University of Illinois
Gerri Martin-Flickinger, current CTO @ Starbucks, former CIO of McAfee, Washington State University
Safra Catz, U Penn
Tim Cook, Auburn

And my personal favorite, Michael Mayberry, CTO of Intel
 Midland College. A technical college. (I double checked that this was not a mistake and no, they’re not referring to Midland University.)

The list goes on.

Sure, there’s lots of success in the upper tiers too, but I think tech values talent and hard work and you don’t need an expensive degree to prove that.

On the contrary, the ability to be flexible, to dedicate yourself to an internship, to live nearer to work because you aren’t saddled with debt seems to me to be a better choice for many people.

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@MmeZeeZee Not sure we disagree in any way. My reference to weak state schools was schools like Southern CT State University. You can still do just fine there, but there is certainly a larger hurdle.

Most of the schools you listed above are between good and elite. Wisconsin and Illinois are elite schools. Auburn is excellent. UNH and Oregon state are good schools, A- rating on Niche. Washington State is also very good. You listed U Penn as a decent state school? It’s a top 10 college in the country (and an Ivy).

I would be charmed if my children went to ANY of these great schools. In fact, my daughter applied to almost exclusively state schools like these. Uconn, Umass, UDel, Penn State, Binghamton U, Buffalo were applied to.

The Michael Mayberry one is a legit sub-par school, ranked very low. 100% acceptance rate. Having said that, he seems to have gone from Mayberry on to get a PhD in chemistry from UC Berkely. Something is off there, there is more to that story. Having said that, that was 50 years ago, and the world of college couldn’t be any more different today than it was 50 years ago.

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@ucbalumnus

I’m not sure exponents are required? I explained compound interest to my youngest the other day just by saying:

If you have $1000 and a 7 percent interest/return rate, you get 1000 + (1000 x 0.07) in year one.
At that point you have 1070.
Do the same thing again and you have $1145, and keep repeating each year.

Although, I am sure that credit card debt can feel exponential! It did for me when I was younger.

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Sure?

The current Midland University in Nebraska had former names Midland College (1887-1962) and Midland Lutheran College (1962-2010).

The current Midland College in Texas is a public junior college which first held classes in 1975, though it offers one bachelor’s degree program (not in Mayberry’s majors).

Mayberry earned a bachelor’s degree in 1978 and a PhD in 1983.

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That’s compounding annually. Most interest that compounds (and student loan interest is simple interest except for the one time compounding when it is put into payments) does it daily or at least monthly
 Credit card interest usually compounds based on daily balance over a 60 day average. Same concept, much more math.

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thank you for your insight

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Less rank sensitive than other fields can still be very rank sensitive in the big picture. It might not matter a lot whether you went to UT-Austin or MIT, outside academia, but graduate outside the top 30 or so engineering schools and your career prospects become much more limited.

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The impact of student loan debt has been a hot topic in the veterinary field for the past 10 years as vet school tuition has increased at an alarming rate during this time. Average student loan debt for recent veterinary graduates exceeds $166k. Starting salaries are around $73k. I knew going into veterinary medicine that I was going to be saddled with this debt and that my only saving grace is the income based repayment plans and living thrifty. I also know that buying a house will be out of reach due to my financial situation. Unfortunately, veterinarians have one of the highest suicide rates in the nation and I believe a large contributor is the debt many veterinarians are burdened with.

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Vets were I live are paid A TON (high cost of living suburbs). A college loan of $166K could probably be knocked off pretty quickly. I think of teachers, and how they start at closer to 35K, and need to work 10 years just to get to 50K, and where as Vets maybe start at 73 and are making 200-400 in 10 years.

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I should clarify on the above. Cost of living (and salaries) are very high in the NYC suburbs. These numbers are inflated because of that. But, it would be a smart move for any young vet to move into these areas where people are throwing money at vets for their beloved pets. In lower income areas, I am sure that things can be far less appealing. Also, a lot of vets over time move into running their own business, hiring other young vets into their fold, taking a cut from their efforts, similar to doctors.

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Rutgers is ranked around 50 or so. Post-graduation survey suggests that career prospects from there are not so limited.
https://careers46.rutgers.edu/Public/new_webpage_GradSurveyHome.cfm?school=eng