Young “heretics” with high-tech skills are Saying No to College, according to the New York Times.
Inspired by billionaire role models, and empowered by online college courses, they consider themselves a D.I.Y. vanguard, committed to changing the perception of dropping out from a personal failure to a sensible option, at least for a certain breed of risk-embracing maverick.
Tumblr CEO David Karp dropped out of high school and hopes to “grab 16-year-olds that are going to be brilliant and help them get there,” he tells Tech Crunch. “College isn’t making very good engineers.” Karp’s heroes are Steve Jobs and Willy Wonka.
“Here in Silicon Valley, it’s almost a badge of honor,” said Mick Hagen, 28, who dropped out of Princeton in 2006 and moved to San Francisco, where he started Undrip, a mobile app. He is now recruiting from the undergraduate ranks, he said, which is becoming a trend among other tech companies, too. In his view, dropouts are freethinkers, risk-takers. They have not been tainted by groupthink.
Dropouts can educate themselves without going into debt, says entrepreneur James Altucher, author of 40 Alternatives to College. “I think kids with a five-year head start on equally ambitious peers will be ahead in both education and income,” Altucher told the Times. “They could go to a library, read a book a day, take courses online. There are thousands of ways.”
Most young people are not future high-tech zillionaires, whether they earn a college degree or not. We can’t all be Willy Wonka. But it’s healthy for young people to consider alternatives to a high-debt degree. Or somewhat less debt and no degree.
Young four-year graduates are earning less, while college tuition grows and grows, reports the Fiscal Times.
President Obama’s more generous plan for income-based repayment of student loans means “typical undergraduate borrowers will not repay their loans,” writes Andrew Gillen, now research director at Education Sector.
Using the New America Foundation’s IBR calculator, Gillen looks at repayment for average student borrowers, who run up $26,600 in debt, and starts work at $27,000 with 3 percent salary growth per year.
To pay off the debt in the standard (10 year) plan, their monthly payment would be $307. But under IBR, their monthly payment in the first year drops to $63, which doesn’t even cover the interest on the loans (meaning their balance is growing over time). Over the 20 year life of the loan, they will repay less than what they borrowed (<$23,000), and will have over $40,000 of debt forgiven (paid by taxpayers).
Even if their starting salary is $35,000, they will still end up having $20,000 of debt forgiven. Moreover, borrowers who become parents during their loan repayment will find their monthly payments are reduced drastically. If the $35,000 starting salary graduate has children 5 and 7 years into repayment, they will repay much less than the principal of the loan (total payments <$18,000) and will have more than $45,000 of debt forgiven (paid by taxpayers).
Many borrowers won’t repay the principal, let alone the interest.
The priorities are skewed, Gillen writes. While low-income students will get $22,000 in Pell Grants to attend community college, upper-middle-class students will get a (delayed) grant of $40,000 or more, a gift from the taxpayers.
Big borrowers — those who’ve chosen a high-cost private college or earned a professional degree — get the best deal, notes the New America Foundation in Safety Net or Windfall?
. . . contrary to benefitting low-income borrowers, the pending changes to IBR will actually provide generous benefits to borrowers with higher federal loan balances – those with graduate or professional degrees. A borrower with an MBA or a law degree can easily have a six-figure loan balance forgiven, even if his income exceeds $100,000 for much of his repayment term.
IBR treats the symptom (high college debt) rather than the disease (high college costs), Gillen writes on Minding the Campus. He favors income-contingent lending (ICL), which actually requires repaying loans.
President Obama proposes expanding income-based repayment of student loans: Debtors would pay 10 percent of their discretionary income, down from 15 percent, and the loan balance would be forgiven after 20 years instead of 25. The changes will help borrowers with expensive graduate or professional degrees and lots of debt, concludes Safety Net or Windfall?, a New America Foundation analysis.
A borrower with an MBA or a law degree can easily have a six-figure loan balance forgiven, even if his income exceeds $100,000 for much of his repayment term.
The report recommends changes to target benefits to borrowers with lower incomes. The plan is expected to go into effect by the end of the year.
The community college track to success leads savvy students to a good job without a “mountain of debt,” a new book argues. That’s especially true for those who choose a technical or health care major.
Net price calculators – now required on nearly all college web sites — let future students enter their personal information and get an estimate on the true cost of a specific college, including financial aid, not just the “sticker price.” But the calculators are difficult to find, use, and compare.
Parents can borrow unlimited amounts through federal Parent Plus loans, regardless of their ability to repay the loans. Not surprisingly, an increasing number of parents face garnished wages (and Social Security checks) and ruined credit.
In an appeal to Hispanic voters, President Obama’s new campaign ad says Romney would cut Pell Grants, costing Hispanic students $1,000. In an interview with Univision, a Spanish-language network, the Republican challenger called for letting the maximum grant rise with inflation, a larger increase than the president’s proposed 1.5 percent boost.
Both candidates are running Spanish-language ads attacking the rise in college costs. Obama’s ad promises to decrease the tuition growth rate by 50 percent over 10 years.
