College is crazy stupid. Don’t get me wrong, Courtney and I both went to college. In fact, I delayed getting an engineering job and went back to get my master’s degree so that Courtney could finish her degree. College is great, and college degrees are *almost* necessary to succeed in life. Bachelor’s degree holders earn about $32,000/year more than those with just a high school diploma (source). The problem isn’t necessarily college, it’s the crazy stupid approach we take to college.
Borderline Predatory Recruitment Strategies
Imagine you’re a high school senior, 17 years old. Colleges are circling like buzzards, filling your mailbox and inbox with spam about how “our college is the right place for you, <insert name here>!” It’s up to you to make the decision on where to spend 4 years of your life (nearly 8 in my experience) and probably 6 figures. You’re not even legally an adult yet.
Take my Alma Mater for example. I went to the University of Nebraska, and as an in-state public university tuition was $6,956.70 annually. Room and board were about $8000/year and books were about $500/year. I spent 5 years getting my engineering degree (STEM degrees often takes longer than other degrees because of all the labs.) So that comes out to $77,500 to go to college. That’s a huge amount of money. If I had gone to Colorado School of Mines like I had originally planned, it would have cost between $140,000 and $175,000 depending on if it took 4 or 5 years to graduate!
Come to college here, we have shiny toys
And how do colleges usually recruit 17 year-olds? They often tell you about their campus: how pretty it is, what kind of clubs there are, how active the student union is, etc. They’ll show off their rec center or their sports leagues, and they try to convince you that you’ll “fit in” at their college. They act like parents in a particularly nasty custody battle: “Come with me, I’ve got shiny new toys and a house with a pool!” But literally none of that matters. The only thing that matters when going to college is whether or not this really expensive experience will give you the ability to get a job afterwards.
Unless you are the heiress of a multibillion dollar company, the only reason to go to college is to get a job afterwards. We are going to talk about how not all majors are equal in the next article (On how to do college right), but suffice it to say that colleges will sell you a totally useless degree in a totally useless major simply because you’ll pay for it. The job you can get with your degree, and how hard it will be to get said job, should be weighed very heavily.
So if getting a job afterwards is the most important reason to go to college, the most important criteria you should be judging a college based on is academics, job placement, and how it looks on a resume. The second most important criteria is cost. Picking a college based on how pretty its campus is is like buying a house solely based on the color of the paint: not a great plan.
Small Private Schools
When it comes to recruiting foolish 17 year-olds, small private colleges are the worst offenders. They boast a tight knit college experience with a low student to faculty ratio and a pretty campus that really appeals to high school seniors who are social creatures used to small classrooms. But to get this community experience, you have to pay through the nose. The average private college costs more than three times as much as a public state university (source). And unless you’re going to Harvard, the chances are that your small private college won’t look as good on a resume as your public university anyways.
If you are a recruiter for a tech firm and you’re looking for engineers from around the state, chances are that the local university in town has a program you are familiar with and you trust their system. You’ve probably interviewed and hired graduates from that program before and you know basically what to expect.
If you interview a recent graduate from some small college 100 miles away, they may have a good resume and good GPA, but you probably aren’t familiar with their school’s program. It may be a great engineering program, but you don’t know how well it covers the subjects you care about or how hard they grade classes. Whether it’s right or wrong, a recruiter is going to go with what they know and will most likely be biased towards the graduate from the university they’re familiar with.
A Real World Example
I have some friends who went into teaching. Some of them went to the University of Nebraska, and some went to smaller private colleges. The Lincoln Public School system (LPS) hires dozens of teachers a year. The majority of them graduated from the University of Nebraska. LPS is very familiar with the university’s teaching college. They know what to look for and exactly what they’re getting. For better or for worse, my friends who got teaching degrees from schools other than the University of Nebraska didn’t end up getting a job offer from LPS.
With Crazy Prices to Match
There are two problems with college:
- Teenagers usually pick a college based on how it feels to them or how much fun they had on the campus tour.
