- Created on Friday, 01 March 2013 00:00
- Published on Friday, 01 March 2013 07:00
- Written by Aaron Gentzler, Editor, Unconventional Wealth
- Hits: 1250
Americans carry roughly $800 billion in credit card debt and over $1 trillion in total student loan debt according to Forbes.
The average graduate who takes loans now begins his working life with over $27,000 in debt to go along with a crisp diploma.
This is the "big bang" moment for a lifetime of debt slavery...
Repayments eat into entry-level paychecks. Buying a first home or a first car, getting married and starting a family disappear further off into the future.
But it's not just students who are sinking into debt. A 2012 report from the National Association of Consumer Bankruptcy Attorneys says parent borrowing for college education is up 75% since 2006.
And the situation is getting worse, not better. Average student loan debt has increased 58% since 2006.
Education is crushing America from both ends. It's a major reason why many baby boomers are so woefully unprepared for retirement. And it's also a major reason why so many young Americans are up to their necks in debt.
You see, education costs have skyrocketed over the past 30 years. According to Forbes, between 1981 and 2010 the list price level of tuition and fees rose sixfold (more than double the increase in the consumer price index).
That's a real problem. Especially when you consider that average household incomes, when adjusted for inflation, fell by 7% between 1999 and 2010. And that, thanks to the financial crisis and home price and stock market wipeout, Americans' average net worth plummeted 39% between 2007 and 2010 -- wiping out two decades of gains.
But there are simple steps you can take to make sure you don't end up in a lifetime of debt slavery.
Groundbreaking online resources www.coursera.org and www.openculture.com offer free courses from instructors at schools like California Institute of Technology, Johns Hopkins University, Princeton and Stanford.
These resources allow you to get a college education -- without going to college and without paying colleges' exorbitant fees. Math, physical sciences, medicine, chemistry, computer science, software engineering and dozens of other disciplines -- these resources allow you to take college-level work for free.
Your pre-college family could take a calculus course from a UC Berkeley instructor at openculture.com then a software course from Princeton at coursera.org. And you don't have to travel to Berkley or Princeton to do this.
In a nutshell, you get most of the reward of a college education and none of the financial risk. Not bad -- especially when you consider the average yearly cost of an in-state public university is $22,261. The average yearly cost of a private college is now over $43,000 a year.
This means an education at a private college is a $172,000 gamble. But it won't be like this for much longer. Technology has democratized the distribution of knowledge.
You can now "virtually" attend lectures and take online courses from some of the top names in academia -- guys like Duke University's behavioral finance whiz Dan Ariely or Princeton computer science professor Robert Sedgewick, who also sits on the board of directors at Adobe Systems.
Soon, debt-free and "self-taught" job applicants will display the same level of skills as those who went to a traditional university.
I am not saying all university education is a bad idea. But before you go into debt for a university education -- or borrow money to fund a child's college career -- ask whether the money you're prepared to spend on an education could be better used to fund a business idea or pay the down payment on a new home.
That's unconventional wealth creation at its finest.
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