This is the second part of Kubo King’s thoughts on college education (the first part is found here). He talks about one of the most important issues in higher education. So read on!
Today, if someone were to ask me if I thought a university education is worth pursuing, my answer would be — it depends. I believe that every situation is different. My experience as a college graduate might be different from another college graduate. In fact, my experience as someone who studied computer science and math might be different from someone who studied the same field. However, there is one important thing I wished high school teachers had warned kids about. I think it could have saved my peers from financial and emotional pain.
In my final year of high school I had a classmate who had gotten accepted to Harvard. Our school wasn’t one of those high-performing schools, mind you, it was just an average high school in an average school district. In other words, the kids going to it did not drive BMWs bought with parental subsidies, the majority of them took the school and city buses; and they headed off to state universities or community colleges after graduation. So, naturally, her acceptance became a real big deal at the time. It became the topic of conversation in every class for about a solid month. I didn’t participate in the conversations, but there were things I overheard that I still remember today. Apparently, her father was discouraging her from going to Harvard because he realized he and his wife didn’t have the money to send her. At the time, all the other kids’ reactions were Wow, what a terrible father. It’s Harvard! And, I remember saying to myself Well if they don’t have the money, then they don’t have the money. Why not go to a cheaper school?
Here is the unfortunate thing about colleges in America — they are expensive to go to. A quick Google search reveals that it costs $13,856 to attend the University of Michigan, per year, for in-state students. The cost for out-of-state students is a whopping $43,476, per year. How many years does it take to graduate with a degree? It took my stupid ass five years to graduate (not including my time at the community college). Also, keep in mind that this is only for the tuition fee. The amount it costs to actually live in Ann Arbor, Michigan isn’t even included. Additional money will be needed to pay for the essentials like rent, utilities, transportation, and food. Here’s the fun part — the University of Michigan is a state university [1]! That means it is subsidized by the state government (the state of Michigan, in this case). Private universities like MIT, Harvard, and Chicago can easily cost a lot more. So how do most students afford to go to school in America? Well, let’s take a look.
The total amount of student debt owed by students in the United States is $1.4 trillion, and, on average, a person who has a student loan debt owes $37,172 [2]. You should be shaking your head. In fact, you should be upset. That is A LOT OF MONEY. And, that is not even the full price you owe! Whenever you borrow money, there is interest associated with it that you have to pay. At this time, the interest rate for federal student loans is set by the federal government at 5.05% [3]. So what does this mean? Well, let’s assume that you had to take out student loans to fund your education, and the amount you racked up by the time you graduated is $37,000. Let’s also assume that you elect to do the standard repayment, which means you’re put in a repayment plan that will take 10 years to pay off your debt (this is the standard plan, and many people do this because the monthly minimum payment is smaller). So, at 5.05% interest rate compounding annually, you will end up paying a total of $47,201 total over a period of 10 years. That’s about $10,000 MORE THAN YOU BORROWED. Depending on what you studied, that amount alone might already be half of your annual salary — before taxes! Keep in mind that this is if you managed to pay every month for ten years (that’s 120 months). What happens if you can’t work for a few months (e.g., you get laid-off, have an accident, you quit because your boss is abusive) and you can’t pay the monthly minimum? You will end up owing even more. Here is the crappiest part of it all — student loan debt does not go away even if you file for bankruptcy. If you choose not to pay (default on the loans), they will find ways to collect the money. For example, if you default on federal student loans, the federal government can and will garnish your wages. That means there will be a court order issued to your employer to withhold a certain amount of your paycheck to pay for the debt you owe until they have been paid in full. Don’t be surprised, it’s America’s money you’re messing with after all. They need that stuff to pay for things like their own debts [4].
Did that scare you? It should have, because $37,000 with compounding interest is a lot of money to be working against you (imagine if you can make it work for you instead). Note that $37,000 is around the average; a lot of people owe significantly more than that. Look at how much tuition fees are at private schools like Harvard and Chicago. When you take cost into account, all of the sudden, the decision to go to college is not as straightforward. So what should you do? No, being in debt for 10 years or more is not an option; you were not born to pay debt every month, and then die. Fortunately, you have two great options. The first one is to go to college, but doing so in such a way that will benefit your future. The second one is to not go at all, at least not right away, and do other admirable and financially beneficial things for your future. The details of both will be discussed in the next part.
- The University of Michigan is not an average state university. It has a strong reputation in engineering, science, mathematics, and medicine, among many other academic fields.
- https://www.debt.org/students/
- https://studentaid.ed.gov/sa/types/loans/interest-rates
- http://www.usdebtclock.org/
Be First to Comment