College Is Too Cheap

October 17, 2012

You can tell when someone’s speaking from the heart from the size of his index card

 

UPDATE, 10/17/12: In our haste to post this, we missed some details. Reader Brad Hutchings points out that the subject of our post studies exercise science at Adelphi University.

 

Yes, too cheap. If it were more expensive, say 3 times as much across the board, maybe people would then step back and ask themselves the education cost-benefit question they’ve been avoiding all these years.

 

Against our better judgment, yesterday we watched an uncomfortable-looking Statistic (his name escapes us) ask the two men vying for the presidency a question related to the price and importance of college. (Every American should have the opportunity to go to college, don’t you know.)

As a 20-year-old college student, all I hear from professors, neighbors and others is that when I graduate, I will have little chance to get employment. What can you say to reassure me, or more importantly my parents, that I will be able to sufficiently support myself after I graduate?

Because both men want to get elected, they each delivered a variation on “You worked hard, you deserve a good job, college should be more affordable for all Americans, and my 5-point plan will ensure that…” It’ll ensure that our attention switches to the competing baseball game on another network, is what it’ll do.

Neither Mitt Romney nor President Obama asked the awkward and uncomfortable young man with the bad posture any of the following questions:

  • What are you majoring in?
  • What are your grades?
  • Can you read and write, or if I go on your Facebook page will I see a grammatical killing field?
  • Are you grinding, or do you drink a lot and smoke a lot of pot?
  • No, seriously. Come on. You get drunk a couple nights a week, don’t you?

But the candidates didn’t even have to respond to the question with questions of their own. They could have been more direct:

“I can’t. I’d like to think that the job market will improve by the time you graduate, but your future employment is not my concern. Honestly, it’s not. It’s your concern. And your parents’, it seems, but if you want to be an adult entrusted with the responsibility of voting then maybe you should be standing on your own.

“Kid, the real world is unforgiving. 8% of Americans are out of work, thus 92% have jobs. The odds are in your favor. Lots of people in your graduating class are going to get hired. The ones who don’t are going to be the least employable ones.

“So, all this reduces to whether you’re hirable. You obviously don’t have any real world experience, so it’s going to take grades and specialized knowledge to make money.

“You’re probably a liberal arts student. No, that’s not a comment on your nebbishness and your demeanor. Nor is the word ‘nebbishness’ a comment on your palpable Judaism. The reason I think you’re a liberal arts student is that you’re worried about your future. Go ask the kids majoring in engineering and math if they’re concerned about getting hired. It’s like the old joke, ‘What do you call the guy who graduates at the bottom of his med school class?’ ‘Doctor.’

“So let’s assume you’re majoring in English, sociology, something like that. Then you’re screwed. But I’m older and smarter than you, and I live a pretty comfortable life, so I must know a little something about this. Listen to my advice. You’re almost certainly not going to act on it, but at least I’ll have answered your question.

“Get out. Get out now. Drop out of school immediately. You go to school where, Hofstra? That’s like $32,000 a year. Drop out and find yourself a trade school. There’s one in Chicago that practically guarantees its students jobs. These students are getting hired before they graduate.

“The catch is that you have to give up on your dream of being a professional nothing-in-particular, and commit to something more concrete. The kids in question are getting hired as machinists. You don’t appear to be the kind of person who likes working with his hands, but as you pointed out, the job market is rotten. And the most satisfying lives are often the ones that diverge from the original plan.

“Best of all, it costs next to nothing to go to that school. $89 per credit hour for people who live in the district. You’re from Long Island, so you can probably find a similar and similarly priced college close to home. Hell, you can live with your parents. Work part-time to cover the $89 per credit hour, and you can emerge from this with

  • No debt
  • A well-paying job waiting for you.

Conservatively speaking you could make $45,000 out of the gate, and tons beyond that with overtime. After a couple years, you’ll be making a lot more.

I’ll say this again: you’ll be carrying zero debt, notwithstanding what your parents have already thrown away on college tuition. Read the example from the guy at the end of that last story, the father with a son who’s a budding machinist and a daughter who’s a teacher with a 4-year education degree. Her student loan debt is 15 months’ wages.

But yeah, the son’s collar is blue. And he never had the ‘opportunity’ to go to college. So he’s the loser in this scenario, by some crazy measure. Meanwhile his sister will be in debt for the rest of her life. Well, maybe not her life. But even with the most diligent financial planning – which she hasn’t exactly executed up until this point – it’ll take her at least 5 years to pay off those student loans. After that, she’ll be…a teacher. Not a profession with a lot of room for financial growth.

That, or you could fix airplanes or learn to operate machine tools. You know, actually make tangible stuff with a tangible benefit. Get rewarded handsomely, if not richly, and make yourself employable for life. And, one more time, no debt. Believe me, personal debt will affect every step you take as an adult. The deeper it goes, the worse it’ll get for you. Avoid or minimize it now, and you’ll breathe that much more freely than your counterparts. You’ll be able to build future wealth – investments, etc. – that the Hofstra anthropology class of ’14 won’t be able to. Because they’ll still be paying down student loans while working service jobs.

