Will College Debt Stop You from Becoming a Millionaire

Going to college used to be the fastest way to generate wealth in this country, but it has now become the quickest way to generate a lifetime of back-breaking debt. So, what happened?

We can’t blame colleges and universities completely. After all, no one forces us to go to school, however, it does make a big difference in most jobs to have a degree. There are plenty of places that show the lifetime earnings difference between high school and college graduates. 

Students and parents need to take a step back and realize the true life costs of school and decide whether or not it will be worth their time to go to school and earn that degree. Actually, you should go to school, but you really need to evaluate the cost of your degree and future occupation.

Once schools see that students aren’t going to continue to spend ten’s-of-thousands of dollars in fruitless degrees then a philosophical change will start to enter schools. No longer will students tolerate having humanities, sociology, and communication degrees that lead to a $28,000 a year job and $70,000 in debt. It’s absurd. Just like people cutting the cord to outrageous TV costs, the same will happen at universities. This level of student debt is unsustainable.

Welcome to Reality

So students, here’s the deal. Just because you go to college doesn’t mean you will have a nice high-paying job or career. Certain degrees do not offer a good-paying job. You might want to look into that before you get started. You need to evaluate if you are going to be able to afford to have a large payment for years and years because of your schooling.

Things to Consider

  • Can I accomplish what I want to do as a career at a cheaper and closer university?
  • Do I really need to go away to college or can I live at home to lessen the costs? I know you want to get away, but staying at home for 1-2 more years could lead to quicker financial freedom in the long run, and avoid moving back home after college.
  • What do you really want to study? It’s expensive to switch focus and stay in school longer than planned.
  • Will my degree lead to a successful life and the potential for growth?
  • Will I need to have an advanced degree? How much will that cost?
  • Will my advanced degree/MBA even help my earnings potential in the career I am going into?
  • Should I look at online schooling?
  • Can I graduate faster than the required amount of time to reduce debt?
  • What can I do now as a parent to help reduce the burden on my children when they go to college? Do you really want them moving back in?
  • How can I get scholarships?

We could go on and on, but the reality is you have to look beyond college. What kind of job and income are you going to have or likely to have? What are the odds that you will stay in the career? Can you pay off the debt you will incur?

Advanced Degrees Don’t Always Pay

At my first job at a TV station (which paid horribly out of college), I had a boss who actually threw away the applications of everyone who had an advanced degree. His thinking was that it was an entry-level job and if the person had to go back to school to get a master’s for a beginning job, they weren’t good enough the first time around with a bachelor’s degree. He wanted someone with life experience and not more book experience. That logic doesn’t always follow in life, but it was interesting to see what a boss thinks sometimes whether rational or irrational.

The Doctor & The Lawyer

I have two neighbors, one a doctor and the other a lawyer, and when people find out about their careers they wonder why they are living in our neighborhood. Now it’s a nice neighborhood with new homes, but not doctor/lawyer homes if you know what I mean.

The reason they are living here is that there are too many stinking lawyers graduating each year and the competition for jobs is crazy. Instead of making six figures each year, he is pulling down just over $50,000. With the debt, he has they can’t afford to live in a bigger home because they are already paying a huge school bill that is just as big as the mortgage.

Same situation with the doctor. He spent years and years in school and his debt is actually bigger than his mortgage. Work is not as consistent as expected and with the change in healthcare laws, the reimbursement from insurance companies has been less consistent. I know they pull down a great salary between himself and his wife, but it is crushing them. Looks at what his wife just posted to Facebook just yesterday.

“My husband and I have loads of student loans. And by loads, I mean LOADS! Like, our loan payment is quite a bit higher than our house payment.

We are tired of making that huge payment and feeling like we never get anywhere. It will take us 25 years to pay them off at this pace. And we want to speed that up. Significantly! We are tired of having the payments weighing us down, and feeling like we can never get ahead because of that payment! If you are in a situation where you a…re tired of debt, you may want to join us!

We are starting a support group on Facebook to help support others who want to pay down debt.”

It used to be pretty much guaranteed that advanced degrees paid for themselves and you were set for life. That just isn’t the case now and you have to evaluate if the costs are worth it.

No Debt

I lucked out quite a bit with college. I was accepted to the school of my choice which also happened to be just five miles away so I could bike to campus from my parent’s house. The cost was also pretty low for a private school and they had a great program that I was going into with a high rate of success for people getting jobs.

I went all year round (much cheaper to go to spring and summer classes, plus they were smaller) and tested out of many classes. I had saved up money as well and my parents put in half what they started saving for since the day I was born (just $25 a month for 18 years with compound interest).

I knew my first job wasn’t going to be high paying in the TV reporter industry but you just know that is going to happen so I considered my first two years on the job to be my “advanced degree” time to help my future earnings. It was also on-the-job training.

When you have zero debt out of college you can survive on a small salary. Plus when you start earning a lot more money later on, guess what, you get to keep it because you don’t have student loans to pay off. Plus you learn to leave with less and when you make more you don’t always feel the need to have to increase your lifestyle because you survived on less.

I see my brother-in-law currently going to medical school and coming out he will be at a salary similar to what I am making right now. It’s a good solid salary, but the debt he will have will be tremendous having to live across the country and pay for housing and years of medical school. By the time he pays it off will it have been worth it? Could he have spent the time on something else and worked his way up or used that money to build up investments and other revenue sources without debt?

That is a question we face now.

The Future of Universities

I honestly think brick-and-mortar universities will disappear because of expenses. There are legitimate online schools that can provide cheap options. I know one because it is in my backyard and continues to grow like crazy.

Western Governors University has giant growth in students each year and provides an affordable option for people to learn without paying for the “tenured” staff and large campuses. Whether or not your future career looks at online schools as legit is another debate, but I think online learning is going to become very mainstream. Why do I have to sit in a classroom when everything can be recorded or done online? Lots of schools offer online options now, but the pay will have to go down.

What is Better?

Looking back and playing armchair quarterback is always easy to do, but let’s take two scenarios.

The first is a person who graduates with little to no debt and starts with a job paying $30,000. They buy a modest home with an affordable payment. They work hard for 10 years and make it into a management position by their mid-30s and start making $60,000-75,000 a year. 

Instead of paying down debt, they are able to start saving immediately. While it isn’t a lot initially, they are consistent and then continue to add to their investment. It started at $100 a month but now they are up to $500-1000 each month. Their investment income is now tremendous and the habit of saving was started immediately and is no big deal.

The 2nd scenario is someone who has taken extra time in school and earned an advanced degree. They graduate nearly 30 years old and have $125,000 in debt. Since they are a doctor, they earn a salary of $100,000-130,000 a year to start with the potential to go higher. They also buy a large home for over $500,000.00 and between housing and student debt they are unable to invest because they are paying off their loans for 30 years. They start saving around 35-40 years old and are catching up. This is not always the case but being in health care I’m amazed how many people making $250,000 a year are broken and in debt, because their expenses are so high.

Those are scenarios to think about.

Education is the Key

Life is about learning. It is vital to learn and grow; now at what cost, well that is the question. How much should it cost to be educated? If you are not going to an elite school, does it make sense to take on mountains of debt? You spend years preparing to go to school and deciding what is best, but shouldn’t we put as much time into preparing for a job or life after school and how much debt we can overcome?

That is something to think about because incurring extreme debt will impact the rest of your life.

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