Punching Your Future In The Face
The last thing that anyone wants to do is punch themself in the face. With tuition rates across the country steadily increasing at an average of nine percent per year, there are few controls that students have over the financial choices of a university. However, there is plenty of control available in their own decisions.
Today, I want to share with you a story that, I hope, will convince you to heavily consider how much money you’re planning on spending to attend school. In the interest of confidentiality, I’ll refer to him as Dr. Smith.
I was under the impression that being as educated as possible would lead to great doors being opened for me, and I was right, in a way. Doors were opened for me that would have never been opened if it weren’t for the level of my collegiate education, but what I failed to see in the process of receiving my education was that the cost was simply insurmountable. After high school, I was influenced to attend a private university because it would help me to attain the prestige that I desired, so I went without any question whatsoever. Cost didn’t matter because I was convinced that a degree would get me exactly what I wanted. Once I got through the first level of college, I went to another private school to attain my master’s degree, and after that, yet another private university to attain my doctorate degree.
As far as being educated goes, I’ve done it all. I have published many works and met incredible intellectuals, but there is just one problem: I have so much debt that the only way that I will ever get out of it is by my own death. Sure, I love what I do, but the burden of the cost is so great; my wife and children live in another state, I fly back during summers, if I’m not teaching, and Christmas break. The only chair that I could find open in the subject area that I was given my expertise was here, a thousand miles from the people that I love.
In retrospect, my life would be much different if I didn’t have $250,000 in loans that I’ll have to pay every day of my life for the rest of my life. I love teaching, but the burden of debt is so heavy, not even my life insurance policy will cover the cost of my education once I die. I wish that there were something that I could do to change my situation, but I’m paid a teachers’ salary, even though, by many people’s standards, I am highly qualified. I wish that I had considered another path, because I honestly believe that I could have gotten exactly where I am now with more affordable degrees. Prestige only goes as far as your pride will let it, and that pride will cost people dearly.
I agree. Students in the U.S. graduate with an average of $10,000 in student loan debt. Our national student loan debt is over $850 billion, and growing at exponential rates with no sign of slowing…ever. Not only is this loan burden tough on Dr. Smith, but it’s tough on the economy. If you have an issue with the growth of the economy, listen up. Unemployment rates are higher than ever and test scores are lower than ever. We’re also spending more money on school than we ever have. Maybe we need to reconsider the way that we do things.
Dr. Smith is an incredible person. He is brilliant and intelligent, but he is stuck. The only way that he will get out of his debt is by his own death. How depressing is that? As clear-thinking students, it’s important that we consider this kind of thing before we sign a loan paper. Dr. Smith didn’t, and now he’s paying the price. I sure don’t want to be in his shoes.
Consider your future as you prepare. Don’t punch your future in the face.
Zachary Freeman is the author of Free Money Please!: The Ten-Step Guide to College Financial Aid. He can be reached by emailing zachary@freemoneyplease.com. Follow FMP on Twitter and Facebook!
A Credit Card Story: The Debt Pregnancy
“Get outta the way! Get outta the way! She is in labor!” yells the doctor as he sprints towards the delivery room. As I leap out of the way, I hear a baby crying. Chase has welcomed her first child, Debt, into the world.
Once upon a time, there once was a lovely, popular, beautiful lady named Chase. She was full of promise and she was very wealthy; she seemed perfect in every way. Sadly, she was also what one might call, “easy”. Everyone wanted her, and everyone got her; she had no requirements or restrictions. She constantly tempted people, whether rich or poor, and even convinced some of her lovers that all of their wildest dreams would come true if they would just use her. She even offered money, rewards, and gifts to her lovers so that they would use her more frequently.
She was constantly getting in students’ pants, and sometimes she even snuck into their parents’ as well. If only they knew that this girl was trouble! That sneaky, tempting, plastic girl just inserted herself everywhere she could find a spot and no one seemed to care!
After a while, people started to get the idea that maybe Chase was getting around and sure enough, she turned up pregnant. Who impregnated poor Chase? Why, you did. Everyone that used her did. You, when you bought that new pair of jeans at the mall; that frat boy that supplied the alcohol at the party last night; the young married couple that bought the extravagant honeymoon; the teacher that needed car repairs to get to work; all of Chase’s lovers impregnated her with debt.
“Well, that’s unfortunate for Chase,” you may say. But in reality, she’ll be just fine. She doesn’t have to pay for anything – you do. You see, Chase’s parents found out about what you did to her, and they’re mad. They said that, if you didn’t pay her back for all that you used her for, plus extra, they are going to take everything that you have and send you to jail. You’ll be broke – and in jail.