Does that answer your question?”

Filed Under: Healthy Living, Making Smart Choices Tagged With: , , , ,

Nothing Is Your Fault Or, Student Loans Are Killing Our Economy, Part CXXV

April 25, 2012

 

This picture was taken in 1992, right when the loan balances were at their highest. No word on how much the wedding cost, or if the betrothed paid for it out-of-pocket.

 

We’ve got a fantastic investment idea for you, one that you’re a fool if you don’t take advantage of. It’s a no-brainer, really. Refusing this investment would be like turning down matching funds from your employer for your 401(k). In fact, it’s even more fundamental than that. Refusing this investment would be like turning down a raise. “Do you want more money?” “No, I’m good with less, thanks.” Saying no to this investment would be like simultaneously spitting on the flag and tearing up a Bible. (Note: On the first draft that showed up on the page as “tearing up a Buble”, which would be awesome. Thank you, Mr. Qwerty, for putting the “I” and the “U” keys next to each other and making such comedy possible.)

And if you need more incentive, the President himself does it.

The investment? Student loans! Yes, they come with a mandatory interest payment, but who cares? Investment! In your future! (As if you could have an investment in your past or your present.) Keep repeating buzzwords as necessary!

If you needed any further proof that our economy is doomed and that you should save yourself and your loved ones first, read this quote from the chief executive himself:

We only finished paying off our student loans off about 8 years ago. That wasn’t that long ago. And that wasn’t easy–especially because when we had Malia and Sasha, we’re supposed to be saving up for their college educations, and we’re still paying off our college educations.

To recap: the President of the United States has a B.A. (from Columbia, which is not inexpensive) and a law degree (Harvard, which is less so). He started attending Occidental College in 1979 before transferring, and received the law degree in 1991. He financed at least one of the degrees, and paid back the loans in 2004.

So it took him somewhere between 13 and 25 years to pay off his education. Let’s split the difference and call it 19.

Also, while paying off the loans, he and his wife decided it’d be a good idea to take on more expenses – in the form of a couple of children. Those children, by the way, now attend an elementary/middle school that costs them a combined $64,920 to attend every year (includes hot lunch).

Let’s take the last part of that quote again:

We’re supposed to be saving up for their college educations, and we’re still paying off our college educations.

“We’re supposed to be saving up for their college educations”, as if it’s a moral imperative on a par with “we’re supposed to feed and clothe them.” No one even questions the value of this anymore: going to college is at least as important as anything else you can think of.

The above quotes come from a speech to, appropriately enough, a bunch of college kids (at the University of North Carolina); none of whom spent the previous weekend passing around the bong and sleeping through lectures. President Obama didn’t get into the financial details of his and the First Lady’s loans, but we do know that they took somewhere around 2 decades to pay off.

But that’s OK, because a college degree enables you to earn more money, right? It should be obvious that whatever increase in salary these borrowers enjoyed because of their educational status, it was more than negated by the price of the loan. 19 years is practically half a regular working life, and it’s being spent committed to paying down the debt incurred to ostensibly enrich that life in the first place. How much further could we take this? Would it be OK to work for 42 years, and spend 41 years paying off student loans? Why not? Investment (in your future)!

Some of you wags are bringing up objections. We can hear them already. Let the debunking begin:

1) “He was a law professor. An intellectual. The smartest man alive, in fact. What was he supposed to do, drive a truck?”

So by virtue of being smarter than someone who began working sooner and accumulated no debt in the process, the smart person…incurs obligations that take 2 decades to pay off? Fine, you lead 1-0.

2) “Well, he ended up as President. Therefore incurring student loan debt was the right move.”

By that logic, you can defend everything he did before the 2008 election. Snorting coke while organizing the community? +1. Attending a church presided over by a lunatic preacher with insane opinions? Another +1. Kids, put down the shovel and instead pick up the mirror and the straw. Then join the Westboro Baptist Church. Ticket to success, right there.

Finally, for fairness and balance, let’s include another quote about tertiary education from another man running for president:

When I went to school, we didn’t have a federal student loan program, and I was able to work my way through college and medical school because it wasn’t so expensive.

Never mind. Those are clearly the ramblings of a crazy person.

Seriously, why was college so much cheaper when Ron Paul was studying?

1. College hadn’t been rammed down our throats as mandatory. It was perfectly acceptable to brag that you were going to learn a trade after high school.

