Driving Away From Debt …

I have to shake my head when I see politicians promoting “free college” and “student loan forgiveness”. College grads are supposed to be smart & responsible, aren’t they?

In my view, college students are adults and they voluntarily entered into these loans with the help of the friendly folks in the university admissions department (who try hard to disguise their job as anything but what they are – simple salespeople).

The first education these students should have received is to be wary of anything sold to you with debt. Buying anything with a price that requires decades of future payments is a dangerous business. Even more so when statistics show that 40% of those who start, won’t finish their degree.

Increasingly, we are seeing that a college degree has an iffy ROI. Compare the starting salaries by major in the chart below with this article from MSNBC reporting that Walmart will now train new drivers at $85K-$110K/year starting salary …

Walmart Raises Starting Pay For Drivers

Just think how far ahead these truck drivers will be financially than college students investing four years of their life and a small treasure for a diploma! With a starting salary 3x higher than the average college graduate and no debt, it will be hard for college students to catch them financially.

I’m guessing the same tough comparison applies to many trades and construction jobs. While debt-drenched students are strolling between ivy-covered university buildings, these folks will be miles ahead financially. (I say this as someone who worked all through college and still ended up with a good deal of college debt).

Obviously, there is more to life than just money. Many interesting & challenging jobs are only available to those with a college degree. I had a job that required a graduate degree. Still, we are doing a disservice to everyone to pretend college is singularly the most advantageous way forward for most young people. Especially those that would take on significant debt.

Perhaps some clever young folks would even consider working a job like this for a few years to fund their college later? Or start a small business of their own? Maybe a trucking company?

Has the cost of a college degree become significantly out of line with the financial benefits?

Image Credit: Walmart Corporate, Statistica

20 thoughts on “Driving Away From Debt …

  1. As many things in life…..it depends. Far too many go to college. Twenty years ago at my employer they encouraged employees to enroll in a one class at a time program taught on site. I personally knew 6-8 who enrolled, 2 worked for me and were in their 40’s at the time. None of them progressed further in their employment and had no gained skills, only a piece of paper. My 27 year old took some classes out of high school but when reached age 22 began driving for Greyhound as the youngest driver in the fleet. He is now studying for an accounting degree, he is quick and perhaps brilliant. He drives charter buses while going to school. The crazy thing is that he will likely take a pay cut when he becomes an accountant. That however won’t last long. He can perform long complex equations in his head

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    1. Great that he is working his way to his accounting degree! I know college is much more expensive now relative to when k went to school, but I had many part time jobs to pay tuition & rent – none as lucrative as driving a charter bus.

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  2. Agree! There need to be a balance. Right now much of the trade industry is a much better choice then college for those that can and will work with their hands. College has become more of an experience, vacation or an adventure vs preparation for adult hood. I had a younger freind (25yrs old) tell me one time “My goal is to coast in life with as little effort as possible”. After I appreciated his honesty, I asked him if it matter to him to make a difference in his world, sphere of influence. His response was shocking. He said. “Your generation worked hard and made a difference so I don’t have to. I can just coast!” He is a smart educated adult that just wants to do the bare minimum. This is are world. The trades are struggling to find workers because it is a hard day of work for good pay VS and easy day of work for good pay.

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    1. Wow – “I can just coast”. That’s a scary attitude. I have read that the so-called Gen Z folks (which would include a 25yo) are a pretty chill crowd compared to the older Millennials. Of course, that’s what they also said about my own Gen X cohort compared to the Boomers ahead of us. Boomers were going to change the world (they did), and Gen X are just “slackers”.

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      1. I just read “The Millionaire Next Door” yesterday morning. The main part that everyone always hears about is that many of the Millionaires that the authors studied did not have the highest income level or the most education. They went to cheaper universities, if they went, and graduated debt free. Most started working early and had a high propensity to save and invest. They got ahead by not wasting money on consumer goods and investing tax efficiently instead.

        The second half of the book focused on how to raise successful, as measured by being self-sufficient and productive children. Many of the Millionaires studied made the mistake of trying to “make things easier” for their children. This often resulted in adult children who are on economic life support and are unable to wean themselves off parental support.