- They are supposed to shell out six figures to pay for it.
Teenagers are rarely expected to make any decisions for themselves, much less hundred thousand dollar decisions. We can’t even expect them to think one year into the future, much less multiple decades. Kids are impulsive, short-term thinkers who are very susceptible to peer pressure. Why are we trusting them to make hundred thousand dollar decisions basically on their own?
Also, how are they going to pay for it? Unless their parents are pretty well off and they get scholarships, they’re going to have to get student loans. Long gone are the days where you could work part time and summers and make enough to pay for college. Unless you have a lot of circumstances go right you’re going to have to get a loan.
Student loans are dangerous
Over 20% of current student loans are held by baby boomers. That’s over $336 billion owed by people over the age of 50. Their average student loan amount is $40,000/family, which is really depressing considering the average cost of tuition in 1990 was only $4000/year (source). Imagine paying student loan payments every month for 30 years and still having more debt than you started with. That’s equal parts crazy and disheartening. You can see the need for financial Independence.
When you apply for a regular loan, you put something down as collateral. Something roughly equal to the value of the loan as a pledge so that the bank can be assured that their interests are protected. When you get a mortgage for a house, you put the house down as collateral. That way if you fail to pay your debt, the bank can sell your house to cover it.
The bank also requires you to have an income. When we bought our house, they required bank statements from all of our accounts, two months of paychecks to ensure we had a job that could afford the house, and a statement from our bank saying we’ve had the money a while, that we didn’t just get it recently. There are a lot of hoops to jump through to get a mortgage. If you don’t have a job, even if you have the money to buy the house outright, no bank with give you a mortgage. Even if you are retired with a million dollars, it is really hard to get a $200,000 mortgage.
Imagine you’re about to graduate high school and you go to the bank and ask for a $100,000 loan.
Loan Officer: What do you have for collateral?
17 year old: I’ve got an Xbox and that’s about it.
Loan Officer: OK, let me see your bank statement.
17 year old: I’ve got a thousand dollars in my checking account
Loan Officer: Um, do you have two months of pay stubs?
17 year old: Yep, I’ve been working part-time at McDonalds for the past year making about $600/month
Loan Officer: HAHAHAHA good joke. REJECTED.
That’s literally how it would go. And yet we hand out six figure loans to any Joe Schmo who says they’re going to college. These student loans are given without a thought as to how the borrowers will pay them back because they are guaranteed by the federal government. Student loans can’t be expunged via bankruptcy and if the borrower defaults on the loan we, the taxpayers, will foot the bill.
We’re the collateral
According to Investopedia: “As of July 8, 2016, the federal government owned approximately $1 trillion in outstanding consumer debt, per data compiled by the Federal Reserve Bank of St. Louis. That figure was up from less than $150 billion in January 2009, representing a nearly 600% increase over that time span. The main culprit is student loans, which the federal government effectively monopolized in a little-known provision of the Affordable Care Act, signed into law in 2010.”
The reason banks can offer tens of thousands of dollars to children without collateral, income, or prospects, and who may not even want to go to college, is because they can. Since the taxpayers are ultimately on the hook for loan, it’s free money. It doesn’t matter whether Joe Schmo gets a high paying job or not. They still get the money. It doesn’t even matter if Joe drops out of school. The bank still gets the money. Investopedia also estimates that the government loses between $100 and $250 billion/year due to student loan costs.
Conclusion
College is not stupid, but the way we are doing it is. We sell kids the complete wrong thing when it comes to what they actually need out of going to college. And then we charge them exorbitant amounts of money to get that college degree. What can be done? First, we need to learn how to do college the right way (under the current system). This is a short term solution. Secondly, we need to discuss how to fix the current system. The next two articles will be discussing those two solutions, so be on the lookout for them.
What do you think? Is college really this crazy or am I an alarmist? Are there any crazy things my list is missing? Let us know in the comments below.
