Apr 11, 2018
The burden of college education is affecting families for decades.
Is there an answer? Do you have to go into debt to get a college
degree? We talk about this and more on episode 42. 
Well hey, everyone Dan Thompson with you again on this
wealthy and wise Wednesday, glad you can join me, hope you are
having a great week. I have been thinking a lot about different
topics that we can talk about and for some reason I don't know what
happened but started talking to some clients about college tuition,
college education for kids and I got to thinking that what a big
decision this really is, you know obviously I think it is pretty
common to think you want your kids to go to college and obviously
that is a good thing for the most part but I don't think that we
have really take into account what that really means anymore and I
thought that it would be good just to kind of talk about some facts
and you know some statistics and maybe come up with some solutions
that might help a little bit. [00:01:22] you know first thing we
got to realize is just the cost and if there is anything we can do
to reduce them at all. I get a little frustrated with the college
community because it seems that they are not trying to do much in
way of helping kids get through school without this huge debt. So
let's just talk about a few things, so what is the average cost
across a country, well a public 2 years’ college is about $44,000 a
year and these are all averages. So what that means is that there
is going to be some school more expensive and there is going to be
some schools less expensive. Then the average public four-year
college in state is ninety-four hundred a year, so let's go back to
the two years, so $34,000 a year, you could basically in a two
years’ college get out of there for less than $7,000. A public
four-year college at ninety-four hundred a year, so we are looking
at about $40,000 to get through school there. [00:02:40] a public
four years’ college that is out of state is more than doubles, that
gets you about $24000, so this is called twenty-five, four years
that is one hundred thousand dollars’ college education and a
private four years’ college is running at about thirty-three
thousand a year, so now we are 120, 130 thousand dollars for your
education. But all in all, cross the board, average cost, people
spending about thirty-four thousand dollars. So again that is the
highest and the lowest that community colleges, the more expensive
college. You know the most expensive college out there and I
believe this figure includes some tuition, some books, supplies, it
might even include a room on board, I am not 100% sure. It was just
a big number; $61,000 a year goes to Sarah Lawrence college. Now I
have heard of a lot of colleges and I can't say I know exactly what
Sarah Lawrence college is but it is 61, 62 thousand dollars a year.
Quarter million dollars’ education, hopefully it is really good. In
comparison, MIT is fifty-four thousand a year, Harvard is
forty-three thousand a year and both of those, so MIT is fifty-four
and Harvard at forty-three and that does not include room, board,
book, supplies, and fees. [00:04:23] So again, you are probably
going to attach on another ten or fifteen thousand dollars there as
well, so and you know not everybody is going to get an MIT and
Harvard degree or Sarah Lawrence college degree. I realize that
most, I'd say a vast number of college students are somehow in
state or close to instate as they probably can be. Let's just see
what happens today. So if you have a child today, is you are going
to send to school 18 years from now and we are just going to assume
a five percent inflation rate, well a five percent inflation rate
is a little bit low, it is real because college cost a really
closer to seven percent in escalation. So I will throw this graph
up there so you kind of see how this works but well if you look at
this graph in the middle, it looks like public and state
Universities, you can get out of there with about a thirty nine
thousand dollar cost. In 18 years, that same thirty-nine thousand
is going to turn into ninety-four, almost ninety-five thousand
dollars. If we look at the graph just to the graph, a two years’
community college and two years’ private college, that would look
like $77,000 currently but in 18 years, that is about a 186
thousand dollars with just a small inflation rate and then just
private college right now, you are looking at about a 134, just a
little under a 135 thousand dollars. That is going to grow to over
three hundred and twenty-three thousand dollars by the time your
child gets to be 18. [00:06:17] so you can see, this is huge, this
is big money, these are retirement fund and that is part of this
whole battle here is it more important for you to be saving,
investing and preparing for your retirement, that could be as long
as thirty years or should you be taking that money or saving it for
your kids' college educations. You know because having two, three,
four kids, you are taking hundreds of hundreds of thousands of
dollars. And if the parents don't pay for it then the kids are
going to have to pay for it and unfortunately kids who are
typically not in a situation where they have a job that is going to
be able to handle all those kinds of funds. So what do they do?
They go into school debt and kids are going into school debts, I
mean just like it is going out in style as they used to say and it
is just hanging a chain around our kids neck and then pushing them
off the dock and hope they can tread water for a very long time. It
is just a burden that have never been put upon kids like it is
today, I mean even back when I was younger, not many kids went into
debt, somehow, it was either they worked through school, they went
to less expensive schools but then the government comes along and
they say hey, we are going to guarantee these debts and it is like
wow. It is just crazy the amount of debt these kids take on and
right now, school debts are 1.4 trillion dollars, just in
comparism, that is six hundred and thirty billion dollars more than
all the credit card debts out there. And we know how bad credit
card debt is but we have 1.4 trillion dollars out there in school
debts of which it really can never be bankrupted out of. [00:08:29]
the only time it could potentially be forgiven is if you carry it
for 20 years. So think about that, you are 25 years old and you
carry debt for 20 years and now you are 45 years old and you might
be able to get some relief from that debts. The sad part is, it has
taken 21 years on average to pay these debts back. That means
obviously some are paying it back sooner but some are going longer
than 21 years just to get that average. I mean 21 years to pay off
a school debt, that is just a burden that is just on you constantly
month after month. You know I work with a dentist a while back, he
has been practicing for 20 years and he still had a $100,000 in
school debts twenty years later. Now obviously some do better than
others at eliminating that debt when they get out of school, I mean
some of the most successful people I see out there are those who
got rid of the debt quickly. I can tell you story after story out
of you know whether it is dental school or medical school. Now
these guys are really rack up some debts, you can be talking three
to four hundred thousand dollars in debt currently to get through
medical school and dental school. But the ones that are wise get
out of school and they kind of just mhen, they just suck it up and
get tough and live like paupers for a while and they get that debt
out of the way as quickly as they possibly can and then they become
some of the most successful businessmen, whether again medical,
dental, attorney, engineer, whatever that might be. [00:10:15] If
you can get rid of that debt quickly, you have a chance to be much
more successful. The critical thing is when you get out of school,
if you do have debt, try to return that just as quickly as you can.
