Monday, November 19, 2012

eating my loan

After two full weeks in Oregon, I finally had my first home-cooked meal here.

My friend and former work colleague Nancy invited me to her house where her daughter Molly whipped up a great meal of stuffed pork chops, roasted potatoes, and salad.  And an amazing home-made cherry pie.

I caught up on what was happening locally.  And, because we are attorneys, the topic turned to the cost of higher education.  Law schools, in particular.

Several young attorneys have told me their tales of financial woe involving they debts they incurred in law school.  One friend has a student loan of $160,000.  Amortized to pay off when he is in his 70s.

Those obligations make me feel like a space alien.  I knew that I had student loan debt when I left law school, but I was not certain how big the debt was.  Certainly less than $160,000.

As  a result of my donation project to Salem's land fill, I now know.  When I graduated in May 1979, I owed $2,500.  The first monthly payment of $90 was due a year later.  The interest rate was ridiculously low at 3% during the height of the Carter-Ford-Nixon inflation years.

Even though the last payment was not due until 1988, I paid it off in three years just before I bought my first house.

Why the big difference?   Between living at home, financial support from my parents, a part-time job, and short-term loans, I graduated college without any student loan debt.

My financial support in law school was similar.  Two years of GI Bill benefits, a part-time job, and summer work kept my debt under control.

So, what happened between 1979 and 2012?  Why doesn't the "putting yourself through college" formula work any more?

The big difference is tuition increases.  I have seen the statistics, but I do not recall the details.  But education costs have increased almost as much as medical costs.

There are lots of reasons for the medical cost increase.  But the prime cause of tuition increases is linked directly to the increase of education loan availability.  The more loans families are willing to undertake has freed educational institutions to increase their costs.  Student loan debt is now targeted to be the next housing and .com bubble to burst.

During the past year, I have read several policy proposals to reverse the education cost spiral.  But most of them seem to have about as much hope of being implemented as do reforms to Social Security and Medicare.

I am just glad I am a consumer of home-cooked meals, and not education, these days.

18 comments:

Felipe Zapata said...

The United States of America is going to hell in a handbasket.

Steve Cotton said...

My optimism is beginning to fade.  But it will be a shopping cart that sends us to our destination.

NWannabe said...

My daughters books ALONE were $1200.00 this last term. Oh, and she was forced to purchase paper edition as there were no e-versions; so much for technological wonders of college . Again, that is one term; do the math.

kushnir said...

HA, 2500 dollars is something that you write a check for nowadays. It is amazing how the value of the dollar has declined in 30 -40 years. People laugh when I tell them that my brand new 1965 GTO that I purchased in my last year of high school (since I had a job) only cost $3200.00
Now you can't get your transmission fixed for that.
And they keep printing fiat money.
My feeling is that 33% of the kids going to higher education should not. We are failing in filling jobs like machinists that pay $ 125-150K a year, and at the same time supporting career students who's value system becomes jaded after going to "higher education" for 20+ years.......

Steve Cotton said...

Yikes!  Textbook prices make no sense to me.

Steve Cotton said...

 Fiat money.  That is another post in itself.

John Calypso said...

Harvard in a Box - completely possible.  Time to give some education back to the public cheaply - God knows they can use it.

Joanna van der Gracht Powell said...

Our two kids have made it through Graduate School debt free. Yes we helped but we also put the kibosh on a lot of extra stuff that seems necessary now-a-days. They attended universities in Mexico, Canada and Europe. They lived in student housing, ate simply, and did not have cars. They were both Spanish and English tutors T.A.s. They applied for and won scholarships and grants. In short, they worked their buts off to not get into debt. I think the expectations of young people have a lot to do with incurring so much debt...

Norm Kwallek said...

My oldest finished law school with 36 grand in debt, she had a full ride for undergrad so the 36 was just the grad degree. She has not found any work in law but she is making enough to service her note. 

I think the "new" free online coursework may change higher ed pricing. I know the low wages paid to workers in the 3rd world have pushed down the wages for manufacturing labor here in Ohio. I always made the claim that my fellows could have worked for free and not been able to beat the "China" price.    

barbara eckrote said...

It IS possible to go to college nowadays without incurring debt.  How do I know?  My granddaughter is going to Texas A&M on scholarships, grants and working part-time, 20 hours a week and carrying a full load.  Yes it is hard, but she will be SO happy when it is all over and she's not saddled with debt.  We all started looking for aid when she was in the 10th grade.  It is amazing all the private scholarships there are in specific areas and we helped her apply for anything that was appropriate.
Yes, that was time consuming and aggravating, but it sure helps now.

My kids did it the same way..........

Steve Cotton said...

 It is time to cut the education monopoly down to size.

Steve Cotton said...

 And I think you are correct.

Steve Cotton said...

That is good to hear.  But it has been some time since I met anyone who got through school without a big debt.

Steve Cotton said...

Online schools have been touted for years.  But they do not seem to have gained rotate speed. 

Norm Kwallek said...

It took a very long time for foreign cheap labor to nick the average US manufacturing paycheck. Give it time.

Steve Cotton said...

Maybe. But the education industry has proven to be one of the most reactionary of American businesses. Innovation is not part of its makeup.

Gary Denness said...

The cost of education is ridiculous. And if there is one place for 'socialism' in the capitalist world, it's in education. The next generation are the countries future and our/my retirement. Mitt Romney wanted kids to get as much education as they can afford. That was the single most misguided statement he came out with, in my opinion.


I don't know what percentage of the population he was writing off on that occasion, but it's to everyone's benefit that we equip the right people with the right skills for the job market of the future.

Steve Cotton said...

In the case of American education, I suspect governmental involvement has exacerbated the problem. But all of the proposed solutions I have reviewed seem to have very little hope of surviving our political system.