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How Higher Education is Ruining the Economy

June 5, 2012 By Shane Ede 20 Comments

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?

College Fund © by Tax Credits

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

I started this blog to share what I know and what I was learning about personal finance. Along the way I’ve met and found many blogging friends. Please feel free to connect with me on the Beating Broke accounts: Twitter and Facebook.

You can also connect with me personally at Novelnaut, Thatedeguy, Shane Ede, and my personal Twitter.

www.beatingbroke.com

Filed Under: Children, Consumerism, economy, Education, ShareMe, Student Loans Tagged With: college, debt treadmill, economy, higher education, student loan interest, Student Loans

What Motivates Your Finances

February 23, 2011 By Shane Ede 12 Comments

What motivates your finances? What is the purpose that drives you to reduce your debt and make more money?

For me, the one thing that keeps coming back when I ask myself those same questions is the idea of freedom. The start of my own personal finance revolution started with some realizations. I realized that the financial path I was on wasn’t getting me anywhere else but broke. I wasn’t going to hit the lottery or discover some miracle money maker that would make me a millionaire. But, that isn’t my purpose. It’s merely the keystone that sparked my current journey.

When I began my journey, I decided that I needed to learn how to handle my finances. The one name that kept reappearing in my reading was Dave Ramsey and his “Total Money Makeover” book. So, I bought it and read it. And, something he said in that book brought my true motivational factor to the front. Yes, I wanted to have less debt and make more money. But, what I really wanted, was freedom.

He spoke about being debt free and having the freedom to tell your boss to “take this job and shove it.” What a thought. So many of us have to go to work every day to make enough money to pay our bills. But, what if we minimized those bills and had the freedom to do whatever we wanted to do to make money?

That is what motivates me to remove myself from the debt treadmill, and join the select few who have the freedom to pick up and do something that they enjoy! What a freedom!

What about you? What really motivates you to become debt free?

Shane Ede

I started this blog to share what I know and what I was learning about personal finance. Along the way I’ve met and found many blogging friends. Please feel free to connect with me on the Beating Broke accounts: Twitter and Facebook.

You can also connect with me personally at Novelnaut, Thatedeguy, Shane Ede, and my personal Twitter.

www.beatingbroke.com

Filed Under: Debt Reduction, pf books Tagged With: dave ramsey, debt, debt free, debt treadmill, total money makeover

The Debt Free Treadmill

October 8, 2010 By Shane Ede 6 Comments

Treadmill  WorkoutWhen you’ve got bills and debt to pay off, you are constantly feeling like you’re running a personal finance marathon.  Each month is a sprint to the finish to see how much debt you can pay off.  We do it to get to that finish line.  To send that last check (or bill pay payment) and then run into the streets screaming.  Some of us may even follow that up with a call to a certain Mr. Ramsey.  With any luck, most of us will reach that point sooner rather than later.

But, then what?  We’re done paying off debt.  We don’t need this silly budget thing anymore right?  And we certainly don’t need to be worried about how much we’re spending.  And so what if we leave a balance on our credit cards now and again.  Wrong.  Oh so wrong.  If your years of debt repayment hasn’t conditioned you to it already, you’ll soon find out that you still have to do all of that.  You might be able to loosen the strings a little, but keeping those habits is what will keep you from ever going back there again.

Just like any physical trainer will tell you; if you want to keep in marathon shape, you’ve got to keep maintaining your fitness. You can’t expect to stop and then still be able to run another marathon. In short, you’ve got to keep on the treadmill.

With all of your debt paid off and only your monthly expenses to worry about, you’ve got to get on “the Debt Free Treadmill”. You’ve got to use it to keep your self in financial shape. However, in this case, it is so you never have to run that marathon again. Debt is an easy trap to fall into. It only takes one lazy month to leave a little balance on a credit card and start the cycle all over.

Get on “the Debt Free Treadmill”!  Keep yourself in financial shape by continuing the same habits of saving, budgeting, investing, and frugality that you used to finish that marathon.  Use it to your advantage.  Unlike a large majority of the people in this world, you aren’t running that marathon.  Best of all, you get to use that financial fitness to benefit others.  Share your knowledge, and help people reach the marathon finish line so that they can jump on “the Debt Free Treadmill”!

Image Credit: Treadmill Workout by sirwiseowl, on Flickr

Shane Ede

I started this blog to share what I know and what I was learning about personal finance. Along the way I’ve met and found many blogging friends. Please feel free to connect with me on the Beating Broke accounts: Twitter and Facebook.

You can also connect with me personally at Novelnaut, Thatedeguy, Shane Ede, and my personal Twitter.

www.beatingbroke.com

Filed Under: budget, Debt Reduction, Frugality, Investing, Saving, ShareMe Tagged With: budget, debt treadmill, financial fitness, financial marathon, Frugality, Investing, Saving, treadmill

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