Indentured Servitude

Is college the modern indentured servitude? Judging by definitions it doesn’t look too far off:  A worker who is under contract to an employer for a fixed period of time.  The terms have somewhat changed, but the premise remains the same.  We go to college to get an education that allows us a particular job in the workforce and in exchange we owe debts that our employer pays off for years to come.

According to a report from the Institute for College Access & Success’ Project on Student Debt, Two-thirds of the class of 2011 held student loans upon graduation, and the average borrower owed $26,600.  That is up 5% from the previous year.  And, that number is just looking at students graduating from undergrad schools, not even considering those who go on to grad schools, which can add significant debts.

$26,600.  Average.  That comes to $275 a month for ten years if you are fortunate enough to get a government backed 4.5 percent rate.  And, from what I know via personal friends’ stories that is a low-ball number.  Most people seem to have between $40-80,ooo in debt when they graduate and have payments of $500-700 a month.  $500 a month for 10 plus years makes it awfully hard to save money, especially if you add some credit card debt and a car payment to that.  All of a sudden you can find yourself in a $1000 a month hole.

I’m not espousing or denouncing college, but I am saying that it’s important to read and understand the literature before you drink the Kool-Aid.  College can be a wonderful learning experience and personally I grew a ton while attending the University of Georgia and fortunately came out debt free as there was a Georgia Lottery based scholarship that anyone who kept a 3.0 average received a full tuition scholarship.  If I had attended a different school and graduated with 30-50,000 in debt I’m pretty certain that I would not have been able to save money for the past 6 years and get to the point where The Dan Plan was possible.  The money that could have gone to paying student loans went straight into the bank and accumulated to a tipping point where this was possible.

Again, not trying to be down on the university system by any means, I think that it can be a great place if you know what you want to get out of it.  But, it doesn’t have to be the only way.  I see what I am doing as a modern apprenticeship.  I will spend 10,000 hours practicing golf and at the end I will be expert enough in the field to make a living.  There are certain things in life that require degrees (doctor, lawyer, architect, etc) but for everything that doesn’t require a paper degree, don’t be afraid to think outside the box.

If you decide to take out the loan, just make sure you read the fine print and understand how long it could take to pay off.  This goes for students and parents.

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