Monday, September 28, 2015

The Success Formula: College Reexamined

When you buy something on credit, by either taking out a loan or using a credit card, you will pay interest.  Interest is the cost of using someone else's money.  Hopefully, you will be buying something useful that will in turn earn you money.  When you do that, you need to be making more money than what you paid in interest to borrow the money in the first place.

This is basic business common sense.

However, when it comes to student loans, people throw common sense out of the window. 

You are purchasing something as expensive as a house without looking at its monthly payment, how much income you can expect, what other similar houses would cost nearby, or if there is a resell market for that type of house at all.

But still, there is a huge industry, making huge money, trying to convince you to borrow money to go to college.  And the message doesn't even have room for debate.  There's no critical thinking questions like: should I go to college?  why should I go to college?  what are alternatives?  what are the strengths and weaknesses of getting a college degree?

This blog, and this book, address this essential question:  Why college?

Buying a college degree means different things to different people.  Some think you are only middle class if you have at least a four year degree.  Others think there is no good jobs unless you get a college degree.  Think whatever you want.  It doesn't change the financial analysis you have to go through:  Revenue - Cost = Profit.

Figure out these numbers before you sign for student loans.  I didn't, and regretted it until my mid-Forties, when the last of my student loans were paid off.

Friday, September 25, 2015

You Have a Choice

Traditional American success has ALWAYS been living debt-free, having a family and a business. Successful Americans were honest and humble.  Bragging was viewed as classless and tacky.

It has NEVER been:  getting into debt, having fancy toys, impressing other people. 

Somewhere American values changed.  No coincidence that commercial messages tell you to buy stuff on credit.  A lot of profit is made telling you to borrow money. 

Buying on credit used to be abhorrent to Americans.  That attitude changed when mortgages became affordable as 30 year mortgages around World War II.  And a decided advertising push made credit card debt socially acceptable.

This change in attitude conveyed to education.

That worked fine for a while.  The recent college graduate could rely on a healthy economy to get a job and pay the money back.

I don't know if you've noticed, but those days are done.

My experience with systems engineering, systems testing, as an attorney in the foreclosure crisis and as someone who paid over $1000 a month until her mid-forties allows me to give you the benefit of hindsight.

Please listen.