At the Univision event at the University of Miami, Romney told students that what they need is “good jobs,” not more loans. “I don’t want to overwhelm you with debts. I want to make sure you can pay back the debts you’ve already got and that will happen with good jobs.”
You Can’t Always Get What You Want, writes a graduating senior at New York City’s elite Stuyvesant High. After earning top grades, test scores, etc., the well-rounded student got into three dream universities — but the financial-aid offers were meager. She’d have to borrow $100,000 over four years or ask her near-retirement-aged parents to drain their life savings.
. . . I could either take on the debt for a brand-name school and pray to the deities of the job market that I’d get a job lucrative enough to pay it off (which is what many of my peers are doing, I learned), or I could graduate debt-free from a less prestigious school and hope that I’d get hired despite my not-nearly-as-impressive-but-decent undergraduate credentials.
She’s heading for a state university, where she plans to graduate at the top of her class with minimal debt, get a good job and start saving so her kids can go where ever they want.
She’s bitter about having to say no to her dream schools, but she’ll enjoy the freedom to do the work she wants. It’s no fun being a debt slave.
If your parents can’t afford private-college tuition, but are paying your state university bills, don’t whine about it, advises Ann Althouse. “The culture has truly tipped, with everyone feeling entitled to things they can’t pay for and assuming somebody else over there will pay somehow, some time.”
Nineteen percent of households owed student loan debt in 2010, more than double the share two decades earlier, according to a Pew Research Center analysis of government data. Forty percent of households headed by someone younger than age 35 owe such debt, also a record high. The average debtor family owes $26,682 in unpaid college loans, up from $23,349 in 2007.
The U.S. Education Department has released two-year and three-year default rates for student loans that came due in 2009 and 2010. In two years, 9.1 percent defaulted, double the rate six years ago. Defaults rose to 13.4 percent in three years.
The default rates don’t include borrowers who’ve deferred payment because of hardship, such as unemployment, notes the Wall Street Journal. ”Over the long haul, the government projects that nearly 1 in 5 borrowers will default on federal student loans.”
Borrowers can link repayments to their discretionary income; the balance will be forgiven after 20 years. But college debt is still a burden: Debtors are likely to postpone buying a new car, much less buying a home.
Glenn Reynolds has more in The Higher Education Bubble.
At 25, Katie Brotherton is working two jobs, but living in a parent’s basement, dependent on Mom (or Dad) for food, gas and health insurance. She owes $188,307.22 for two college degrees at private universities, she writes on Cincinnati.com. (She doesn’t specify her major or her occupation.) Sadly, Brotherton didn’t learn to write or think clearly — and she certainly didn’t learn to do the math.
My pursuit in excellent education is rooted in a value system that promotes progressive thought for the betterment of the individual as well as society. Education is a core tenet and vested interest of the functioning democratic society. Upon that basic assumption and principle, I am overwhelmingly incensed by the silent epidemic of crippling student debt.
. . . this particularly sensitive conversation is being ignored by our mainstream consciousness. Perhaps I should be ashamed for buying such an unaffordable education and internalize my debts as personal failures. Perhaps my mistakes warrant pained silence. But silence breeds apathy, and in regard to the welfare of the American economy, I want to humanize the numbers and give voice to this reprehensible problem.
Due to reckless neglect, student debt will be the financial ruin of my generation, and there is an incredible need for a public discourse addressing this reality and its grave consequences.
I want answers and clarity as to why this happened. How did I arrive at this position in life so financially handicapped and disenfranchised? I followed societal expectations, earned an education and am employed. I will gladly repay my debts within the comfortable reason of affordability.
. . . I am owed answers simply because I have the right to pursue happiness. And since I am not alone in this debilitating epidemic, my peers deserve their voice as well.
Overborrowing and underthinking will get a gal in trouble, writes Bryan Preston on PJ Tatler.
Millennials are “the screwed generation,” some argue. They were told to “invest in yourself” and take on “good debt” to win a guaranteed college premium, writes Megan McCardle on The Daily Beast. As tuition goes up and up, the college premium is eroding for humanities and social sciences majors. For marginal students, college is a bad bet.
The price of a McDonald’s hamburger has risen from 85 cents in 1995 to about a dollar today. The average price of all goods and services has risen about 50 percent. But the price of a college education has nearly doubled in that time. Is the education that today’s students are getting twice as good? Are new workers twice as smart? Have they become somehow massively more expensive to educate?
College costs rose faster than inflation by 1 percent a year till the mid-1980s, says Ohio University economist Richard Vedder.
“Now I see them rising 3 to 4 percent a year over inflation. What has happened? The federal government has started dropping money out of airplanes.” Aid has increased, subsidized loans have become available, and “the universities have gotten the money.”
“Even with these high prices, you’re still finding a high return for individuals who are bright and motivated,” says Nobel Prize-winning economist James Heckman. On the other hand, “if you’re not college ready, then the answer is no, it’s not worth it.”
And don’t go to a non-elite private college unless the financial-aid deal brings the cost down to the state university level.
Correction: As a commenter notes, Brotherton earned one of her degrees at Miami of Ohio, which is a public university.