The Savage Truth on Money, 2nd Edition

CHAPTER 10

THE SAVAGE TRUTH ON PAYING FOR COLLEGE

Make This Investment Carefully

Going to college has always been part of the American Dream. For a nation of immigrants, a college education meant that children would always do better than their parents. After World War II, a college education became part of the GI Bill that rewarded veterans for service to their country. During the 1970s, the huge baby boom generation impacted college campuses, causing tuition prices to rise even faster than consumer price inflation. Except for federal student aid programs, college might have been priced out of reach.

Then because of all the financial aid (credit) that became easily available, tuition prices started rising at twice the rate of the consumer price index. Caught up in the belief that a good education at a top school would pay for itself over a lifetime career, students and their families increased their borrowing, much as they did on home equity when credit was easy. As a result, student loans have become another recipe for financial disaster.

By 2009, according to the Project on Student Debt, graduating college seniors carried an average of $24,000 in student debt—a 25 percent increase over the debt held by graduates just four years before. And, as the recession progressed, they had an average unemployment rate higher than 9 percent. Clearly, the traditional dream of repaying minimal student loans quickly with a high-paying job has collided with a new reality.

It’s an issue I started ...