The last thing you probably expected, today, was a post about how higher education is ruining the economy. After all, aren’t personal-finance bloggers supposed to be all about advancing yourself, spending wisely, and earning all that you can? Perhaps, but I’m of the personal belief that one can still advance yourself, spend wisely, and earn all that your worth without having to go to college. Before I get off on a tangent let me explain just what it is that I mean. Higher education has its place. If you want to be an engineer, a doctor, social worker, or even a teacher, you’ll likely need to have a college degree. For those professions that require a college degree there simply isn’t any other way around it. But, that doesn’t mean you need to go to a college whose tuition costs exceed several years worth of the expected salary for the profession that you wish to have. After all, the idea is to learn a profession so that we can earn more money, not learn a profession so that we can spend more money.
Higher Student Loan Debt is Burdensome.
How does all that relate to the economy? The effects of the high cost of tuition are far-reaching. The added debt of college loans can create a cyclical debt treadmill. A recently graduated student may have a small window of time to get his or her affairs in order, but is quickly saddled with a student loan payment. Newly minted professional usually work extra hours to make extra money to pay off the large student loans they’ve accumulated. The combination of less free time with higher debt repayment figures creates a vacuum whereby the money earned never gets a chance to enter into the economy. And everyone knows that the quickest way for money to enter into the economy is through consumer spending.
Exaggerated Educational Requirements are Exaggerated.
But, the added debt isn’t the only reason that higher education is ruining the economy. Heck, it isn’t even the student loan interest rates. Our economy has always had an informal hierarchical system. When I say that, I don’t mean that the people with the degrees got the better jobs, either. Not so very long ago, the people who got the better jobs were the people who were best suited to it. For many positions, that meant that the people getting the better jobs were the people with the most experience, and the most aptitude for the position. Somewhere along the way, the people in charge of hiring decided that a higher education degree could replace some level of experience. More and more companies decided that this was a good thing. And now, many job openings require that you have a degree of some sort. Real world experience in a position has been surpassed by classroom experience. Entry level jobs that could just as easily be done excellently by a person with a high-school diploma are suddenly closed off to anyone without a degree. Anyone that aspires to hold such a position is thereby required to attend college for a minimum of two years rather than spend those two years gaining experience and job skills for the position. Worse, for the economy anyways, is that that person is then effectively taken out of the economy for at least two more years. Instead of earning money, paying taxes, and contributing to the economy, that person is racking up the debt while taking so many credits that they can’t even afford the time to take on a part-time job.
How do we fix higher education?
I think, first and foremost, we need to stop pretending that a degree is a “requirement”. Stop pushing our children to attain a degree, and instead push them to get the minimal required training to attain the job/position that they desire. Kids will be kids and they’ll do what they please, but they shouldn’t feel like their being pushed into a college education because their parents want them to get one.
We need to stop requiring degrees for positions that clearly don’t really need one. In my particular field (IT for those curious among you), very little of what I learned in college has been applied in my work experience. And yet, each of the positions I’ve had (with the exception of my most recent part-time job) has required a four year degree in the field. Let me tell you, anyone with an aptitude for IT, and a willingness to learn on the job could have easily fulfilled all of the duties that I performed. It’s a fact. How many other positions are there that are the same way? Lots and lots, I’d wager.
From a strictly financial perspective, we have to do a better job of educating our children about how to go about getting a degree if that’s what they choose to do. There are numerous tools that can help us out, in this internet age. Our own government has a plethora of information to help, and there are plenty of other resources, like Big Future, that have lots of information too.
We also have to properly express what a fiscally responsible adult should do. I can’t count the number of my fellow students (myself included) who took the maximum allowable student loans out, despite not needing that amount, so that they would have the extra funds available to do what they pleased with. Yes, it’s some of the cheapest money you will ever borrow, but unless you’re planning on investing in a guaranteed rate account while you attend college, it’s still debt. And every penny of it will make your financial life harder once you graduate.
Finally, we have to stop this idea that we are all entitled to a college education. We aren’t. It’s a privilege that we pay grandly for. Just because you can spend $50,000 a year to get your library sciences degree, doesn’t mean you are entitled to, or should.
Do you have a degree? Was it required for your position? Should it have been? How would you fix higher education?
Shane Ede is a business teacher and personal finance blogger. He holds dual Bachelors degrees in education and computer sciences, as well as a Masters Degree in educational technology. Shane is passionate about personal finance, literacy and helping others master their money. When he isn’t enjoying live music, Shane likes spending time with family, barbeque and meteorology.
