I was in the mortgage business when the Real Estate/Mortgage Bubble started blowing up in 2007. From where I sit, the college/student loan alliance is heading down the same path. And the evidence is piling up – quickly.
According to the Consumer Financial Protection Bureau (CFPB), an agency of the US government, more than 7 million student loans – both federal and private – are in default. In addition, a substantial number of debtors are enrolled in alternative repayment plans to lower their monthly payments.
The student loan crash will be different than the Mortgage Meltdown
What makes the student loan crisis – let?s call it what it is – more complicated than the mortgage meltdown is that you can?t default on the loans and then get on with your life. There?s no foreclosure equivalent in the student loan business, and no ability to discharge them in bankruptcy.
If you?re facing a student loan crisis on an individual level, it?s already too late for you to make a clean break. Your only option is to work within the government?s alternative repayment programs, which can lower your monthly payment. But those plans only extend the repayment term – they don?t make the problem go away.
The government has been trying to make the unfolding student loan crisis more comfortable with plans such as the Income Based Repayment (IBR) or the Public Service Loan Forgiveness (PSLF) plans. And while those plans can help those already drowning in student loan debt to manage their monthly payments, your best bet will be to avoid borrowing for an education entirely if you haven?t gotten on that treadmill yet.
A six figure education is no longer practical for middle- and lower-income households, and more upper middle income families than most will admit. Here’s a point that most people don?t fully grasp: Student loans don?t benefit students and their families nearly as much as they do the colleges and universities, because it enables them to charge increasingly outrageous fees.
You have the option to not participate in the madness! What are the choices?
Drop the Animal House delusion
Somewhere lodged deep in the psyche of college students and college student wannabes everywhere is the cult-favorite movie National Lampoon?s Animal House. Perhaps the ultimate moving picture advertisement for the marriage between university life and reckless abandon, it has set the standard (if only subliminally) as to what campus life should be.
Not to rain on your parade, but you probably can?t afford that life (without student loans), and shouldn?t enter an adulthood of indentured servitude to make it your reality.
Back in 1978 when the move was filmed, college was much less expensive and middle class families were often able to send their kids to live away at college, without having to borrow money. That situation has changed completely and you need to adapt to the change – or pay the consequences later in the form of debts you can?t get rid of. You can cut your college costs roughly in half by living at home and commuting to school.
To take it a step further, community colleges offer even lower tuition than typical four year in-state colleges. You can cut your college costs significantly by spending your first two years attending one, then transferring to a four year school.
Beyond cost, community colleges have another important benefit: since they typically confer an Associates degree upon graduation, you may be able to get a job after just two years in college. Even if that isn?t your plan, it?s an outstanding option to have.
Not only can earning money during your college years help to lessen the reliance on student loans, they can also be a valuable source of work experience that will help you to land a decent job upon graduation. Too many college students are living the life, and never hold any meaningful employment prior to graduation.
In today?s job market, you can?t get a good job without having hands on skills. The more you have the more employable you are.
That makes a compelling case for maintaining some sort substantial employment while you?re attending college. By substantial, I mean some sort of job – or even a business venture – where you can learn the kinds of skills that employers are looking for. Sales, marketing, computer skills, accounting, finance, and customer service are skills that are welcome everywhere, even in jobs where they?re not specifically required.
During your college years, you should think of your education in the broadest possible terms – as a combination of what you are learning in school, plus skills acquired through employment/self-employment. It can no longer wait until graduation.
Careers that don?t require a college degree
Today, we have this sanitized, standardized notion that everyone needs a college degree. Bunk! I don?t think it?s a stretch to say that much of the problem with recent college graduate un/under-employment has to do with the fact that a lot of kids are graduating either with useless degrees, or degrees in majors they have no real interest in or aptitude for (there?s a fundamental difference between being able to pass tests, and being able to apply what you?ve learned in the real world).
