Vincent Safuto’s Weblog

Notes and observations

Debt for education may be the worst idea ever

I’m a bit of a know-it-all, I openly admit, and there are a few topics on which I cannot shut up.

One of them is student loans.

I am not opposed to debt. Indeed, I actually have lived a goodly proportion of my life on borrowed money, and it always was an article of pride that I paid back the money I owed. I’ve borrowed to buy cars, houses and used credit cards.

After I got out of the Marines, I took out a student loan to attend what was then called the Academy of Aeronautics, near LaGuardia Airport in New York. It had been a dream of mine since I first saw the place as a child. Back then, student loans were tough to get and I was very worried that I was taking on this kind of debt, betting that the airline industry would recover. Shortly after starting school, I quit school because I had landed a job with the Postal Service.

The job paid well, and it was clear I couldn’t take classes and work nights and weekends. I think that then I made the right choice. I gave back the loan, and have never regretted abandoning those studies.

Years later, when I began attending Palm Beach Community College, I had a steady job and a decent paycheck from the Postal Service. I loved then and love now to complain about the post office, but the regular schedule and pay enabled me to go through college and get a degree at Florida Atlantic University without borrowing a cent. Thanks to the taxpayers of Florida, I had a well-subsidized education, for which I am very grateful.

At the time, I had a mortgage, a car loan and credit card debt, but attending college part-time was well within my financial means. I was worried, however, about my peers.

Part of the orientation in 1988, when I first matriculated at PBCC, was the mandatory financial aid session. Everyone there was told that student loans were an integral part of higher education, and the logic was that everyone else was going into debt, so why not you?

Step onto any private or public college campus, and the “Financial Aid” office usually is pretty large and very, very busy. (At least, it was when I was in college, up until 1994). Brochures touting student loans showed smiling people working at good-paying jobs with benefits. This was what was possible if you had the gumption to borrow the money for your education.

I was hesitant, despite the pressure to take out a loan, because being older I knew the financial risks at hand. I wasn’t really borrowing for anything tangible, like a house or a car. If I didn’t pay the mortgage, they’d take the house. If I didn’t pay on the car, they’d take the car. I’d take a hit on my “credit rating” (that’s what the credit score was called then), but what could they seize if I didn’t pay on a student loan? My brain?

In the 1980s, there were stories about people who had gone to medical school on student loans, and just never paid them back. The parody group The Capital Steps wrote a song equating medical students with the federal government’s budget writing:

Do medical school on credit,
Take a student loan and then, forget it.
Look at me.
A doctor, exalted, my debts I defaulted,
My schooling I got for free.

And later:

When writing a federal budget,
If it doesn’t balance you can fudge it.
Like we do.
What’s $200 billion, on top of a trillion?
It won’t matter when we’re through.

The need for financial aid among those not making good money led to cottage businesses that were downright exploitative. For example, I remember one fellow coming into the student newspaper to buy an ad pitching a service to help students find loans and grants. In actuality, all the information was available for free from the financial aid office. The help, for which the student would have to pay about $100, seemed to be just putting it all together and giving it to the student.

The pressure to borrow more continued at the university. At Florida Atlantic University the mandatory sessions were ratcheted up, and more opportunities to go into debt were offered. Short of cash on Friday? Just sign and walk away with a few hundred dollars – added to your balance, which you will pay off later – for weekend fun.

I had very serious misgivings, all of which were dismissed by other students and financial aid personnel. I was labeled as being some old worrywart and against debt, but to me debt is a tool and a very good one for getting things you cannot afford to buy in cash if, and only if, you can pay it back.

After college, it might take a few years to land a good job, and then all that debt would be hanging over you like a vulture. You might want to buy a car, a house, start a family, etc., but that debt is always there, knocking points off your credit score and demanding priority. Private student loans are even more troubling than the federally backed ones, and cannot be discharged in bankruptcy. They always are there, and you are tripped up financially.

Why won’t anyone listen to me on the dangers of student loans?

Maybe it’s because I’m just an old fogy now, and no one listens to you unless you’re a drug addict in recovery, or they think I’m just an arrogant old fool.

Thanks to my debt-less college degree pursuit, I was able to take a job that paid less than my postal job in the field for which I had attended college, and advance in that field. Not having loans due meant I could move around, buy houses where I moved to for work and more.

My tendency to take responsibility, even when it wasn’t to my immediate advantage, left me free to pursue other interests as well.