2. The government wasn’t involved.

The costs are allowed to skyrocket because you can keep kicking the can down the road. When no one has to pay the bill for decades, why even think about it? The same applies to healthcare: not post-2014 healthcare, but healthcare as it’s currently constituted.  When a 3rd party – the government, an HMO – gets between the provider and the payor, who knows (and who cares) what things cost? It’s not your problem. “My insurance is handling it.” Sure, insurance is supposed to reduce individual risk, but it increases collective risk. Give 100,000 people the same policy, same coverage, same premium and same benefits, and many of them will take risks they wouldn’t have otherwise. At that point, why not smoke and/or ride a motorcycle unhelmeted? Again, it’s not your problem. It’s someone else’s.
Furthermore, if you declare bankruptcy, the courts won’t discharge your student loans. From the lender’s perspective, this is great. If you can fog a mirror and have a Social Security Number, they’ll lend you the money.
But if the government got out of the picture, and the lenders risked losing money, they might start asking tough questions: like, “How will you pay this back with a B.A. in women’s studies?”
Would the government get out of the picture? A lot depends on who’s in charge, and what his own experience is.
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Filed Under: Education, Making Smart Choices, Math, Newsflash Tagged With: , , , ,

Majority of the Tyranny

June 15, 2010

Founded c. 1775. Hope lost c. 2010.

We try not to get political here, but sometimes it’s impossible. So before we begin this week’s post, here’s some of our philosophy, without getting too detailed. These are not so much opinions as they are objective truths:

  • Governments should only provide what competition and a marketplace can’t – i.e., what everyone can benefit from, but which no private individual or business could receive a tangible return on were they to pay for it themselves. (Unlike governments, private agents have an incentive to reduce waste and increase efficiency – because they’re not using money blatantly confiscated from other people under penalty of death.) Which means governments should provide police, courts, a military, maybe some roads and not a lot else.
  • Taxpayer dollars are sacred and should be treated with the utmost of care.
  • Governments almost always do more harm than good.
  • Governments don’t and can’t create wealth. They can only take it from some and award it to others.
  • The higher the level of government, the greater the potential for damage and the greater the likelihood of inertia. It’s easier to reason with a county official than a state official than a federal official than a UN official.
  • Your job is not as critical to you as a politician’s is to him or her. Reelection is more important to a politician than any of the following: promoting individual freedom, increasing prosperity, fostering peace, curing disease, reducing and/or punishing crime. In other words, if a politician does something that seems illogical, it probably isn’t. It’s done with a nod to ultimately securing exposure, donations, or something that will hopefully result in more votes or the elimination of rivals.

If any of that sounds outlandish, let us know. Because this is what sounds outlandish to us:

The American Jobs and Closing Tax Loopholes Act of 2010. Like many other federal bills, this one’s title obscures more than it explains. You can read the 28-page summary here.

This bill punishes small businesspeople harder for committing the unforgivable, possibly racist and maybe even carbon-positive sin of trying to earn money without sucking at the ever-augmenting public teat.

In our new book (available in both physical and Kindle format on Amazon), we devote the final chapter to entrepreneurship – which is the only way to create lasting wealth. You really have to read the book (did we mention it’s also available at BN.com?), but in it we encourage you incorporate your small business as an S corporation – a special designation that gives you tax breaks single proprietors never experience. Setting up an S corporation costs only a few bucks but pays for itself many times over the course of your business. Or at least it did.

An S corporation lets you pay yourself a reasonable salary out of your profits, the remainder of which gets distributed among your corporation’s shareholders at the end of the year. This is NOT subject to self-employment tax, which is 15.3%.

The new law would affect anyone who has a professional services S corporation with fewer than 3 shareholders who actually have a hand in the company. In other words, one or 2 shareholders. In other words, people who would otherwise operate as a single proprietorship or a partnership – which are the most tax-disadvantaged ways to organize your business.

So if you’re an attorney, a recording engineer, a medical transcriptionist, a hairstylist, whatever – that all changes with the new law. It just becomes that much more difficult to operate, in an economic climate that isn’t exactly friendly in the first place.

People respond to incentives. This will encourage some people to simply give up their entrepreneurial dreams and go back to work for the stifling, soul-crushing man. It’ll encourage other people to get a little more creative with their business deductions. From the government’s perspective, this is wonderful – it’ll give all those new IRS agents something to do and someone to pester.

Here’s how your representative voted. The Senate is apparently set to give the House bill its imprimatur soon enough.

The Congressional Budget Office itself acknowledges that the bill would increase our already semi-comical deficit by $174 billion. (Oh, you think that’s cause for alarm? Look at you, you adorable little idealist. I bet you might even write a letter to your representative and senators, as if they read them or think your opinion matters.)

When is Congress holding its next hearing concerning whose nipple appeared on which TV broadcast? Or which baseball players injected what substances into their posteriors? Or which idiot thought the brake pedal on her Lexus was the one on the right? As long as it results in camera time for the politicians in question, who cares if it takes away from the business of actually freeing up the economy and letting capital and resources get allocated in the most efficient way?

But remember: it’s evil, greedy businessmen who are killing the country. Politicians and those committed to a life of public service are the real heroes.

(Thanks to Diane Kennedy of USATaxAid.com for drawing our attention to this horrid bill.)

Filed Under: Taxes Tagged With: , , , , , , ,