So, congratulations, new parent. Enjoy your new baby. Its fat and ugly and horrifying like Frankenstein. Unlike any other child, you want to get rid of this Debt kid as soon as you can – and forever. You don’t want it showing up twenty years down the road at the Thanksgiving dinner with the whole family there! “Oh, I didn’t tell you? I have a kid…”
Moral of the story: Debt would have never been born if you hadn’t fallen for Chase. Chase was used. Chase was abused. And after Chase became impregnated with debt, she took all that you had, and left you with nothing. If you haven’t met Chase, don’t. Save yourself for something better. Besides, you can’t afford that expensive and unfaithful Chase chick, and she sure isn’t the kind of lady you want around to manage your money.
Zachary Freeman is the author of Free Money Please!: The Ten-Step Guide to College Financial Aid. For information on booking Mr. Freeman to speak to your group, please email kevin@freemoneyplease.com
I’ll Be There Unless I’m Dead
By Zachary Freeman
Students are elated when they discover that they can choose when to go to class. In fact, most classes don’t take attendance whatsoever, leaving students with the full decision of whether they want to go to class or take a nap. My history class last semester was rarely more than half full, but aside from the toll that skipping takes on one’s grades, I think you’ll be surprised to find out how much money you – or your parents – forfeit to skip just one class.
According to CollegeBoard, the average tuition at an in-state, public university is $3,803 per semester. Meaning that, for an average student with an average class load – we’ll call him “Skip”, for obvious reasons – the cost of learning from a professor is about 45 cents per minute. Skipping just one class, one day costs Skip almost $34. Ouch!
But, let’s say that Skip comes down with a cold and misses all of his classes for the day. Unfortunately, this happens, and it can’t really be completely avoided; but, aside from Mom and Dad being dreadfully worried about Skip’s health, they themselves become sick to find out that they lost almost $135 because of Skip’s one day of missing class. Think of all the stuff that much money can buy!
Let’s just say that Skip wants to go out-of-state to escape the wrath of his parents, where the average tuition is $5,995 per semester. Assuming he keeps the same full-load class schedule that he would have had in-state, it now costs a whopping 71 cents per minute to listen (or not listen) to a professor. Skipping one class costs him almost $54. Now that he took a tuition hike, one sick day puts him $214 in the hole. Heck, for that much money, I would suffer through class vomiting my brains out!
But wait, someone has decided that Skip needs an elite private education so that he can be rich and successful one day. The average private university education costs $13,647 per semester, meaning that Skip pays an astounding $1.62 per minute to go to class. Each seventy-five minute learning session costs him $122. Every sick day costs him $488. Say that skip gets pneumonia and misses a week of class; his illness costs Skip, or his parents, nearly $1,000. Gone. Forever. And with nothing to show for it.
Why do I feel that it’s so important that people hear this message? Two reasons: first, although college may be helpful for success, paying more for an undergraduate education is unnecessary, expensive, and risky. Second, students, you should think twice before skipping a class because it costs someone a lot of money. At a hundred and thirty five bucks a day, the only thing keeping me from going to class is my own death.
A Good Ol’ Fashioned Contest
The second edition of Free Money Please is releasing in June! In honor of this momentous occasion, we are holding a little contest. How do you win? Great Question.
To win, submit a question of your choice, related to college, financial aid, scholarships, etc. either by commenting on this post (be sure to include your name and email address in a comment) or emailing us directly at info@freemoneyplease.com. Entries will be taken until May 1st, 2011. You can submit up to three questions, but you can only win once.
Zachary will select five of your questions to appear (and be answered) in the book. Each of the five lucky folks whose questions are chosen will receive a signed copy of the new Free Money Please and a big ol’ recognition in the June 2011 newsletter!
Let’s help get students and parents ready for college! Question away and good luck!
The Ramblings of a Nineteen-Year-Old Kindergartener
Remember that Bill Cosby show, Kids Say The Darndest Things? When it originally aired in 1995, I was only four years old and, as far as I knew, these “darn” kids had a completely accurate view of the world. “Why is this funny?!” four-old-Zachary said to himself (yeah, I’m using third person). My parents laughed heartily, not only at the baffled look on my face, but because kids in general are just so clueless. Kids don’t know any better!
High School Students: You don’t know any better, either. Unfortunately, turning eighteen doesn’t turn you into a wisdom-filled adult overnight. Look, I graduated from high school last summer, and I can tell you firsthand, high school students don’t know anything about the way the world works. They never think about the fact that a container of laundry detergent costs an hour of wages, until they have to do their own laundry. They don’t think about having to eat Ramen for a week, until they run out of cash. Many of them don’t have an understanding of the concept of having nothing, until they get out on their own, and have nothing.
The Point: Save some money while you can in high school, so that you can live on it in college. Simply living life is far more expensive than you think.
Why Does it Cost SO Much?
Sometimes I can’t help but ask myself, why is college so expensive? How can tuition can be increasing by thousands of dollars per year but colleges still have to cut programs and staff? Governments, families, and students struggle with these questions constantly, but the answer lies in the simple truth of fundamental economics.
