<p>"Real earnings for full-time workers between the ages of 25 and 34 who have only a bachelor's degree have, in fact, dropped by almost 10% since 2000, by 5% in 2004 alone. This exaggerates the burden of their debt. For many 30-year-olds, establishing themselves takes longer and is more complicated than they thought it would be. "It's so much more difficult to achieve the adult milestones today than it was 30 years ago,"</p>
<p>Going into debt limits life choices.</p>
<p>We see this more and more. Larger debts----Smaller earnings potential----A Bad financial result.</p>
<p>Colleges are not working for the students' best interests. As parents, we have to work in the students' best interests.</p>
<p>Debt has an effect on career choice. It makes a difference when one is considering poetry, music, school teaching, etc. as opposed to, say, law.</p>
<p>On the other hand, graduate school in the arts and sciences often comes free, whereas professional school means more debt, not that anyone should feel sorry for physicians.</p>
<p>Wow, I have a lot of thoughts about the Yahoo article -- I didn't even get to the Businessweek one. What strikes me the most is the cavalier attitude toward consumer debt and the attitude that the student loans are somehow more of a burden, as opposed to an investment toward future earnings. </p>
<p>"When these students start out in the working world, many use their credit cards to fund a richer lifestyle than they can afford, get by between jobs, or cover emergency expenses." "She paid as little as she could on her student loans, about $50 a month, while working in Tulsa as an accountant at Deloitte & Touche and later at WilTel Communications Group Inc. as a product manager."</p>
<p>Honestly, I don't think that $20K is an unreasonable amount for a student to invest in their education -- I still think that many college graduates purchase a new car soon after graduation (a much worse use of debt, in my mind). And if someone buys lunch out everyday, instead of brown-bagging it, that could run into $100 or more per month. </p>
<p>I do think that some fields of study are more difficult to justify financially. But the students described seem more concerned about jumping right into the lifestyle their parents earned after many years of work, and don't have the patience and maturity to live frugally when they are young. </p>
<p>As far as colleges not working in the students best interest, I don't think that's their job. Their job is to offer a product -- the best education they can. It's the student and family's job to make good choices, so that the investment in the education makes sense. I'm willing to foot the bill for my kids' education, as long as it will eventually enable them to be self-supporting. But (apologies to all French literature majors!!!) I'm not willing to have them -- or us -- go into debt
for a field where they will end up working at Starbucks.</p>
<p>One of the issues is if you go into debt, you may have to go into a more lucrative field whether you want to or not. You may have to go into a career you don't like for the money. Life is too short to have to follow the money.</p>
<p>My older d. has picked out a career path with very low income potential (and her backup has low income potential.) We are fine with that, and she will leave college debtfree, which we considered an extremely high priority in making college choices. We have trained her in frugality (a lesson which, in fact, I think she has learned too well). Had she chosen a different career path, we would have felt differently about the debt issue.</p>
<p>We are also pleased that she has chosen to join a coop house, where all the students chip in for their food, and cook and clean together. More life training in living rich (even if poor).</p>
<p>Thanks for posting this. My son will be debt free as well because we're paying for his very expensive education. We however, have not trained him in frugality, so I'm worried for him. Right now, dad is paying all his bills including credit card bills. This does make me wonder how he will get along in the world. He's not impractical, however.</p>
<p>We live a frugal lifestyle. Not impoverished but frugal. I don't think son has picked up on that....and has ambitions of living a "better" lifestyle than we do....I emailed the article to him.</p>
<p>There is a person in my family who was raised in what he considered a poor family. In college and especially in law school, he borrowed every dime he could and lived quite well. He got used to it and decided that that life was what he wanted. Now he is worth hundreds of millions and says his education loans were the best investment he every made.</p>
<p>Tough to feel sorry for the kids who use their credit cards for dinners out and lots of toys. By the time I was 30, H and I had two kids, were helping to support an elderly relative, and were still paying school loans. We were pretty grateful to have jobs (that's what graduating during a recession will do for you) and knew that someday if mortgage rates ever dipped below 12% (remember that?) we might even be able to buy a house.</p>
<p>Thanks for the links dstark. Debt is sure does have far reaching consequences. We had school loans when we graduated, but we wanted to get married. We still had school loans a few years later, but we wanted a home. We still had school loans when we were 30, but we wanted to start a family. All the while, we accumulated credit card debt for these things because we were paying off school loans. It was so difficult to start out in our adult life with so much debt. Friends of ours who did not start out behind the eight ball have done much better over the years and now can have nicer homes, pay cash for their cars, take nice vacations, etc. Heck, they can even pay off their credit cards each month! I really would like to give my children the chance to begin their adult lives without the burden of debt. Somehow, many people just assume that large loans for college education are okay, but they don't think of the far reaching effects that come with it.</p>
<p>How about debt forgiveness for going into public service? (I know the $$ starting this program is a drop in the bucket, but it's a neat idea.)</p>
<p>(see dstark's post above) This addresses the problem of MBA students graduating with a mountain of debt feeling they need a high paying career to pay off the debt. </p>
<p>
[quote]
**
Lowenstein Foundation Grants $2.5 Million for MBA Student Debts**</p>
<p>Established through a $2.5 million grant from the Leon Lowenstein Foundation, the John M. Bendheim Loan Forgiveness Fund for Public Service will help cover the debt obligations for MBA graduates who pursue public service or not-for-profit work.
