The Walking Dead and Higher Education

I am closing in on being 55 having worked in financial aid for close to 30 years with a son who in several years will go to college followed by my daughter. It has allowed me to reflect upon my professional and the great hype and spin that higher education revolves around.　

There amongst us live a group of financial zombies that higher education has given birth to! 　

The zombies are young people who have pursued a degree at a college or university and have over borrowed. At some points borrowing is incredibly valuable in obtaining a degree. Like anything too much deteriorates the value/worth of the degree and leaves people with a bachelor’s degree with a debt level that does not match the worth of that degree. The debt is unsustainable for the value of the degree.

Students are coming out of college increasingly in financial distress. This last for upwards of 10-15 years. They often seek out a Master's Degree as a solution. Often this places them further into debt compared to the extra value they get for the degree.

Parents are also increasingly falling into this trap in borrowing for their kid’s education.

A rule of thumb is you should have no more debt than you can anticipate your first year salary to comfortably pay back the student loans. The average graduate makes about $36,000 per year upon graduation. So the total borrowed should be about $36,000 to be able to comfortably pay back those loans. 　

The problem is two part:　

1) Parents and student overestimate the potential earnings power their degree offers.　

2) Parents and students often have few options other than borrowing to pay for the college of their choice. 　

This happens at great colleges and even elite colleges. The national solution is to offer loan forgiveness after 25 years or serving in a public non-profit capacity for 10 years. 　

We have ignored the cause. The cause is what I am able to offer students to pay for their degrees. The cause is not having a warning label attached to every colleges admissions and or every financial aid award letter. “Warning over borrowing can turn you into a financial zombie who will live for the next 25 years having financial issues because you over borrowed for a degree.” 　

When a student is accepted to a program, just say History. There is earning potential for that major that if the school has limited funds may offer loans to pay for that degree that will exceed the values of that degree. 　

It applies to parents as well in a different way. I am 55 how much could I reasonably borrow and still have the capacity to pay back at my age? If my son was admitted to an Ivy League school and they said I had to borrow $50,000 per year for my son to get a degree would I do it? Yes. Could I reasonably pay back that loan? No! Who is at fault? The school who knowingly offered me loans as the ONLY way for my son to get a degree at an elite college or I for taking the ONLY option offered for him to have a better life?　

Admissions to a college should come with a disclaimer like a warning label on foods. Warning excessive borrowing can cause financial zombieness. What is the cure? We have to look at the economic realty and do a better job of saying what the debt to potential income ratio is for certain majors in today’s economic reality. We need to STOP the spin that gets done at high schools and colleges in recruitment and admissions to colleges. Colleges need a warning label! A college degree is incredibly valuable in today’s world economy. But, it comes with an economic warning that you need to be cost effective and protect yourself from over borrowing. 　

Maybe somewhere between a student’s sophomore year and junior year a student and parent need to examine the debt ratio to potential earnings potential.　

Ultimately the price of higher education has outstripped a majority of college’s ability to help students and parents afford that degree without relying heavily on student’s loans. We may be entering a time when ONLY students/parents with means are able to send their kids to elite private universities and the rest of us will send our kids to the best public education we can afford.

So increasingly we see the walking dead who are fiscally in way over the heads. They tried their best to get a decent education and become productive. They are often living back with mom & dad after graduation as they realistically can not afford to live on their own. Time frames for marriage and children have also been pushed far back as they spend years trying to get on their feet financially.