The job market is more diverse now than ever, and you should seriously investigate careers that don?t require a college degree. The demand for ?managers?, ?marketers?, ?consultants?, ?account executives?, and other generic categories is largely saturated, and you will probably earn better money in some of the trades, or up-and-coming internet based careers. If that?s where your interests lie, skip college and do what you need to to get a foot in the door of work that you can turn into a career.
The entire concept of ?jobs? is a rapidly evolving concept. More positions than ever are contract, temporary, or especially part-time (the Affordable Care Act will guarantee that). The education you are getting to prepare for jobs that would have been typical and abundant in the 1990s may not exist by the time you graduate.
I believe we are transitioning back to the days before the two world wars, when the majority of people were self-employed. No, it won?t look at all like the 19th or early 20th Centuries, but absent jobs, people are increasingly having to create their own. You may want to investigate self-employment as an alternative to a college education.
While it may be that you will need a degree for the business you want to enter, consider that the internet has made self-employment easier than ever. It enables a one-man shop to leverage products, services and partnerships in such a way as to perform as a much larger organization.
Unfortunately, college doesn?t adequately prepare graduates for self-employment. Their focus is primarily on training them for life in the organizational/institutional world. If you want to be self-employed, you will have to go out and become self-employed.
I realize that sounds like an over-simplification, but it?s absolutely true. There?s no way to become self-employed through any method other than trial-and-error. The best education in that regard may be to spend the four years you would be in college working to build your own business. Once you start, you can gain experience, build contacts and alliances and learn the necessary skills and systems to be successful in the business. No one can teach you any of that – you can only learn it, and that will only happen when you do it.
Apprentice into a career
One of the best ways to blend education and experience is through the centuries old process of apprenticeship. It?s an opportunity to earn and learn in a real world environment. You can possibly apprentice into a business, or even certain jobs, but the best place for this is in the skilled trades. Apprenticeship is the normal course of entry in the trades.
If you really would rather be a plumber than an accountant, you should ignore the societal pressure (to say nothing of high schools) to pursue a college norm job, and go the skilled trade route. There are several major advantages to this:
- You can begin working and earning money immediately.
- You won’t incur student loan debt.
- Your income will increase as you move through the apprenticeship process.
- Since the work is local, it can?t be off-shored.
- Technology can supplement the trades, but it can never replace the tradesman.
- Common trades – mechanics, electricians, plumbers, etc. – have no geographic limitations – they?re needed everywhere.
- The trades are an excellent entry into self-employment.
- Because fewer young people enter the trades, pay levels are often higher than what they are for college norm jobs.
Follow your passion – even if it doesn?t require a degree
I?ve written on this topic before: Pursuing Your Passion Isn?t as Risky as it Used to Be. As the traditional job market degrades, pursuing your passion becomes a lower risk proposition all the time. But more important, you are more likely to be successful in a career or business that you are passionate about than in one that you merely enter to ?make a good living?.
The job market is no longer a low risk proposition. As such, you might be better off pursuing your passion than risking burnout in the pursuit of a career-type position you?re not particularly enthusiastic about. I reached that realization when my mortgage career ended seven years ago. I finally let go of the elusive notion of ?security?, and began pursing my passion to be a blogger/freelance blog writer. As a veteran of the pursue-your-passion route, I strongly recommend it. You will be working for the rest of your life, and doing so will be so much easier if that work is something you really like.
Once again, college doesn?t necessarily prepare you to follow your passion. In fact, it?s generally the default choice in favor of security. But there is no security, not any more. You might be better served by seeking out the kind of work you were ?meant to do? – we all have such work, but most people aren?t doing it. If college and your passion don?t mix, you will probably be better off going for your passion.
You don?t need an education to do that. For the person pursuing his or her passion, inertia is your best friend. You simply need to set the direction on your passion, and you?ll learn all you need to along the way.
Once again, it?s a strong dose of trial-and-error – but don?t we all know that that?s really the best teacher anyway?
Do you agree that the cost of college and the size of student loan debts have become too threatening to ignore? What careers or businesses would you recommend right now, either for a high school graduate or someone looking to change careers?