Are you thinking about borrowing for college? It's too risky, too expensive and a waste of money to do it.
These are unexpected words from a college professor. I am not saying anyone should give up on getting a college degree. It doesn't require being indentured to a ruthless, unforgiving lender, namely Uncle Sam, to take the cheaper college route.
How many of us would borrow at a high to super-high interest rate for the chance to invest in something with a 40% chance of a complete loss? Not many.
These are the odds that 18-year-olds face when they borrow for college. Only two in five will get into the hallowed halls of academia. The majority borrowed for the privilege. Almost two-thirds of college graduates leave in debt.
Student loans are larger than credit card debt. Borrowing by parents on their children's behalf is $100 billion.
The loans are likely to represent additional borrowing by the children as the parents either guilt their children into repaying or extract repayment in the form of a smaller bequest to their children.
No one knows the full extent of informal student debt because loans are unclear. College students are graduating with an average of $33,000 in formal student loans. One in seven owe over $50,000.
College students can now borrow up to a four-year maximum of $32,500 with Uncle Sam. There is no limit on what he will lend to. That is over four percentage points higher than what Uncle Sam pays.
It is possible to get a college degree without directly or indirectly borrowing large amounts at high rates.
There are many colleges and universities. You can find one that is cheap. It could mean attending a community college for three years and then transferring to a better school as a senior.
You can work for a couple of years to save up for college and establish that you are independent of your parents and shouldn't lose grants or scholarships because of their income.
Another option is to attend community college and take online graded courses that give certificates. MIT, Harvard, and my employer Boston University offer such courses.
If you are a resident of Iowa, you can get a University of Iowa degree for less than $25,000 per year. The costs to study online at Yale include completion certificates. Next to nothing.
You can state on your resume that you studied at Yale, even if you graduated from Iowa. It's worth codifying a secret: Get a cheap, debt-free degree and a super expensive education.
If you want to attend college, do what it takes. Two-thirds of Americans don't have a college degree and are leading full and productive lives.
If you are from a low- or middle-income family, a college with high prices may be cheaper than a college with low prices. It is important to compare shop to understand each school's net price.
Parents need to take steps early to limit at least the specific assets that will raise their children's net college price given what enters the government's needs-based formula.
The departments of interest in the schools that the applicants apply to must be ranked by their own research. National rankings lists are popularity polls and not serious comparisons of research, which is the basis of outstanding teaching.
Uncle Sam should stop exploiting America's youth for trying to get a higher education.
Students should be allowed to borrow on the same terms as Sam, at the 30-year Treasury bond rate. Student loans should be treated the same as other I.O.U.s when it comes to discharge.
The lower the proceeds from bleeding students, the better. Uncle Sam is able to leave our children official and unofficial fiscal obligations far beyond their capacity to pay because he helped destroy our climate.
That is enough malfeasance and malevolence for any good uncle.
Money Magic: An Economist's Secrets to More Money, Less Risk, and a Better Life is a book written by an economics professor. His columns have appeared in a number of newspapers. He was named one of the world's 25 most influential economists by The Economist. Follow him on the social media site.
Don't miss:
All Rights Reserved © 2024
