President Obama’s move to help ease the student loan crisis started a cascade of think pieces about student loans over the weekend. Here are a couple of the most interesting:
+ Here’s Why the Student Loan Market Is Completely Insane, via Businessweek. Complete with charts! Oh, and facts, lots of sobering facts:
Default rates at such places as Stanford, Duke, Carnegie Mellon, MIT, and Yale are all less than 2 percent. Not surprisingly, graduates from these schools command high salaries in the job market. At such places as West Virginia, Louisville, South Florida, and Boise State—schools much better known for athletics than academics—default rates are 10 percent. Further down the food chain are much higher default rates at places such as Alcorn State (16 percent), Colorado Technical University (23 percent), University of Phoenix (26 percent), Lincoln Technical Institute (30 percent), and Arizona Automotive Institute (42 percent).
+ Finding Shock Absorbers for Student Debt, via the NYT, also concerns itself with the problem of default, and wants to help cushion students against the risks they incur by paying for college.
The core problem with student debt is that we don’t adequately insure students against the risk of investing in college. While a vast majority of undergraduates have borrowed much less than some headlines suggest — in one study from the last decade, 98 percent borrowed less than $50,000 and four out of 10 borrowed nothing at all — millions are in default or behind on payments. With damaged credit records, they face higher interest rates on car and home loans, rejected rental applications and lost job opportunities. … But how can we help in the short term? We should allow student-loan payments to rise and fall with income, as we do with Social Security and taxes. If borrowers hit a tough spell, payments should drop automatically. If they score well-paying jobs, payments should rise. This is called “income-based repayment.”
+ Perhaps all of this has something to do with why millennials are hoarding cash like dragons?
Business School is not just about the degree but about the experience, which means students shell out tens of thousands of dollars above and beyond tuition, whether they have the money or not. Are the extracurricular activities worth going (further) into debt for?
In many M.B.A. programs, lifestyle experiences are gaining on academic ones in importance, as seen in much busier evening and weekend schedules of bars, parties and trips, says Jeremy Shinewald, founder of mbaMission, an M.B.A. admissions consulting firm based in New York. “My father went to business school a generation ago as a married 25-year-old, and I can assure you he has no stories of jetting off to Vegas for the weekend,” says Mr. Shinewald, who is 38.
The trips usually aren’t free, often adding a shadow budget to an already expensive M.B.A. “I would say that $5,000 total for two years is a low to moderate budget, but is one that would still allow a student to experience significant social and academic travel opportunities,” says Mr. Shinewald, whose firm works with M.B.A. applicants. At the high end, $20,000 to $30,000 for two years is not uncommon, he says.
Some of the trips are vacations, excuses sponsored by Rolex for the rich, or proto-rich, to have fun. Still, even those are bonding-experiences; those trips, and the others that are more straightforwardly career-oriented, alike help students network with each other and with future employers. So plenty of students suck up the costs, thinking of them as an “investment.”
In 2003, Mr. Caballero, then a second-year student at the Sloan School of Management at M.I.T., received internship offers from Intel and Cisco Systems after leading a career trek to Silicon Valley. “I got interviews at firms, and I certainly feel more comfortable reaching out to the people I went on the career trek with for favors than the average classmate,” says Mr. Caballero, 36, now vice president for programming at the nonprofit Venture for America, based in New York.
Did you try B-school? Was this your experience? Or is it emblematic of why you’d rather get Rubella than an MBA?
Following up on Josh’s post, “We Need a New Kind of Financial Advice,” I’d like to posit the following, to be taught in all schools and financial literacy courses immediately:
For most of us, debt management is part of being an adult.
Right now, the standard financial advice is get out of debt immediately because debt is bad. Or, the more nuanced version: because the longer it takes to pay off your debts, the more you have to pay in interest.
All right, kiddos! It’s time for Part II of the conversation begun last week about estate planning for millennials, wherein we find a lighthearted way to talk about money and death. There should be a Schoolhouse Rock! cartoon on the subject. Unfortunately the show went off the air before it could find a catchy way to address the importance of bequeathing your earthly possessions and making provision for your dependents and heirs, so we’ll have to make do the best we can. Let’s start at the top.
WHERE THERE’S A WILL, THERE’S A WAY: What is a will exactly? Is it different from a Living Will? Is there such a thing as an Unliving, Unleavened, or Zombie Will? Do we still “entail” things, like they do on “Downton Abbey“? What if we’ve got nothing to leave but debt and a questionable browser history?
It’s time to check in on our debt payments and savings goals again. If you’re joining us for the first time, you can read about our decision to publicly keep track of our debt here.
Pull up those balances!