        I noticed when I was in college that there were ‘students’ whose successful parents gave their children an all expenses paid trip through college. Most did not do well and were unmotivated. My summers consisted of working six twelve hour days per week for thirteen week. For me school was easier. When I graduated, I found putting the words “My college education was 100% self-financed” signaled to employers that I had a work ethic and it seemed to attract positive attention. I had six solid job offers despite being in the middle of the Jimmy Carter era.

        Universities are delaying the onset of adulthood by expecting parents, instead of students to carry the financial burden. I get it that college tuition has outpaced inflation by 200%, while entry level jobs have fallen behind inflation by around 50% over the past 40 years. My middle son was totally unwilling to pay any of his own college expenses and didn’t work during summers. I would have cut him off in NY second, but my wife thinks education is all important. He is not doing great in the working world. A possible solution might matching the amount of money that student earns and saves by working during the summer. They need to earn $5,000, and you, the successful parent will match their savings 5:1. If they don’t work or save their collegiate vacation immediately ends.

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      2. I think it really depends on the kid. We paid for our son’s college – tuition, room & board. He worked summers (and sometimes during the school year) and banked the great majority of his earnings. We gave home my wife’s old car when he lived off campus and could park it on the street. When he graduated, he had a degree, a used car, and a good amount of money in the bank to get started. He also had a job he had lined up through an internship. Very responsible, no issues – we all felt good about how it worked out.

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  3. Chief,

    When I started at UW – Eau Claire in the fall of 1977 the all inclusive cost was $1,650 per year. This cost including the school loaning you the required books for your classes, unlimited food, housing, student health services, and tuition. My only other expenses were entertainment and gas to get to and from home. I worked in the Dells during the summer and cleared $2,400 by working 12 hours per day – six days a week for thirteen week. I got these income number from my Social Security past earnings statement. The $2,400 that I earned is worth $12,797.25 in today’s dollars.

    In 1979, I transferred to UW – Madison and the cost for tuition and garbage fees was around $850 per year. I had to buy my own books which cost around $250 per year. My half of the rent for a two bedroom apartment was $115 per month. I earned $2,471, which is worth $11,224 now.

    Here are some numbers for 2022-23 WI Residents.
    UW – Eau Claire – $17,464 (they still include book rental in tuition)
    UW – Madison – $11,872 (you have to rent your books)

    How much has UW – Eau Claire increased their cost compared to inflation since 1977?

    $1,650 X $12,797 / $2,400 = $8,797

    $17,464 / $8,797 = 1.98. The cost increased 2X inflation since 1977.

    How much has UW – Madison increased their cost compared to inflation since 1979?

    $1,100 X $11,224 / $2,471 = $4,996

    $11,872 / $4,996 = 2.38. The cost has increased 2.38X inflation since 1979.

    Let’s look at this one other way. How much could I earn working a minimum wage job for twelve hours per day, six days a week for thirteen week.

    $7.25 X 12 X 6 X 13 = $6,786. This number does not even come close to paying UW – Eau Claire’s all inclusive $17,464 or UW – Madison cost for just tuition and books.

    In one generation, we have gone from a situation where students such as my sister and myself could pay their own way through college without taking on any student loans.

    The reason for this two fold. Universities have been raising their cost at double the rate of inflation and entry level jobs have not kept up with inflation. If I was emperor for a day, I would solve these problems by outlawing student loans and limiting legal and illegal immigration.

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    1. Those numbers are very recognizable to me as I went to UW-River Falls in the 1980s. I ended up with some student loans, but not a huge amount. I think UW-RF was about $3,400 in 1984 ($9,300 in today’s dollars). Actual tuition today at UW-RF is $$8,100, so they raised prices SLOWER than inflation. Pretty unusual, huh? Fact is, when government subsidizes a product (in this case through easy money student loans), market prices artificially rise to manage demand, relative to capacity. Not hard to figure out!

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      1. Your $3,400 figure must have included room and board. The $8,100 figure is tuition only. The all inclusive rate today is $15,111. As a contrast, my youngest son is a commuter student at UCLA where tuition and garbage fees alone are around $13,500. An extra $2,000 at UW River Falls gives you an all inclusive deal.

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      2. Actually, I think I figured it wrong! The number I remember was $1.7K a semester. But, it might have been $1.7K a year. I think it was just tuition. I was an RA in the dorms, so I didn’t pay room or board.