There is a counter-arguments out there that says because school
debt is a very low interest rate typically then you should retire
all that quickly and you should be saving and investing. Well, I
have just seen it way too many times, if you carry that debts, the
chances are all that burden is just going to become so heavy that
it gets really difficult to concentrate and just to always looking
at that can be extremely frustrating. So that is just so burdensome
to young families, you know they recently did an interview of how I
think it was a thousand different college graduates but here is
what was interesting, 70% of them were either unemployed or working
in nonprofessional jobs just to make ends meet and these jobs, they
do not need their college education or their college degrees to get
those jobs and 20% of those that were working were already looking
for another job. So what I get frustrated at is this promise and
this misconception that if you get this degree, you are going to
get this great job, you are going to get your debt paid, everything
is just going to be you know just perfect. [00:11:46] I remember
years ago, not even years ago just a couple years ago, talking with
this young girl who is trying to save and put away some money, she
had forty two thousand dollars in school debts and her jobs was
paying her twenty two thousand dollars a year, so she was making
less than two thousand dollars a month and her school payments owes
like $400 or something like you know twenty or twenty five percent
of her gross income was having to go pay these debts, she was not
getting anywhere, just really frustrated, so she was frustrated on
many accounts, one that she went into the debts, the other she
couldn't find a job that paid enough that helped her retire that
debt. And that is what is really hard for me to swallow is when
people goes to school for these degrees that are sometimes, they
are just degree to get through school, to say you have one, they
will have no idea what they are going to do in life or what their
interest are and yet they come out with these massive school debts.
So what do you do about it? Well, the first thing I think you
should do is have an objective, I mean what is your dream job, what
do you really want to do and search for that and figure that out
and have a reason to go to school, have a reason to get that degree
so that you can achieve that particular college trained job. If you
can and you probably can, walk through school, pay for it as much
as you can, pay as you go. With this little debt as possible.
[00:13:33] you will be better off taking six years to get through
schools so that you can work through summers and have a part times
jobs and take school a little slower if you have to and get rid of
it and retire that debt as you go along. Stay in state and maybe at
a community college, at least for those first couple of years where
they are called classes where they are probably not that
meaningful. Apply for grants and scholarships and anywhere you can
get some money and like I always told our kids, get good grades
right. Good grades help you get a few bucks, we had very success
story with colleges but one of our kids did very well when it came
to grants and scholarships and that kind of stuff and think he
actually came out of college making money. So it can be very
beneficial if you could use those things. So try to stay out of
debts as you are going through school, that is the big thing
because that nooks around your neck for decades to come is so
frustrating. [00:14:49] well I will end on this, you know schools
are so far behind technology and I don't get it, I mean school
should be leading edge, it should be where you are learning the
best of the best and the newest from the brightest but they are so
far behind time, why is school no online, why isn't possible to
jump on a computer and go to school. I mean I know it is, but why
is that not pushed more and why isn't it so cheap. I mean you can
learn anything right now on the internet. Let's suppose I want to
be an astronomer, I can spend an entire time or semester learning
right here from my computer because I was interested in astronomy,
I want to learn everything about it. There is so much information
out there, I could get an astronomy degree on my own right here.
Now I realize that it doesn't count for anything because they want
you to take their test, they want you to be in their lecture halls
on and on and so I blame a lot of these on the school system and
how archaic it is but I think they got this hold, I think they got
this monopoly and I just don't see it changing because it is too
profitable, too much money in it. Putting debt on kids is just
awesome for them and it doesn't have to be that way, like I said
with technology, we could be as educated as we wanted to be. So I
get on this [00:16:30] get little frustrated with this archaic
system that we live in and I know there are some good. Don't get me
wrong, let's not throw it all out, I know there is time where you
really needs to be in class with a group or with a professor of
some sort. And those I get, I just think there are so many things
we could use technology for and get way ahead of these things.
[00:16:57] more importantly, thinking about our kids and the debts
and the burden we are putting on them for years and decades to
come, I just think that is a crime. So I guess the moral of this
podcast and video is just doing everything we can to stay out of
the debt trap, to stay out of putting that news and chain around
our kids neck for the next number of years. Well that was fun
right? Feel free to write to me any questions, email me, you know
questions@wisemoneytools.com. I will be happy to answer them as
quick as I can, this is a good topic, it is a vast topic we can
probably do two or three different podcasts on this because there
is so much to talk about but I hope at least got you thinking and
if you have got kids that is coming up or in school right now a
hope that gives you some ideas and maybe had eliminate and avoid
some of those debt traps. Alright that is it, well you guys have a
great week, I will talk to you next week, take care.