Joe Kellum, who majored in law, knows that those who are sucked into the education dream soon find it turning into a financial nightmare. Because of the expense, he couldn't pay the $36,000 annual cost of attending the University of Virginia with financial aid and part time work so he took out a loan. His girlfriend and eventual wife did the same. By the time they graduated their total bill was $195,000. Even though both took six-figure jobs, Kellum still had to moonlight. With annual interest accruing at 12%, they were only able to chip away at the total bill. Within a year they had divorced, citing their combined debt as being a major contributor to the stress that ended the marriage.
According to Kathy Kristof, "Crushed by College," the above attorneys were "victims of an unfolding education hoax on the middle class that's just as insidious, and nearly as sweeping, as the housing debacle The ingredients are strikingly similar, too: Misguided easy-money policies that are encouraging the masses to go into debt; a self-serving establishment trading in half-truths that exaggerate the value of its product; plus a Wall Street money machine dabbling in outright fraud as it foists unaffordable debt on the most vulnerable marks" (Forbes, Feb 2, 2009).
There's also the myth that if you go to college you make about $1 million more on average than a high school grad, once again, failed thinking. The belief is that it is college that is enabling the individual to make more money. Maybe it's just that smart people go to college and are more likely to make more money than high school grads because of their smarts, and it has little to nothing to do with the degree. It's failed cause effect thinking. There are many who have never gone to college or dropped out, like Bill Gates from Harvard, who don't have a degree who are making cash hand over fist.
Even if you get a degree, there's no promise that you'll use it, need it, or that it will prepare you for the work you desire to take up. For example, I hear time and again that those who are now in business have little use for their business degree. Personally, I obtained a certificate in programming and had to get in at the entry level shuffling reports. I eventually got into programming, but I didn't use any of the languages I learned and acquired all of my know-how on the job. Even my BA and MA in English did little to nothing to prepare me to teach grammar, mechanics, punctuation, and composition, all of which I learned on the job, once again. Interesting to note that an English major was not required to take even one grammar or composition class.
But there's more to the story.
If you add the expense of going to college (tuition, fees, books, room & board: $46, 700 / yr. public schools; $99,000 yr. / private schools) what isn't taken into consideration is that the "$1 million college over high school grad" advantage doesn't kick in until the grad has been out of school twelve years or more (don't forget to include the four years of college where no money is earned) before the loan is paid off.That is if you graduate (half entering college never do), don't default on your loan (17% write offs), aren't delinquent (upwards of 24%) and pay without interruption (many defer payments or file for hardships while interest continues to accrue).
On top of all this is the fact that private lenders add 10% "origination fees" onto 18% variable interest rates (there's no legal limit). These private loans are now twice as profitable as government loans and has attracted financial institutions like Citigroup, Bank of America, and Wells Fargo.
The arm of abuse extends far, for according to New York Attorney General Andrew Cuomo's office, investigations have discovered "troubling, deceptive and often illegal practices . . . involving
lenders, educational institutions and financial aid officials." So those "sacrosanct" college and university staff are not as many perceive them to be.
Another thing that colleges, universities, and other institutions of learning (for profit) don't tell American Dream hopefuls is the reality of what their degree can actually get them. Often times, as stated above, the curriculum to job or reality match is not even close. Some students are preached to about the great paying jobs they'll get only to discover that it is those with years of experience or a greater degree and years of struggle that has "ensured" said success.
Here's another sobering factoid:
"One in four college grads takes home considerably less than the top quartile of high school grads, according to a College Board study" (Kathy Kristof, "Crushed by College").
Also, if you're thinking of taking the traditional path to "job security" and the American Dream through being a doctor and opening up your private practice, think again.
In a recent survey only 18% of physicians deemed their practices financially stable. What with liability, exorbitant student loan debt ($155,000 average which has jumped from 20% of their average pay to 60%) and the fact that the self-employed don't get considerable tax breaks like business owners or investors, the American dream here has moved into nightmare territory.
One day at a McDonalds, my wife and I were sitting next to a nanny with two children. Speaking in Spanish, she told us that she worked for a couple with private practices. They worked from seven in the morning until seven in the evening seeing their children for an hour before putting them to bed and going to bed themselves.Why? To survive.
Another consideration is a single income stream and its overall disadvantage. Even if the employee happens to be a college grad who has optimized her income (some $30,000 / yr. over what high school grads make), what happens when that steam dries up in these economically challenging times? where cost of living to income ration is the worst it's ever been for single income employees. Never before has it been so challenging just to pay the bills never mind put away a little money for a "rainy day." If the employee can't work any longer for whatever reason (health, business or industry collapse, competition), what is a single-stream income employee to do?
It's old thinking, out-dated thinking, failed thinking, and most of all, dangerous thinking. Never before has it been so critical, so essential that the individual understand that he is responsible for his financial future and that financial IQ is one of the most important elements of his ongoing education.
The American Dream has changed along with the economy and few are aware. There needs to be an awakening to the facts that achievement of the American Dream through college and "job security" are things of the past and that people need to quickly get up to speed as to what needs to be done to survive financially through the working years into retirement. Little of what is needed relies on a college degree. Just ask the experienced. They'll tell you the truth. No lie.
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