Investment, Risk and Reward

Investment, Risk and Reward …it sounds like I have turned financial planner.  Nothing could be further from the truth…..but, I am all about the plan.  Some of my earlier Blogs were about the importance of having a plan.  The plan I referenced was a plan for identifying career direction and using effective tools to meet that goal.  But for the last three weeks I have written about the importance of watching trends and aligning your career choices with marketable degrees.  I have also promoted the importance of completing that degree in four years.  But today, I want to take you further down the planning path and look at the impact of paying for college as an investment, reward and risk beyond completion of the degree.

In the Winter 2011 Newsweek Kaplan, Linda Stern wrote an article, Strategies to Help You Pay the Bills.  In it she says, “During the 2009-10 school year, tuition went up 6.5 percent at public schools and 4.4 percent at private schools, while the consumer price index actually fell 1.48 percent, continuing a long trend.  Since 1991college tuition has risen 163 percent and household income has gone up 23 percent, according to College Board and census figures.” While the numbers are alarming, she points out that thoughtful planning, effective questioning and reasonable judgment can result in controlled spending and available funds for advanced degrees or creating career opportunities.

So why am I talking about financial planning?  Because student loan debt is out of control and the ramifications are extensive.  Going back to the concept of marketable degrees, how marketable are you if you default on a student loan and create a poor credit rating?  Did you know that there is an increasing trend of employers who monitor credit ratings as part of employment prospects?  In an article published this past week in the New York Times, Laura Asher states some of her concerns regarding the student loan crisis as, “Things like buying a home, starting a family, starting a business, saving for their own kids’ education may not be options for people who are paying off a lot of student debt.”  The article addresses the fact that student loan debt now exceeds credit card debt for the first time ever and that in 2008 two-thirds of bachelors degrees awarded also carried student loan debt.  Click here to read the entire article.

Getting and paying for an education is an investment.  It is an investment in earning potential, social and cultural opportunities and self satisfaction.  It can have great reward both financially and in personal fulfillment.  The risk is how to balance paying for the education without using all of your resources and without loan debt that exceeds your earning potential and creates negative lifestyle impact.  When making decisions about schools… investment, reward and risk are definitely part of the equation.

The Biggest Bang for Your Education Bucks

The process of deciding on a college or university is a time consuming and daunting task.  From the time you begin the search to the time you walk on the campus as a freshman, the process is enormous.  But so is the responsibility of paying for college.

Students across the country are receiving their acceptance letters and making decisions on where they believe they want to spend the next 4-6 years of their lives.  That time frame is based on acquiring a bachelor degree and the national average to complete that four year degree.   But the national statistics indicate that less than forty percent will complete their degree in four years.  The average is 5.8 years.  Did you create a college savings plan that accommodates six years of tuition, room and board for that bachelor degree?

The Wall Street Journal recently ran an article wherein they addressed the issues of financing college.  In five perspectives of advice to parents from five financial advisers, the first recommendation was, “Encourage your child to select a career first, and then a school.”  One of the advisers interviewed, Greg Gilbert, a financial adviser based in Atlanta, went on to make a statement so similar to what I have blogged about over the last month when I encouraged students to seek out internships and volunteer opportunities.  He said, “The key is not just saying ‘Oh, I want to do this,’ but instead, really actively vetting out the [career] idea to see if it’s the right choice.” 

Funding a college degree is an enormous commitment.  It can become bigger than expected if it is not managed effectively.  Investing in a career professional may mean spending a little up-front, but it will be a fraction compared to the extended tuition payments made when a four year bachelor degree becomes a 6 year bachelor degree  as a result of a student trying to “find himself” in the process.  Even students who believe they know the direction they want to take can be blindsided when the courses or internships turn out to be vastly different than they expected.

The business of running colleges and universities is big business.  Part of that business is your tuition dollars.  You can choose to make it a four year plan or an extended plan.  So, before you choose that college, make sure you have a career plan and that the college you choose will provide the biggest bang for your buck!

Avoiding America’s College Debt Crisis

On December 21st, CNBC presented, “Price of Admission – America’s College Debt Crisis.”  It was a great piece from the perspective of alerting the masses of a potential bubble similar to the one that fed our nation into the financial fiasco that has taken place over the last few years.  It highlighted individuals and couples that face a lifetime of debt based on education loans.  Other highlights included:

  • Two-thirds of students complete college with a minimum of $24,000 in loan debt, typical is $80,000
  • Student loans do not get wiped out in bankruptcy or death and cannot be refinanced
  • National student loan debt is greater than the national credit card debt
  • The Government only reports out student loan defaults for the first two years of default
  • The cost of college is increasing 2-3 times the rate of inflation
  • Students can no longer afford to “Discover” themselves in college

So what does all this mean to high school students who are getting ready to attend college or those who are already attending college with no clear direction of career path?   It means the price of a college education can no longer include the luxury of “discovering yourself” through trial and error of courses and career exploration at a cost of ten to sixty thousand dollars a year when student loans are involved.  It means completing a degree in four years may not be the national norm, but it needs to be your goal!

In my previous blog I talked about the importance of identifying career paths.  That path doesn’t have to be single minded, but it does need to capitalize on your natural abilities and provide options accordingly.  That way, your college “discovery of self” is targeted and doesn’t waste time and finances.  In a job market as challenging as the one that exists today it is equally as important that you put yourself ahead of the curve and completion of that degree gets you out there earning and reduces the potential of increased college expenses.