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Friday, March 30, 2012

Students Alone w. Student Loans

We always find it funny how long it takes something newsworthy to finally enter the mainstream media conglomerate subconscious and become officially "news".   Or course the not-funny-at-all irony is how short an attention span the news has to covering an event, leaving it in the mind of viewers and readers to believe "problem solved!"

So glad the Darfur killings magically stopped, the Libyan people are still joyously dancing in the streets since American /NATO forces assassinated its leader, and the US economy is so strong and vibrant, that if you're still struggling and/or not employed, its sooo obvious its your fault, thus you're a Loser.

This week's media faux concern is student debt, which crossed the magical mark of $1 trillion in outstanding debt owed.   Now when it was $900mill, that was just so uninteresting to talk about..  But $1 Trillion--  oooh.. now there's a number

Here's some basic statistics on the situation:

*  Among all borrowers, the median amount owed is $12,800

*  67% of all borrowers are betw 18-37, though there's a growing number of middle aged people let-go from jobs, unable to find employment and going back to school to acquire a different degree

*  NY Federal Reserve believes that more than 25% of all borrowers with due loans are now delinquent on some of their payments.
And here's what the Crap News Network (CNN) wrote to ally fears in a deceitful headline entitled "Debunking the Student Loan Crisis":

"Total student loan debt has topped $1 trillion ... but there's no need to panic.  Most borrowers have a reasonable amount of debt, and the total balance is not likely to cause major damage to the economy like the mortgage crisis did, experts say."

"I don't think it's a bubble," said Mark Kantrowitz, publisher of Finaid.org, a financial aid website. "Most students who graduate college are able to repay their loans." -- CNN/Money

No need to panic folks.. Move along..Everything's under control..

Amazing the lazy and Shoddy journalism--  treating an insider who makes his living by financially profiting off giving financial aid, as an unbiased 'expert' worthy of quoting.

Could spend all day attacking CNN but we'll move on..

If all the debt a young person possessed in the world was that median $12,800 and he/she found work in a relatively reasonable time, then sure, that debt load isn't that big a deal...

Of course we all know life is not that inexpensive to live it.
First, we decided to look up the cost of attending state run universities at various locations around the country.  For this example, we'll focus on in-state tuition fees only, and not look at out-of-state which is usually 3x more, room/board or additional student fees.

-- An Alabama resident wishing to attend the University of Alabama for 1 semester will pay $4,300.  Over a full year, its $8,600 and assuming there's no increases in tuition over the next few years (Yeah, right!), an undergrad student will need to come up with $34,400 to finish obtaining a degree in 4 years.

-- An Ohioan attending Ohio State would be paying $9,711 for a year of tuition.  Multiply it by 4 years and that student will need $38,844

-- A California resident attending UCLA will spend $11,220 for 1 full year.   To obtain a 4 year degree, a student needs to come up with $44,880.

Now unless a student has a sugar daddy or mama to pay the tab, he/she will need student loans to pay most or more realistically All of the tuition.   Based on those three examples alone, that median figure of $12,800 sure does seem low doesn't it?
~ Girl 1: "Thousands in debt, a worthless diploma & no jobs.. ugh.."
   Girl 2: "Aww, cheer up.. there's always stripping"

Next, the so-called 'experts' don't take into account financial debts achieved via car loans or credit card repayment, or the basic costs of a young adult to live and survive-- rent, food, etc.

When someone is making $10-12/hr at one of those shitty jobs we mentioned in a previous posting; the dead-end go nowhere jobs that small business owners are annoyed that people aren't jumping over fences to apply for, it really makes it difficult to make ends meet.

Now let's expand a moment on how much it really costs someone to pay back student loans-- the ONLY debt which will NEVER EVER be discharged from a bankruptcy unless student is permanently disabled or dies.  We will use the University of Alabama tuition as our example:

Four years of tuition at Alabama -- $34,400

Let's say interest rate on the loans is 3.5% which is super low, and 10 years to pay it back, which is the standard length of time once the six month post-graduation forbearance kicks in:

Your monthly payment would be $340.17 for the next 120 months, and by the time you paid off that debt (assuming you could), the total repayment would come to $40,820.09.   You would have spent $6,420.09 in interest alone.
~ "So much debt.. how to repay??  Las Vegas here I come!!"

Let's take it a step further:

To your surprise and shock, you can't find immediate work in the field to which you spent 4 years of your life and thousands in debt to get that degree.   So you're forced to take one of those shitty $10-12/hr jobs in the interim simply to make ends meet.

How much would a $10/hr job pay for 40hrs/wk over a 4wk month?

$10 x 40hrs/wk x 4 wks = $1,600

$1,600 minus 15% for taxes = $1,360 for the month

Take that $1,360 - $340.17 for the student loan, and you get to keep:

$1,019.83 which is kinda like making $6.37/hr for you to keep

And when you subtract the cost of renting, paying a vehicle loan, auto insurance, food, etc.. you're lucky if you have $20 at the end of the month.

Is that how you want to live?
So what is the answer?

First, it has to be said as openly and plainly as possible, that not everyone should be striving to go to college.  It is not like it was 40 or even 20 years ago... Everyone goes..  Everyone has degrees in something and when you apply for jobs, the degree becomes even more unexceptional.

So really a person has basically 4 choices to survive & succeed:

1)  Only attend college if you're pursuing a degree in an area that is growing & expanding and there will be jobs-a-plenty-- these include healthcare/elderly care, criminal justice, and accounting.

2)  Skip traditional 4 year learning institutions and go the vocational route.  Learn to fix automobiles, plumbing, air conditioning/heating, carpentry/roofing,  etc...  Any job that can not be outsourced easily because it requires immediate hands-on labor.

3)  Take the $$ you would have spent on a worthless degree and become an entrepreneur.  Start your own business.  Or take the money you borrow and become your own bank i.e. lend the $ to others with contracts and other re-payment protections like the real banks do, etc.   This isn't for everyone.. some simply don't possess the natural skill to hustle so know who you are before you do this option.

4) Focus on working first & gaining valuable experience, and get the college degree only if you have to or when its needed.
For example, in many companies like fast food places, supermarkets and car rental agencies, they'll hire you straight out of high school and you can work your way up the ladder.  Once you hit your ceiling, if a degree is required to enter management level, at least you will know specifically what you need to achieve your goals vs 4 years of floating aimlessly while partying and lushing.  In addition, some companies will pay for you to attend college if you show to be a loyal and valuable asset and worthy of being invested in.

Any other choice between the 4 listed above, and you're setting yourself up for a decade at minimum of financial pain and suffering in this morbid real world economy.