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Friday, September 7, 2012

College Debt - Worse than Marrying Young?

Here's an interesting statistic: ComPsych Corp., in Chicago, Illinois, a company that takes support calls from kids wanting advice (18-24) has seen a 10% to 12% increase over last year levels.

The reason: kids are discovering the magnitude of their college loans, parents are less able to help in the difficult economy, there is less financial aid.

These calls are beginning to take an overtone of panic according to this WSJ article.

The kiddies are apparently discovering that "college" might leave them with a five or six digit "amount due" at the end of their academic tenure.

Needless to say, according this study linked in the article, the kiddies are not handling it all that well: drugs, partying, alcohol, stress, misery, depression, anxiety.  And let's not forget that this particular age group is big on anti-depressants.

Sadly this is I think mostly the doing of inept parents.

Come on, saddling a 24 year old kid with a six figure debt?

And this debt is not like a house that has some intrinsic value in and of itself.

I bought my first house when I was about that age - I had three kids at that time.  I was making about $35,000 USD a year and my new house cost $72,000 USD.  We move there from NYC.

I needed a little help from family and friends to make the $12,000 USD down payment required and my mortgage was around $600 USD a month (this was at a time of 18% interest rates).  In order to purchase the house we took a "balloon mortgage" which meant we had to refinance it in three years.

By that time I had already been working for six years and supporting a family for five.  And though this was the "Carter Recession" it was a good job and with the election of Regan things were looking up.

It was a big decision and a lot of debt.  But then again the house was worth the $72,000 USD.

Had we defaulted or failed to refinance we would have been out the payment we had made: some $21,000 or so but the house would have resold.  Further, if necessary Mrs. Wolf could have taken a job as well.

So my downside was basically that in the worst case scenario my payments would have equaled rent if I defaulted because I was able to live in the house the whole time.

So at 24 I had a relatively large amount of financial experience, a house, and a debt - but that debt was offset by an asset - the house.

There are many others like me contrary to what kids today are told.

Today little Jr. might easily have a $72,000 college loan debt at age 24.

But where's his asset?

Apparently its on the top of his shoulders - doped up by anti-depressants because his mind and body cannot comprehend why a 24 year old would be saddled with such a huge debt and at best a crappy job that doesn't begin to make living expenses and pay the interest let alone pay back the principle.

Now if you can add and subtract - or at least have a spouse that can - if have common sense about the value of things and are willing to work at something you can start and own your own business.

Its what I eventually did and there's no reason that you can't do it right out of high school.

When I was in high school people did just that - some even got married.

But instead we let little Jr. party away another four or six years running up $10K in debt each year and then turn him out into a world where, he's been told, his college education will "get him a job."

But can he "keep" that job?

Not if he's been partying for the last six years and the other candidates have been working.

All this is just another aspect of how the deflation of our dollar and the stupidity of handing out fish rather than teaching fishing has destroyed our economy and our society.

As our dollar has diminished we, as a society, have turned to debt to "finance our future" by sending little Jr. to school.

But the information in little Jr.'s head isn't an "asset."  The education he has received is basically old news in terms of industry - just bringing him up to speed so that he can get a job.  Not to the point of being in a better intellectual position than industry - just enough so he can get in.

Is that an asset?


And then there is little Jr. himself.  Can he really make use of that education - doped up on anti-depressants - or too partied out to get up on time - or did little Jr. just get the degree to make mommy and daddy happy?

So if Jr. cannot turn that education into something real in the job market its not an asset either.

I would say that, on average, by the time you are in your fifties there's at least a 50% chance you are working at and making a living at (if you actually work, that is) something different than you did at 25.

So at least half of these "educations" are a waste to begin with.

So the US has a $1 trillion dollar debt backed by nothing - no assets - just empty headed kids that might get jobs and might pay back their college loans.

If little Jr. is too irresponsible to get married at 19 like I did why is he any more responsible by getting involved in a debt he is very unlikely to repay and that will likely, like an ex spouse and children, hobble him for decades to come?

In a marriage, at least if you are old school, you work together for your future - there are two people.  And hopefully far less debt.

Alone after college what can you do but live at home with mommy and daddy...

So which is a worse fate: marrying young or running up $100K in debt youmg?

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