I feel sorry for those who are deeply in debt – sometimes into six figures – for education that often isn’t even completed. They still have to pay back the loan, and can’t even begin to address it. That’s not a good way to live.

Going for broke
A big problem I’ve seen in a lot of media coverage about student loans and former students in debt is that the latter kind of went crazy and signed for more and more debt. It’s not uncommon for those pitching student loans to be incentivized monetarily for closing the loans, and often they act as unofficial financial advisers in their efforts.

Students may feel that there’s a narrow window for them to get their education, and that they had better just go ahead and borrow all that money now and register for 24 credits, and worry about the consequences later.

Also, it amazes me that students just out of high school would consent to allow themselves to be so deeply indebted so soon. Easy credit isn’t so easy when you have to start paying it off, and you don’t have a job that pays enough.

Here are some of the myths students will recite and my destruction of them.

1. I have to go to college now, when I’m 18, or I won’t have the full college experience.
OK, people, I know that every politician and businessman talks about his or her wild college years, but there’s nothing in stone that says you have to go to college at 18. When I was at Florida Atlantic University, some students were stunned to find students my age and older, and even senior citizens, taking classes with them. A few expressed the view that their college years were being ruined by all these “old people” on campus and supposedly getting in their way. (I think they included me in that category.)

2. I have to go to an expensive private school like Harvard or Yale, or I won’t be able to compete out there.
Private colleges and the Ivies are good at pushing the point that they are well-respected and their degrees carry a lot of weight. But the fact that you can’t afford Harvard or Yale doesn’t mean that you can’t afford college. Look, I can’t afford a Cadillac or Mercedes, so I drive a Chevrolet. It has four wheels, an engine and it gets me there, albeit in not as much style as others, but so what? Small, less-expensive colleges may lack the bells and whistles of the Ivies, but they have much more to offer. Sure, you may be interviewed by someone who is a fellow Harvard or Yale grad, but maybe not. And most of the folks who interviewed me for jobs only cared about my grades and work experience, not where I went to college.

3. I have to go at 18 and finish in four years, otherwise people will say I have a “night school” degree.
A degree is a degree, OK? I went to work at night at the post office, and to college during the day, and maybe I didn’t have the whole college experience, but I had some of it. I worked for the student newspaper, and believe me my determination to succeed impressed those who interviewed me for my first jobs after college, even if I didn’t get hired. I read once that a New York City mayor, the late Abraham Beame, worked his way through both high school and college. Hell, most of us have it easy; we just have to work in college.

4. America is desperate for technicians/chemists/doctors/veterinarians/anything else in the news, so I need to hurry and hang the expense and get this degree now.
A recent article noted that while there is much talk of the need for scientists, in fact many are unemployed. The pharmaceutical industry has cut hundreds of thousands of jobs, and research scientists often are working way below their skill level. It’s dangerous to try to time the job market. Here in Florida, they’ve been pitching biotech careers and using tax money to attract biotech companies for years, but no one’s hiring.

5. I can’t work my way through school and take more than four years because people will think I’m a moron.
It took me three years to go through community college, and three years to go through university. At the post office, people thought I was as dumb as rocks, but out in the real world my accomplishment got a different reception. I was able to pay for my classes and books as they happened, and got good grades. I did, in fact, do one university semester as a full-timer while also working, but it was tough and I never did it again. Still, I got As and one B that semester. Not bad.

6. As an adult going through college, everyone will think I’m stupid and make fun of me.
I was really unsure when I started college in the late 1980s. About a minute after my first class began, I realized that this was where I needed to be. The instructors and professors – and the other students — treated me with respect, and even the ones where I didn’t agree with the instructors all the time were learning experiences. Look, things aren’t always going to go your way, and college is a good place to learn to deal with that.

7. People who work or go into the military after high school can’t succeed in college.
I joined the Marines in December 1977 and left for Parris Island in August 1978. After the Marines, I worked for the post office. By the time I started college, I had all that experience and perspective behind me, and it served me well in college. In a way, I had an unfair advantage because I had sown my wild oats. As an older student paying his way, I was committed and focused on getting my degree, not going to parties and feeling off the parental leash. (I’d been off the leash for years.) I could have gone on for a master’s degree, and even took a few graduate-level classes, but decided I needed to get back to work. It was the best move I ever made.

8. Why should anyone listen to you? You’ve been laid off twice from journalism jobs.
Very true. I always say that at least I had a few good years in the news business, and I know I have several more ahead of me. In any case, the experience, knowledge and skill are still there; that hasn’t been lost.

