In today’s economy, is the cost of a degree from a four-year college always worth it? Or are there advantages in earning a certificate, perhaps in nursing or programming, from a career-oriented school?
Ron Lieber’s New York Times’ article, “Placing the Blame as Students Are Buried in Debt,” points out that today’s students may accumulate a huge student loan debt by the time they graduate. The students plan to pay back the loan from their earnings. But, because today’s corporations seem to be right sizing, downsizing, and capsizing, accumulating sizable debt upon graduation may start to look more like an anchor than a kite as these students enter the job market.
Lieber illustrated his article with the story of Cortney Munna who accumulated nearly $100,000 in debts in order to graduate from NYU. Lieber points out that Citibank gave Ms. Munna another $40,000 in loans even though she had already amassed debt “well into five figures.”
We must ask ourselves whether Ms. Munna could have gotten a $40,000 car loan at that time. What was used to measure her creditworthiness, or that of any other student who received a similar loan?
Coincidentally, I was rereading “The Millionaire Next Door” at the same time the NY Times article appeared. That book turned my thinking in a different direction, one that perhaps students, their families, and their banks should consider. I began to wonder what these millionaires would think about student loans.
For decades, high-school students have been urged toward getting accepted by the best four-year colleges and universities, using student loans to pay the way when family or personal income was not enough. This made good sense for many, particularly to those preparing to enter fields where there was a shortage of qualified applicants for jobs that existed.
Today, the situation has changed. As corporations pare down costs, the higher-paid specialists seem to be among the first to go. The cream of the corporate crop–data modelers, process designers, trainers, project managers, and business / financial analysts–are discovering the unthinkable: there are capable workers in China and India who can perform their tasks well enough to satisfy corporate budgets and at a fraction of the cost. One very senior project manager, a true workaholic, who had been earning around $180,000 annually was laid off and offered a similar position with another company as a consultant for $29 an hour ($60,000 annually), the rate that was paid to a worker in that position in India.
These types of key positions have been in high demand in the US since 1990 and justify the graduate degree required, even a $50,000 student loan if needed. Today? Probably not. It seems no more practical for a college student than does their buying a new premium sedan with a loan for $50,000. The downsized corporate manager today might not even qualify for the car loan!
In “The Millionaire Next Door,” Thomas Stanley and William Danko report that the millionaires and decamillionaires (ten million or more) whom they interviewed were adamant about many things, including avoiding debt and being frugal so their money could work for them. According to Webster’s dictionary, frugal is “behavior characterized by or reflecting economy in the use of resources”. Do these millionaires live a lavish lifestyle, like those characterized by many millionaire professional athletes? No. They eat inexpensively, usually at home, live in working-class neighborhoods, and drive non-descript American cars that are a few years old. They conserve money and they invest.
Many of the millionaires interviewed are self-employed. If those interviewed were speaking as one, Stanley and Danko thought they might say, “Many of the types of businesses we are in might be classified as dull-normal. We are welding contractors, auctioneers, rice farmers, owners of mobile-home parks, pest controllers, coin and stamp dealers, and paving contractors.”* These are people who might excel at a trade. And, yes, two-thirds were self-employed.
Whereas some of them have likely learned their trade as apprentices, perhaps in family businesses, career-oriented schools today offer two-year degrees and certificates in careers where demand is going up. Good mechanics are always in demand, as are nurses and other healthcare workers. Plus, as changes in the field come about, additional certification classes are available.
According to the New York Times, Cortney Munna’s college loan balance is now $97,000. She earns $22 an hour, working outside her field of study, something that is becoming more and more common today. Her monthly payment on the loan is around $700. That payment is likely close to 40% of her take-home pay.
What does this mean to you if you require a loan to attend a four-year college? Unless you have pored over the United States Bureau of Labor Statistics’ “Occupational Outlook Handbook” and are positive the bachelor’s degree you seek will qualify you for a position predicted to grow, do yourself a favor and investigate entering a trade, earning a degree or certificate from a trade school. If you are intelligent, committed, frugal, and innovative, you might just become one of those millionaires.
And remember some of the most innovative self-employed millionaires did not finish college (Bill Gates and Paul Allen of Microsoft, Micky Arison of Carnival Cruises, Shawn Fanning of Napster and numerous other web gurus) or even high school (Johnny Depp, Quentin Tarantino, Dave Thomas of Wendy’s, Walt Disney). That costly degree is not a golden key today. Take the time to look over the alternatives. Then make a wiser decision.
*Stanley, Thomas J., and Danko, William D, “The Millionaire Next Door,” 1996, Pocket Books ed., p9.



















