School is Cool!

I wrote this awhile ago, but this is a perfect example of the '2am thoughts' that sometimes run through my head.

Does anyone else find it disturbing how quickly and dramatically the cost of higher education has risen over the last few decades?

Example:

UPenn has historical data on educational costs going back to 1900. In 1991 (we were born already!), undergraduate tuition and fees totaled $16383. Today, the same exact education costs $40,514, an increase of $24131 or more than 147%. Also consider than the CPI, or Consumer Price Index, has increased 60% during the same period of time over 20 years. Realize that medium household income has only increase 30% since 1990!

So relatively speaking, things have gotten significantly more expensive for most people considering that medium household income has not kept up with inflation and is way behind the dramatic increase in college tuition.

While the value of a Bachelors degree continues to drop as more and more people enroll in college (thus saturating the job market for college graduates), the cost of higher education has skyrocketed and continues to rise every year.

Who is to blame? For one, easy credit. Students, who otherwise have no credit history to speak of and should be considered highly risky borrowers, have near unlimited access to a combination of guaranteed federal loans and private student loans to cover the full cost of their education. Because student debt is one of the few debts that is completely non-dischargeable (along with criminal-related debts and child support), private lenders have little reason not to lend to you. With private lenders, you are subjected to risky variable interest loans, high fees, and can't ever declare bankruptcy on that debt. Consider that you can walk away from your house and even discharge gambling debt in bankruptcy court, but not student debt. Thus, because students can essentially borrow whatever it takes to pay for the full cost of their education, colleges and universities have little incentive to keep costs down.

Students must also share some of the blame. No one is forcing students to choose a pricey private or out-of-state school over an in-state public college or university. Consider that the University of Washington costs $7600/year in tuition (though tuition jumped 14% last year). NYU, a comparably ranked private school, costs $38,000 (plus $2200 in annual fees + high cost of living). What would entice a student to ever pick a school like NYU over a much more pragmatic option like UW? It is the romanticized picture of collegiate life. The brand. The image. The prestige. When you choose to go to NYU over UW, you are thinking of college not as an investment, but as a priceless experience. Unfortunately, in four short years that experience will cost you about $200,000 + interest at your average private school compared to less than $80,000 at a public institution. For the same degree. And in this job market, the same opportunities. For the vast majority of graduates (perhaps save graduates at the very top i.e. Harvard, Yale, MIT, Princeton, etc.), your major and work experiences really do matter much more than the name of your university.

Side Note:

These days, the only way to combat crumbling under massive debt is to be proactive. Being passive is to expect that medium personal income rises in accordance with inflation (it doesn't) and accepting that the rising costs of higher education is normal (it isn't). We are becoming accustomed to paying for things that didn't even exist a few years ago. Data plans? Broadband internet? HD Digital Cable? 3D movie tickets? Bottled water? Firms in every industry are trying to screw us over these days in the pursuit of profit maximization and higher share prices.

Basically, don't be an indentured servant to your credit card company and student lender for the rest of your life. Living debt free is a MUCH more liberating feeling than any material possession or overpriced education can make you feel.

Welcome

I generally find that I am at my best at 2am. It's pitch dark, dead quiet, and completely soothing. The hustle and bustle of the day has come to pass. Also, no one expects anything of you at 2am. You have the time to just think. It's wonderful.

That is why I started this blog. I wanted to share my '2 AM thoughts' with you.

Actually, it's only midnight right now, but you get the idea.