<p>"How about debt forgiveness for going into public service?"</p>
<p>In separate threads, I offer a similar situation for US citizens as well as ... foreign students.</p>
<p>IMHO, offering grants to foreign students is shameful when we know that the needs of many impoverished citizens are not met. I did not use to think like this, but then I read some of the threads by foreigners complaining about financial aid. I'd keep the doors wide open for them, but make them work in public service one a one year for one year basis. Our public schools could benefit from the input of the smartest people on earth. For them, it would be a small price to pay. Pushig it further, the public service could also come with a more lenient immigration treatment and possibilities of residency or citizenship. Right now, a lot of students are simply overstaying their status in various degrees of legality. </p>
<p>FWIW, when I discussed the public service for debt forgiveness, some people said that it was yet another discrimination against less fortunate citizens. The rich and well-off would not have to "put in" public service. They do have a point, but I still think that the option has merit.</p>
<p>dstark, I agree that debt limits life choices but the opposite is also true; limiting life choices can also avoid one from going into debt.</p>
<p>Over the years we managed to save $76,000 for our son's college fund and, as a result, decided that he would be responsible for paying his college tuition. So he had some choices to make. Go to the likes of Cornell or CMU and graduate with some hefty college loans or find some less "prestigious" college willing to offer up some merit bucks.</p>
<p>He chose the latter and is on track(after 3 semesters) to graduate with honors and a dual compsci/cogsci degree from Rensselaer, happy that he is responsible for his tuition, and on track to graduate with $50,000+ in the bank! We have also let him recently transfer $10,000 into an E*Trade account which he is investing on his own. And as an ancillary bonus it has given him an idea for his senior thesis requirement.</p>
<p>I think we have taught him that financial success involves making some sacrifices in the present while looking toward the long term future benefits.</p>
<p>If the question is 'college with resulting debt' vs 'no college or college with a less marketable degree' the answer seems relatively simple to me. In an ideal world, we would all be able to make the choice that Mini's daughter is making -- most of us, I would guess, had to be sure that the loans or opportunity costs of pursuing a particular degree made financial sense. If it means deferring some desired luxury, then I think it still makes sense to take loans for a better education. Most of us, I would think, had to defer buying a house, or having children until we were more financially secure -- so,
[quote]
Friends of ours who did not start out behind the eight ball have done much better over the years and now can have nicer homes, pay cash for their cars, take nice vacations, etc. Heck, they can even pay off their credit cards each month!
