A Loan Time Coming

The September 12^th Washington Post asks if college is a waste of money for most students, particularly with private university costs so often pushing past $200,000 for a bachelors degree... and public universities’ accelerating tuition hikes in an impaired economy. “Hundreds of billions of dollars of national student-loan debt has now overtaken American credit-card debt, the Wall Street Journal recently reported, using numbers compiled by FinAid.org, a Web site for college financial aid information.” The Post. And with that crushing debt hitting in the young adult years and bankruptcy laws revised during better times pretty much eliminating that option for the vast majority of student borrowers, perhaps that is an excellent question… as the jobless rate for recent college grads hasn’t been worse in recent memory.

James Altucher, President of Formula Capital, borrowed himself silly when he attended Cornell University. He believes that for most, such expenses are a waste: “‘There’s a billion other things you could do with your money,’ Altucher says. One option: Invest the money you'd spend on tuition in Treasury bills for your child's retirement. According to Altucher, $200,000 earning 5 percent a year over 50 years would amount to $2.8 million.” One tiny catch, James, most folks don’t have $200K lying around and couldn’t borrow that kind of money if their lives depended on it.

True, those imbued with focus and entrepreneurial spirit have found dropping out of college to be most lucrative: “Dropouts are the toast of the dot-com world. To the non-degreed billionaires' club headed by Microsoft's Bill Gates (Harvard's most famous quitter) and Apple's Steve Jobs (left Oregon's Reed College after a single semester), add: Michael Dell (founder of Dell Computers, University of Texas dropout), Microsoft co-founder and Seattle Seahawks owner Paul Allen (quit Washington State University) and Larry Ellison (founder of Oracle Systems, gave up on the University of Illinois).” The Post. Yeah, well, for each one of those there are tens of thousands, maybe hundreds of thousands, that didn’t fare so well. Many young folks aren’t ready for work when they leave high school, and there a lot of kids who don’t even get that far.

The question to me is less whether the educational investment is worth it than what is expected, what is taught and how college is paid for. In today’s super-competitive world, it stands to reason that a solid apprenticeship, a skill-teaching community college or a genuine trade school may indeed provide a better bang for the buck, but that is higher education in one form or another; it just happens to be more job-focused. If, for example, a young man or woman ventures into a state university “business” or “marketing” undergraduate degree with expectations of a rapid rise up the corporate ladder – perhaps because they couldn’t figure out what other major to pursue – I would submit that this is indeed a colossal waste of money; graduate MBAs, with vastly better skills, are having enough trouble jump-starting their careers, and undergrads with such nebulous degrees should either learn to be entrepreneurs or seek another path.

For those who just want to learn, are curious, or are bright but haven’t figured out their life-path, college is a wonderful opportunity to find out more and raise educational levels that, sooner or later, will provide that necessary value-added to their lives… and probably to the global competitive advantage for our country as a whole.

The problem today is the cost of college and how we expect young people and their families to pay for it. With the “home as an investment” concept totally gone, the idea of partial family savings coupled with modest borrowing is a myth long since exploded for all but a rarefied few. Whether we choose government subsidies (we call them scholarships!) or simply creating a lifetime “tax” on earnings based on years of schooling paid for, the one true thing is that how we pay for higher education is completely obsolete in the modern, difficult-economy world.

I’m Peter Dekom and sometimes ground-up rethinking is required to solve problems in a world going through a vast array of paradigm shifts.