9. I have no choice. I have to do college now.
No you don’t. Here’s an idea. Join the military for four years, and come out with GI Bill eligibility. A free ride at a public college (what a deal!) or $75,000 for a private college. (Want my advice? Go to the public college.) You’ll go, get free military training, work with great people, see the world, gain life experience and come back with a credential that will help you for the rest of your life. Then go to college, and put the finishing touches on a great preparation for life and good citizenship. And if you decide to work after the service, college always will be there, and I bet its call will draw you in.

It sounds like the rantings of some lonely loon. COLLEGE WITHOUT DEBT!

But it’s the best way, people. Try it, you’ll like it.

July 9, 2012 Posted by | Education, Life lessons | , , , , , , | Leave a comment

Going to college: Smart. Borrowing to pay for it: Possibly risky

One thing I’m not known for is my humility, and I have always been proud of the fact that I went to college and did not borrow a penny to pay for my education.

Granted, I was beyond the traditional age for college education and I was a blue-collar worker, but my degree is just as good as if I had lived in the dorms, got drunk at fraternity events and emerged owing $75,000 for my degree.

I majored in communications, a field not known for generating great salaries at first. I was able to pay as I went by working at the post office and was able to trade a postal job for a job that paid less and still cover my bills, and then some.

Today, students are encouraged to go very deeply into debt for their education. Even back when I went to college, in the late 1980s and early 1990s, there were those mandatory financial aid orientation lectures, where we were told that debt was part of the college experience. In addition to the regular loans, there were “Stafford emergency loans” for when it was Friday and you had a big weekend planned, and were broke. With a few hundred in your pocket, you were ready for fun, and it would be added to your regular loan.

Students who finally graduated found themselves with a crushing debt and I often wonder if there’s anyone out there who has ever paid off a student loan without going through gyrations, or just defaulting. Actually, you can’t default. They can always try to collect. That’s something that’s not mentioned in the brochures, by the way.

I tried to advise people on the dangers of student loan debt, but no one listens to an old man in his 50s who has never snorted cocaine or shot heroin, or defaulted on a debt (yet).

Law school is the biggest scam of all. A New York Times story (Is Law School a Losing Game?, Jan 8, 2011) noted that law schools pack in students like mad because they’re all getting student loans and paying up front. They all think they’re going to be Perry Mason or something, and most will end up working in fast food. The thing is, the law schools know it but many won’t tell their students. They just want that money.

It saddens me when I read about a really smart person who is determined to go to law school no matter what, and the student loan mavens are eager to help. “So what if very few of them will land good-paying jobs?” they figure. Someone has to beat the odds, and it may as well be them.

But often, the result is another indebted student. I’ve even read about students who double down and figure they’re so deep in the hole, they might as well go deeper and go for a master’s degree, and then a doctorate. I can hardly imagine owing more than $250,000, not having a job and knowing that you’ll be paying it off for 30 or 40 years. At least with a house, there’s something tangible out there that you’re paying for.

I just think that colleges need to realize that the working student who goes through the process slower, but comes out without debt, is not a liability but an asset.

Now that the kickbacks to college personnel for selling loans have been exposed, I hope that things have changed, but I doubt it. Marketing the wonders of indebtedness to college students is an effort that continues. Even when I was taking my brief classes to become a teacher, I saw pitches for private student loans featuring photos of smiling people working at careers funded by debt at high interest rates.

Young people have a tendency to sign things without reading them, and the marketers of debt know it. As someone who is not only boring as heck but also someone who has bought things on credit countless times (several cars, four houses, other stuff on credit cards), I know from experience that you must, must, must, must read everything presented to you for signature. It’s a lot of time and effort to do the reading, but it must be done. And when you’re signing for a student loan, you have to know what you’re getting into.

Credit is a tool that can be used for good, but while a tool like a screwdriver can assemble something good and useful, it can also hurt someone grievously, and needs to be used with extreme care.

October 21, 2011 Posted by | Education, Life lessons, Living in the modern age | , , , , , | Leave a comment

Sign now … and regret it later

Culinary students hoping to be the next Emeril Lagasse or Rachael Ray have discovered that while whipping up a soufflé in front of a TV camera – and getting paid big bucks for it — may be a snap for the big kitchen stars, the ordinary chef at the steam table may be drowning in debt while stirring the gravy.

A New York Times story some time back told the sad tale of some people who had signed themselves deeply into debt to attend culinary school, then found that not everyone gets a cooking show, a cookbook deal or even a good-paying job in the industry. True, there are plenty of cooking jobs out there, but the pay won’t set the world on fire, or make a big dent in those student loans.