Boring language time! If we look at the college “business model” from a supply and demand mindset, we can better understand the answers to all of our college-related financial questions. Colleges rely on income from the private investor (parents and students) as well as the federal government (which is actually broke). Colleges are suffocating; let’s take a moment to explore why.
Economic laws state that when a certain commodity (in this case, a college education) is in great demand (which it is), the price rises (which it is — nearly 9% for me this year). The idea works on the premise that people who cannot afford the commodity (the education) will not buy it (just like anything else — TV’s, cars, boats, etc.). In a perfect free market economy, the declining customer base would cause the prices to actually decline; colleges would have to find a way to compete and provide a better price and higher quality product, or as institutions, colleges and universities would fail. BUT, because the industry is so heavily reliant on federal funding and regulated to federal standards, the prices continue to increase. The problem here is actually not the colleges at all.
THE FEDERAL GOVERNMENT CREATES THE ILLUSION THAT EVERYONE CAN AFFORD COLLEGE (with federal money, of course).
The reason that college costs are rising is that people still buy the education that they cannot afford. People have a common misconception: they think that a college degree brings financial success automatically, when in reality, it buries most people in debt for years. Because students don’t have to foot the entire bill (thanks to the government), colleges are struggling; they never receive enough money to cover their costs from the federal government, who uses money from education to fund other projects.
So, although I often talk about taking advantage of the opportunities that the federal government offers, financially speaking, you should never rely on them to finance your entire education. One day, that money will be gone and, as it turns out, that may be the best thing that ever happened to the quality and price of education in America.
Building Wealth in College: Part 1
I want to bury the stereotype of the poor college student. Students like to live in the moment (the reason for the stereotype) and often make very poor financial choices because of their current desires. They are known for moving away from home and thinking that they need a new car, flat screen TV, new wardrobe, you name it. That being said, it is actually possible to make strong decisions that will greatly benefit you in the long run, as a college student…it’s just that most don’t, As Dave Ramsey says, “If you will live like no one else, later you can LIVE like no one else.” If you can make a small sacrifice now, later on, it will serve you well. I am going to be discussing this topic of Building Wealth in College for the next few weeks, in segments, and my sincere hope is that you will grasp ahold and start building your wealth now, even though you may not have a steady job and income. There are a few things that will help you set a good foundation for your wealth – follow them and you’re smart. Don’t follow them and you will fall into the stereotype and become “normal”—debt-ridden and not financially independent.
Part 1: Choosing the Right School
I have developed this opinion: the choice that you make on where to attend college will be the single most important financial choice that you will make in your lifetime. Most people would argue that buying a home or a car would be the most important choice, but I am not one of them, and let me tell you why. Picking a college is the FIRST major decision you will make with your money in your life. Few people understand the toxicity of debt, but let me tell you, choosing a college is dangerous because we oftentimes let our emotions get involved. Lots of students make college choices based on athletics, like I have said in my book, but even more common than that is a student’s choosing a school because of an emotional disconnect with their parents. They often desire to move as far away as possible, for various reasons, which results in two things: out-of-state tuition, and a big fat student loan.
There are many aspects that go into picking a college that is right for you. I speak about this all the time. When you allow this decision to be logical, not emotional, it becomes a simple choice, which you should base on the following guidelines, in this order:
- Does this college/university have the major that you would like to pursue? I have known for several years that I was going to pursue a business major. However there was a point in my life that I wanted to be a TV weather man, and a major in meteorology is not as common as you would think.
- Is this university affordable and are the costs worth the degree? This can be a sticky subject, but here is my blunt opinion: IT DOES NOT MATTER WHERE YOUR UNDERGRADUATE DEGREE COMES FROM. If you are becoming a doctor, lawyer, pharmacist, etc., it becomes acceptable to spend a little bit more getting your masters or doctorate degree. But for a bachelor’s degree, you are going to get generally the same education as long as you go to an accredited university inside of the United States. Why do you think they are accredited? Because they all meet the same standards…also known as: they give you the same education. Why would you pay more?!
- Is the atmosphere what you want? Obviously, you have to add the human element to the decision, and that is also an important part. You are going to be at college for the next four years, so you should pick somewhere that you will be okay waking up in every morning. Also, a HUGE mistake in choosing college is picking based on where your friends or boyfriend/girlfriend is going or which school has the best parties. Also, you should consider the distance from your parents/guardians. Most likely, you will need financial support of some type during college, and being within a day’s drive of home is always a good plan.
This college choice is the basis for your financial future, and you should make sure to pick one that won’t bury you in debt. Keep in mind that when you get out of college, you get an entry-level salary once you find a job. Entry-level salaries are not enough to support your needs and your student loans. Make a plan now, see it through, and you are well on your way to building substantial wealth through college.
Article written by Zachary Freeman, a Business Finance major at the University of Tennessee at Chattanooga in Chattanooga, Tennessee. He can be reached at Zachary@freemoneyplease.com.
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