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  4. Many college fields of study will never pay a return on the money and lost time required to attend and we have too many people attending college. There has been massive over creditionling required by employers who are demanding college graduates for jobs that used to be filled by high school graduates. High schools used to teach trades and life skills. I personally learned auto mechanics, which has been a major money saver of the years. Everyone is being pushed to go to college by our teaching establishment and politicians.

    The key driver of the massive higher education inflation is student loans. Think about it, an 18 year old is considered not mature enough to buy cigarettes, alcohol, or guns. Higher education is taking advantage of unsophisticated consumers to get them to sign contracts racking up as much as several hundred thousand in debt for a dubious product without a reasonable ROI.

    One of the solution to this problems is requiring students to pay a percentage of their earnings throughout their lifetime. This sounds very similar to indentured servitude. Outlawing student loans would also be a great beat-down on a mostly leftist crowd who are undermining our country. I am not the guy that the University Development Office was to cold call.

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  5. Also there is a big difference between education and training. Most people confuse the two. Trade schools and community colleges provide excellent training and prep work for four year programs.

    I went to Maine 1981-1985 instate tuition and living expenses about $7,500. I felt well paid with my first job $17,500 plus a company car. I do think I was at the higher end of a college graduate first year so let’s say the first year average salary was about 2 times annual education expenses. I think an average in-state four year school is $25,000-$30,000 now. What is the average starting wage?

    Please correct me if I am wrong

    Of course much of one’s first two years can be done at community college which is very inexpensive. I also take the position that the teaching is as good or better at Community College as the classes are taught by people who want to teach and not graduate students who are focused on their PhD

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    1. You are describing the higher education system in Switzerland. They push people into trade schools when students in the USA are still going to high school. After trade school, some students decide to go to college. I have observed that people in the engineering field who can do practical things with the hands are better than those who are only book smart.

      I started at UW Eau Claire, which was not the flagship school in Wisconsin. There were some great professors at Eau Claire. I never had a TA teaching a course at Eau Claire. My second year physics professor, was a renowned astro physicist who looked at teaching with passion instead of something he had to do and that got in the way of his research. I had a couple really good professors at the UW flagship, but I had some really awful ones including TA’s.

      Community Colleges often have professors who have a real world profession. They bring real world experience to the classroom.

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      1. I’ve always believed that good kids do well at whatever school they go to. I recently saw a study that said 90% of one’s success comes from inherited traits and how you are raised by your parents. Only about 10% was explained by where you went to school. That seems about right. After all, UW-Madison, not Harvard, produced the most CEOs in American business … https://chiefexecutive.net/fortune-500-ceos-wisconsin/

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      2. Full disclosure: I’ve been on the MBA Brand & Product Management Board at UW-Madison for 10+ years! 🙂

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    2. I have many friends who started their Bachelors degree by taking 2 years of community college classes back in the 1980s. It seemed very common back then.

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      1. I wanted to GED out of high school my Junior year and go to Boo U, but couldn’t get the high school to agree to it. I have friends who doing this right now with their high school students in LA, Chicago, Oshkosh, and Duluth. The cost is free, because it is in lieu of the last two years of high school, and there are no issues about whether the credits are really college credits or not. Saving money and getting started working for real two years sooner, lets the students start investing sooner. The students who are going this route are on a fast track.

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  6. I went to a small private college in the mid-Eighties. Took out a couple of small student loans, and paid them back over the next ten years. I then worked my way through a 20+ year Pharma MegaCorp career to a corner office level VP position.

    I have said for years, that my high school summer job at a local auto parts store better prepared me for my real career than the four year college degree ever did. The degree only got me the first “career” job. But the summer high school job taught me about leadership, customer service, talking with people of all levels, good business practices, the importance of time commitments, and real profits. That summer job was worth ten college degrees, and I even got paid for it! I’ll take people with real experiences over degrees any day, unless it’s a very specific technical role. College degrees are over rated and over priced. Period.

    Liked by 2 people

    1. Agree, whole-heartedly! When people complain about low-paying starter jobs, they forget the biggest benefit you get is learning how to work. How to be responsible. How to serve others. How businesses operate. My first job was in junior high delivering newspapers. Every day through the sun, rain, and snow for several years. That included collecting subscription $$$ and paying for the papers at the end of the month. A great lesson in how hard & smart work produces profits!

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