Tuesday, April 12, 2011

College Loans: Good, Bad, or Just Plain Ugly?

I've had education on my mind for the past few weeks. We are moving very soon, and I'm torn whether I want to put my eldest in the new location's free public pre-school program or drive to my current location and keep on with our current, private pre-school. I've been reading up on local public and private schools in both locations, examining statistics and curriculum (when possible). It's dizzying.

Naturally, this all leads me down that long, dark road called College Drive. (Yes, it's obnoxious, as my kids are all under five, but hey, it's never to early to start planning, right?) Will I encourage my kids to go to college and take out tons of loans to pay for their educations? What about encouraging my kids to go to a technical school where they can learn highly valuable skills that are always in demand (e.g., mechanic of any sort, health technician of any sort, cosmetology, etc.)? Although these jobs probably won't allow my kids to become millionaires in seven years, they will all but guaranteed a job in most economies.

The New York Times just published "Burden of College Loans on Graduates Grows". This article depressed me even further regarding College Drive. The author, Tamar Lewin, tries very hard to present the good and bad side of college loans, but in the end, I only saw the ugly. Case in point: the Obamas had at least $120,000 in student loans when they got married. It took them nearly NINE years to pay off this sum, and it only happened that quickly because Mr. Obama earned quite a lot in royalties from his bestselling books. How many college graduates end up with high-paying careers like the Obamas' and then write a hugely popular book on top of that to supplement their income? Not many, folks!

Here's another jewel:
Susan Dynarski, a professor of education and public policy at the University of Michigan, said student debt could generally be seen as a sensible investment in a lifetime of higher earnings. “When you think about what’s good debt and what’s bad debt, student loans fall into the realm of good debt, like mortgages,” Professor Dynarski said. “It’s an investment that pays off over the whole life cycle.”
Really? Buying a house is a good investment? Let's talk to the average American whose house is possibly only worth 5% more than what he or she initially bought it for. Buying a house is a great idea if you are in a stable job that isn't going to move you or if you really like your area. The tax perks see to that. But as an investment, houses are just as risky as anything else. The market fluctuates, and anyone who doesn't think so should look at all the foreclosures being picked up by the Chinese. Banks are selling homes that cost the initial buyers $450,000 for "only" $200,000. Good investment? I think not! So Prof. Dynarski's comparison falls flat on its face for me, making it less likely that I encourage my kids to take out tons of debt for an education that may not pay itself off.

Besides, doesn't anyone realize that the only job market currently growing is that of service? Restaurants, stores, movie theaters, etc. continue to expand despite the recent recession. Who do you think is filling those jobs? Former executives of large companies? Nope. Recently graduated college students who want to get started on paying off their huge debts. Naturally, that isn't reflected in the statistics that say x% of college students have jobs after graduating. Nobody ever really asks what kind of jobs those are. Let's examine that whole picture carefully!

So what is my plan? Well, my husband and I have 529 accounts for each of our kids, and we contribute rather meager amounts to them monthly. Our kids will be encouraged to work in high school and to save a large percent of their income for college. They will also be encouraged to pay up front with real money up front for college classes, should they desire to pursue an academic route. My brother-in-law worked his way through 4.5 years of college with a loan of only $1,500. If he can do it, I know average Joe or Jane College Student can, too. My b-i-l had drive, passion, and a very real sense of personal responsibility that allowed him to accomplish this. God bless my mother-in-law for teaching it to both of her sons!

College isn't the end-all-be-all, folks. It's a great tool for getting ahead, but there are lots of jobs that need to be filled. As long as my kids are living honest lives, not doing anything illegal or immoral, and contributing positively to society, I am a pretty happy mama, regardless of what their chosen professions might be.

Challenge: Make a plan for your kids' college. If your kids are of age, discuss various options with them. They may come up with something even more creative! Remember the Seven P's: Proper Prior Planning Prevents P!$$ Poor Performance.

-Domestic Goddess out.

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