By Bill Quain
I know this edition of “Six words on a Boardwalk bench” might get me in trouble. I’m a college professor. When my colleagues see this, they might not like it. But it’s insider secret No. 3 in my series on the cost of college. So let’s all take a deep breath and consider what I am about to explain.
It’s not just the sticker price.
In last week’s column, I explained that the cost of college is more than the sticker price. If the tuition at your chosen school is $50,000/year, you still have to pay for room, board, books, fees, etc.
However, the really big cost comes from a lifetime of living poor – or at least, thinking poor. Colleges tell students that it doesn’t matter if they have the money to pay for school. They can take out a student loan and pay it off over time with all the extra money they will make with their valuable diploma. This philosophy begins the “thinking poor” cycle that often lasts a lifetime. It rationalizes debt by telling students that “future income” will cover it, instead of helping them understand that debt is the enemy of wealth. I believe that most students go to college for one reason – to have a better shot at economic and financial upward mobility.
To be fair, they’re not alone.
Colleges aren’t the only ones selling the idea that people can have whatever they want because they can pay for it over time. Almost every student I have at Stockton has a credit card with interest rates running upwards of 20%. But that’s just the start of it. How many people have a new car loan or two? Many online shopping sites offer a “buy now, pay later” option when you check out. The theory is, of course, that we can all have what we want, right now, and simply pay it off over time – with money we haven’t made yet and that we might not ever make! However, those companies are all about making a profit. College is supposed to be about critical thinking and becoming a better or more valuable person. Or am I being naïve?
Running on the “future earnings” treadmill
In his fantastic book “Rich Dad Poor Dad,” Robert Kiyosaki describes how people get trapped on a treadmill of their own making. They get a $5,000 raise at work, and immediately go out and buy something like a brand-new car. The problem is that the $5,000 raise isn’t enough to pay cash for the car. So they take out a loan, and now they need that $5,000 every year to make the payments! They can’t quit. Plus, they can’t afford to get laid off because their loan payments will continue, even if their income stops.
What colleges do is even worse. By encouraging students to take out loans, they are telling them to spend money they may never earn! It doesn’t matter what the student’s major is or how long they’ve been in school. All they have to do is sign on the bottom line, and they can borrow more money.
Didn’t they hear about the pandemic?
Maybe this rationale made some sense before COVID-19, but shouldn’t we all have learned a lesson since then? There is absolutely no guarantee that money will continue to come in! How many people were laid off during the shutdown and had to get by on savings accounts or government handouts? By the way, I don’t know a single faculty member or college administrator who was laid off during the coronavirus. We all kept getting our paychecks. So maybe we are not the best source of information when it comes to considering the real cost of college!
Stop thinking “poor.” Start thinking rich.
At Stockton University, I teach a course called “Make Money and Pay It Forward.” By the way, notice that it has a six-word title. In that class, we have one mantra: “Get rid of debt.” The very best way to get rid of debt is to not get into it in the first place. If you’re going to college in order to have more choices in your life and make money at a job or career you like, then start making good decisions right now. Avoid going into debt.
Already have student loans? Pay them!
If you already have student loans, you need to pay them off ASAP. Do this for two reasons. First, you don’t want to pay any more interest than you already have. Second, it’s time to start thinking rich. You need a “win,” and you need it now! Go to YouTube and watch videos about Dave Ramsey’s seven baby steps. Concentrate on step No. 2: The debt snowball.
By the way, don’t listen to loan companies who advise you to “roll all your debt into a lower-payment loan.” Also, don’t pay off the loan with the highest interest rate. Pay off the smallest loan first, and then keep making the same dollar amount of payments each month, always applying the money you saved to the next smallest loan. This gives you some wins along the way, and it will keep you going until you are debt-free.
I know that’s not what most people will tell you to do. However, most people spend their lives thinking “poor.” Loan companies and credit card companies spend all of their time thinking up ways to make money by keeping you in debt for a lifetime. Start by choosing sides right now.
I know you have some comments!
Send me an email to bill@quain.com. I’d love to get your feedback. Stay tuned for more columns in the cost of college series. As I say each week, I’ll see ya in the papers!
Bill is a Professor in Stockton University’s Hospitality Management Program. He is the author of 27 books, and a highly-respected speaker. Even though he is almost totally blind, Bill is a long-distance runner and runs the Ocean City Half Marathon each year. He lives in Ocean City with his wife Jeanne, and his Guide Dog Trudy. Visit www.billquain.com or email him at bill@quain.com.