[/quote]
this is a nicer option, but who knows if these people would have a better financial situation even if they had loans? How many people make it a practice to pay off credit card balances every month? It's always about choices.</p>
<p>I quite agree with Xiggi. As much as I'd like it to, I don't imagine the situation of the haves and havenots is going to change significantly in my lifetime (check that: I think it will, and has - with the havenots having proportionally less, and the gaps are growing), and so anything that can increase access to higher education for the havenots seems like a good idea to me.</p>
<p>Perhaps, the public service requirement could be applied to anyone (haves or havenots) receiving higher education through the public system, since taxpayers underwrite all of them.</p>
<p>I agree that it's all about choices, and college debt is one of the best choices you can make. I graduated from college (and grad school and law school) with a lot of debt, as did my husband. However, that debt and our mortgage was our ONLY debt. Credit cards always paid off every month, cars paid for with cash and kept until they rusted away to dust. I view college debt as similar to a business loan - it lets the business keep running and growing in a way that it couldn't do with cash on hand, but the business must keep its eye on the books and spend that money wisely. Most businesses could not grow without at least initial debt; neither can most kids who want to go to college.</p>
<p>I'm thankful my kids grew up drinking "earth juice" (water), eating homemade bread (65 cents a loaf), and washing out plastic bags. My hubby and I had our first child when we were both earning about 5.00 an hour at Whole foods market. We washed cloth diapers, shared a crappy house with two roommates, and purchased one very small, very old car. We did not feel poor! Honestly! We felt like the world was full of possibilities, and when we went back to grad school together, we lived in a teeny married student housing apartment and mostly rode the bus to school. With the help of a small fellowship for hubby and a little scholarship for me, we managed to graduate with almost no debt. I think the big problem is the our kids don't realize how little material things they really need to be happy. You don't have to have a cell phone, plasma t.v. etc - and you can delay most "wants" until you can borrow, rent, substitute or do without.</p>
<p>Well, as someone who is swimming in debt to put herself through school, I just don't buy the notion that it's all lifestyle choices. </p>
<p>If my lifestyle could be trimmed back so that I could save a few thousand a year, I will still graduate with six figures of debt. For some people, the "lifestyle" stuff is a drop in the bucket.</p>
<p>I think a lot of you are going to disagree with me, but I see huge tax issues for my generation. We have a (beyond a certain point) progressive tax system - upper-middle class pay a higher percentage of taxes than do the middle classes. (I know that some of you are goign to start in with "data" about the extremes, but I'm not talking about the impoverished or the super-rich, so enough already.) Consider friends of mine: both doctors, married to each other. Just bought a small condo. They have, between the two of them, almost a million of debt (education and house). It's all "good" debt (i.e. no car, credit cards, etc). Most people, however, would say that two doctors are "rich" (although they are both in residencies and are earning almost nothing). They will be pushing 40 by the time their investment starts to be worthwhile - if they are lucky! Do we tax them more heavily than we tax a couple that has almost no educational debt but lower earnings? Can anyone, with a straight face, look at people with such massive "good" debt burdens and call them wealthy? Even comfortable? In some ways, with thousands of dollars of educational debt that must be repaid every month, young professionals are living paycheck to paycheck, with little ability to save and pay their bills if they lose their jobs. </p>
<p>Guess I'm saying that I would LOVE to see a huge change in the tax codes for young people (or older people) to take a larger tax deduction for educational loans - in short, a reflection upon the fact that a couple can earn six figures, live modestly, but still be flat broke from the high cost of their education. </p>
<p>This would - if you think about it - be phenomenal for the people who are not so wealthy as to have parents who foot the bill for education. :) Consider before you attack. :p</p>
<p>ariesathena, everybody always wants to tax the other guy.</p>
<p>As for the doctors, they get to write off their mortgage, so we as a country are subsidizing this. They get to write off their property tax, so again we as a society are subsidizing this. When they sell hopefully they will have large capital gains where the first $250,000 will be tax-free, and anything above that will have a federal capital gains tax rate of 15% which is much lower than many people who make their money with wages.</p>
<p>How can they afford a mortgage of around $600,000-$800,000 if they aren't making much money? I'm guessing the size. Correct me if I'm wrong.</p>
<p>Um, Dstark, your mortgage calculation is way, way, waaaayy off.</p>
<p>Two doctors. Both paid med school with loans. Neither one can begin to pay it back - you know, that whole thing about working for (what amounts to) less than minimum wage when calculated out per hour. But I guess that's "rich" in your eyes with educational debt that exceeds a half a million dollars...??? (House debt I think is about $200k - very small place - educational debt is the killer. But you just want to see lavish lifestyles of the "rich," huh?)</p>
<p>Tuition alone at professional schools is now in the $40,000/year range. Do the math. </p>
<p>Address the educational debt issue, please. Otherwise, new thread for mortgage interest - and we can discuss rental deductions.</p>
<p>Again, read my last comment. Stronger educational deductions will ultimately make education more accessible - which, last time I checked, is good for the middle classes and lower middle classes who cannot afford to pay upwards of $400,000 for undergrad and grad school. It would encourage people to invest in their educations - what, is it better if the US loses out to foreigners because education is too expensive and a bunch of whiny liberals think that a tax deduction for education (beyond minimal amounts) benefits the rich - when those "rich" people are putting themselves through school? Oh, that's sound policy!</p>