Millennial College Students Seem Comfortable with Risk

Recent volatility in the stock market is a reminder that people handle risks differently. Some people wouldn’t dream of investing in equities and subjecting their capital to potential principal loss. Others are high flyers, routinely putting markers down on stocks with high potential on the upside as well as the downside. Others run scared at the first sign of trouble. Others stay the course, grounded in a long-term perspective (or inertia is some cases).

Beyond our individual investment philosophies and strategies, there are many decisions in life that test our appetite for risk. Indeed, most potential courses of action entail some level of risk. Sometimes we try our best to assess those risks objectively (as objectively as possible, that is, given our seemingly inescapable biases and preconceptions), and sometimes we rationalize them away. It occurred to me that my concern with student debt is fundamentally a concern about our risk assessment.

I’m constantly surprised at the amount of risk millennials are willing to accept when it comes to incurring student debt. Last week I ran into a guy who soon will be graduating with a music degree and six-figure student loans. I recall an elementary ed grad with cover $100,000 of student loans. And the data show many students graduating with student loans in amounts far greater than their anticipated first-year salaries (assuming they can get a job in their fields). It’s no surprise default rates are high. It’s no surprise some people are having their social security payments garnished to pay off their student loans.

Decisions concerning debt necessarily entail judgments about future income, the very revenue stream upon which timely debt repayment is dependent. These days it’s tough: many, many college graduates can’t find full-time jobs that pay well. And for those who do, often there isn’t much job security. Things might improve a lot, but maybe they won’t. That’s risk.

The decisions we make about debt are often some of the most momentous decisions we’ll make in life. They will impact our ability to achieve a greater level of economic freedom in our lives. They will impact our relationships and, in the end, our health and happiness.

Many Westerners, of all generations, have taken on a lot of debt. Many also live high-stress lives and, as a group, we suffer from high incidences of bankruptcies, depression, anxiety, high blood pressure, obesity and failed marital relationships. I’m not suggesting there is a casual relationship; however, I’m also not suggesting there isn’t any relationship. You can judge for yourself.

One thing is indisputable, however: debt entails risk. It entails risks far beyond what many of us appreciate. We serve our young people poorly when we fail to educate them about those risks. Or when we shove promissory notes under their noses and instruct them to sign here (so the funds can flow unimpeded to our colleges and universities).

Sadly, our institutions–both our colleges and our government–seem intent on facilitating the incurrence of debt on the part of our young people. Colleges do so out of a sense of preservation (selfish fear). They rely on student-loan debt to survive and perpetuate the old model. Few who run these institutions care about keeping costs as low as possible and providing a high-quality learning experience that is accessible to all.

But government’s role is even less admirable. Our federal government is the chief purveyor of easy credit. They even call it “financial aid.” They’re afraid to name it for what it really is: debt. Countless kids are mortgaging their futures, and we (the adults who should know better) make it as easy for them as we can. The whole system rationalizes away the risks.

Consequently, we’re conspiring to create one generation after another of indebted serfs. From an individual standpoint, it’s a very risky course of action.

Decisions have consequences. And as a nation, we’ll be living with those consequences for decades to come.

Majors and Work Experience Matter

Noted economist Dean Baker, c0-director of the Center for Economic and Policy Research, points out this morning, “The unemployment rate for college grads is still almost 50 percent higher than its pre-recession level. The wages for recent college grads has fallen sharply since 2000.” Continue reading

If Mark Cuban appreciates the fallout from student debt, why don’t others?

Student debt is a drag on the economy (and here). I’m not the only one who believes that. People much smarter and more experienced than I have made the same point.

Those people include Mark Cuban. Indeed, as I’ve explained before (and here), I think Mark Cuban understands higher ed better than many people running it.

One of the things he understands is the drag on the economy caused by indebted twenty-somethings. As reported in this Inc.com story: Continue reading

Debt But No Degree: The Worst Option

It can be counterproductive to push students into college if they do not feel academically or financially prepared, as it may end up just leaving them with a big pile of debt and no degree. – Carly Stockwell, The Status of College Dropouts: Struggling with Debt and No Degree

I invite you to read Ms. Stockwell’s full story at Payscale Career News. It’s particularly important for those students who are feeling pressured to head off to college but feel they lack the motivation or financial resources to pull it off.

As anyone who follows this blog knows, I’m not fond of higher ed’s approach to enrollment and retention. There is a lot of pressure on kids to attend college. And there are a lot of kids who aren’t well prepared to succeed academically, socially or financially. But, of course, that doesn’t stop colleges from enrolling them.

Earlier I wrote about the herd enrollment strategy. Continue reading

Two More Colleges Admit Misreporting Data to U.S. News

U.S. News & World Report, purveyor of the most widely cited ranking of U.S. colleges, announced two more colleges have admitted to providing wrong data that, in both instances, made their colleges look better than they really are (at least from the perspective of factors deemed important by U.S. News).  The colleges are Rollins in Florida and Lindenwood in Missouri. Continue reading

Earnings Premium Justifies Many Advanced Degrees

On average, individuals with advanced degrees earn $28,187 more a year than those with only bachelor’s degrees (source: U.S. Bureau of Labor Statistics and J.P. Morgan Asset Management). Do the math: over one’s career, the earnings premium is huge. Continue reading

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