Student Loans and the Rising Cost of Useless Degrees

The baby boomers were the first generation to truly experience affluence. However, they were also the first generation to truly experience stress and burnout. The boredom of working at the same jobs year after year had taken a toll on these people. They had a dream to give their children better lives than they got. This was the birth of a myth, the myth of higher education.

The next education was sold a myth that education was the jetpack to the top. Armed with a college degree, students were expected to zoom away to six figure salaries. Instead, the opposite has happened. A couple of generations’ later, student debt is the most crushing debt in America. Its magnitude is far greater than credit card debt. Also, the horror stories of debt bondage that are linked to student debt are almost ubiquitous.

In this article, we will further analyze the issue of mounting debt which is used to purchase mostly useless degrees that have little or no application in the real world.

Colleges are For-Profit

Colleges are considered by many as temples of knowledge. The belief is that nobody can really harm themselves by going to college. They may or may not gain. But no harm will be done. This is not true! This belief is totally baseless. In fact, millions of people are today stuck with loans because they have been swindled out of their money by colleges. Colleges were temples of education when trusts ran them for philanthropy.

In the real world, colleges have become quite different. They are hungry, greedy, for-profit institutions that will try to rip off every last penny that their students have. Once people stop imagining the halo around colleges and look at them as possible financial predators, the student debt crisis will suddenly start making sense.

All Degrees are Not Equal

The most common sales pitch for college degrees is that they increase the earning potential of people. Colleges often cite studies that show that college degree holders on an average earn one million more than non-degree holders. The key word here is average!

Firstly, the studies are commissioned by the colleges themselves and are heavily biased towards them.

Secondly, degrees in science, engineering, technology, medical and math fields earn a significantly higher amount than non-degree holders. However, they form a relatively small chunk of students.

On the other hand, the majority of students major is psychology, history, arts and other such subjects which have little to no commercial application. They may be right from an education point of view. However, when education is undertaken on borrowed money, finances automatically become an important facet.

The key takeaway is that there are some degrees from colleges which may be worth the money being paid. However, one needs to carefully pay attention to the ROI numbers to avoid getting ripped off.

All Loans are Equal

Financiers don’t care about the subject you major in. As long as the taxpayers approve the college, they will simply lend the money. Why wouldn’t they? Their loans are protected from bankruptcy protection. Also, their loans are guaranteed by taxpayer’s money.

The burden of these loans on students with non-commercial majors is horrific. A major in art history might end up working at Wal-Mart wherein their degree would have no value. As a result, they would make the same pay as a non-degree holder. However, a significant chunk of that paycheck would have to go to service the debt caused by the degree.

Also, education loans have increasingly long tenures nowadays. Some of these loans last 20 to 30 years after the course has been completed.

Degree-Less Employment

People have been overlooking degree-less jobs for far too long. Jobs like working at plumbing pay significantly high in the United States. Wages increase with experience, and there is no cost of servicing debt involved. More Americans should give up on the illusion of college degrees and make an informed decision. Like every other investment, college degrees too need to be evaluated for their ROI.

The Problem with Giving Everyone a Student Loan

The problem with giving everyone a student loan is twofold.

1. Firstly, it creates a market for useless degrees which would not have existed in the absence of these loans. About 90% of the exorbitant fee low ROI courses are financed with borrowed money. This is a decision that has a massive detrimental impact on the life of students many years down the line.

   Cutting the funding for these courses would severely affect the private colleges who prey on this money. However, the entire youth of United States will be protected from debt bondage.

2. Secondly, it creates a poor indebted workforce. Many of these college graduates are unable to fend for themselves. The state has to supplement their earning ability through welfare and other entitlement programs. This is a huge cost to the taxpayer apart from the losses that may potential arise from underwriting these high-risk low utility predator loans.

   The volume and scale at which these loans are being originated simply cannot be ignored any longer.