More recently, I read a story in the Tampa Tribune about university students who showed up at a job fair, but found most of the jobs were minimum wage and no benefits, in the fast-food industry, or commission sales jobs. Several students said they had tens of thousands or hundreds of thousands of dollars in debt to pay off, and those jobs wouldn’t cut it.

With all the stories about student loans, it’s more important than ever that young people think before they sign up for a loan for college.

I consider myself very fortunate because when I went into career change mode in my mid- to late-20s, I had a job at the post office that paid me enough to support myself in a decent middle-class manner and leave enough left over for a public college education.

True, it took me more than six years to land a four-year degree (and I also did some graduate work), but when I left college for the last time in my mid-30s I owed nothing to no one and was able to take entry-level jobs in journalism that paid me just enough to live on and offered great work experiences.

I can still remember attending the community college and university orientations and having to sit through the presentations for financial aid, which were more like “50 Ways to Go Over Your Head into Debt” than anything else. In addition to the regular loans, there were emergency loans for those times at the end of the month when you were out of money. Few students asked about the interest rates, the terms of payment or the consequences of defaulting.

Colorful brochures showing happy young people working in highly-paid and fulfilling jobs told of the wonderful things that could happen if you borrowed money for your education. But none mentioned that the smiles of the loan personnel could turn to snarls if you couldn’t make those payments, or the consequences for the future.

Even worse, credit cards were marketed intensely all over campus. It saddened me to see students filling out applications for the plastic just to get a sun visor or drink carrier. One ad for a card, on the bulletin board in nearly every classroom, featured your typical male college student, circa 1990, declaiming, “I was like, ‘Just because I’m a college student doesn’t mean I can’t have a life.’ ”

Lesson: Credit cards mean having a life. Makes you wonder.

There were stories back then of credit card companies figuring Mom and Dad would cover their son’s or daughter’s debts, and that was the logic for issuing the cards. One student’s fondness for Mexican food plus a place that delivered and accepted plastic added up to a lot of trouble, a story reported.

Oddly enough, the two colleges I attended, while they permitted the companies to pitch the cards relentlessly, did not have the facilities to accept credit cards for either tuition or the on-campus bookstore. It was better for me to pay my tuition by check, but going on campus to buy books and having to carry a wad of cash was a dangerous endeavor. Right after I left school, though, I heard that they started accepting plastic for tuition and books.

I have often wondered just whatever happened to working your way through college, and attending part-time or stopping for a semester or two if you lack the time or resources to go full-time. We’re fixated on the four-year college experience as if it were engraved in stone somewhere, when more flexibility can stretch out the cost and lessen the stress as well. In these days of longer life spans, taking two or three more years to get a degree cannot be such a disadvantage. At no job interview I ever went on did the interviewer ever see my unusual college experience as something negative; indeed, working one’s way through college – even if it was slower than the norm — shows discipline, commitment and focus.

The culinary school experience mentioned in the Times reminded me of the boom, several years ago, in technical training schools for computers and networking. I was interested in learning some new skills, so I set out to obtain certifications but was working full-time and had other commitments. I discovered that there were self-paced courses you could take at home, and I even bought a second-hand computer to use for practice and training.

The biggest expense was the cost of taking the tests, and a local test administration facility’s personnel were disappointed to hear that I did not want to take out a loan (at 18 percent interest) to take their course, but just take their certification tests. They let me take the tests, and going self-paced I passed them all.

Others went deeply into debt on the promise of lucrative jobs and signing bonuses, but when the tech job market crashed they were left in a deep, deep financial hole. I felt sorry for many of them, and hope they’ve regained their confidence and good credit. As it turned out, I did not use those technical skills but I did learn a lot about setting up my own personal home network, so it wasn’t a total loss.

With all that’s going on in education lending today, people need to take a step back and think of the consequences before signing all those papers and borrowing all that money. Credit is not a bad thing if it is misused. Maybe I’m biased because I’ve bought six cars on credit (and paid them all off early or on time) and four houses (sequentially) through mortgages, as well as using credit cards (sometimes too much, but always paid off on time) responsibly.

But you have to be careful when borrowing money for anything, as today there is little flexibility among lenders and they have a lot of power to affect your life for decades to come if you don’t pay them back on time. They may not break your legs like on “The Sopranos,” but they can do a number on your finances and your future.

October 11, 2008 Posted by | Education, Living in the modern age | , , , , , , , , | Leave a comment