Making smarter investments in education

I recently signed what I’ve been assured will be my last tuition check.

My younger son, who is finishing up grad school, looked at me with a mixture of bemusement and annoyance when I referred to it as “my day of jubilee, ” but who wouldn’t celebrate having such a big expense removed from their annual budget?

Also, I’m happy because it’s been a good investment. I’m proud of my son’s accomplishment. He knows what he wants to do (teach), has gotten enough field experience to show that he’s good at it, and most important of all, he enjoys it. Unfortunately, too many members of his generation are leaving school without such a strong sense of direction.

Worse still, what they lack in direction, they more than make up for in student-loan debt. Total student-loan debt outstanding in America exceeds $1.2 trillion. By the way, this is everyone’s problem, not just a burden on the people who owe that money. $1 trillion of that debt is guaranteed by Uncle Sam, and banks are having to write off bad loans at an accelerating pace. If you are wondering where the next financial crisis could come from, this may be it.

How did we get in this mess? The uninviting employment environment of the past few years is one reason. The unemployment rate for people aged 20 to 24 is still 11.1 percent, or roughly twice what it is for people aged 25 or above. With jobs this hard to find, young people often feel that going back to school is an alternative.

What strongly feeds into this is the proliferation of education as big business. For-profit schools have long been with us, but never before has there been such a preponderance of schools where the only entrance requirement is that your check clears.

Between a generation at loose ends and aggressive education marketing, the explosion of student debt is a natural outcome.

Of course, I’m not against education. My career wouldn’t have been possible without it and, as I mentioned, I feel my son’s undergraduate and post-graduate programs have been good investments. However, just as I can be happily married but recognize that a lot of marriages are bad ideas, I can believe generally in education yet see that too many people make the wrong choices about what education to pursue, how much to pursue, and how much debt to take on in the process.

So, here is a list of suggestions for anyone to consider before they sign up for their next educational program:

1. Work first, then study. A little time working between high school and college — and then between undergraduate and graduate programs — can have multiple benefits. It can teach you what kind of effort is necessary to get by in the world, it can give you some insight into what you do and do not like to do, and it can help you build up a financial war chest so less of your education will have to be financed with loans.
2. Consider state schools. According to data from the College Board (you know, the SAT people), tuition for in-state students at four-year public colleges is typically less than a third of the cost at private, not-for-profit schools.
3. Use a targeted approach. Don’t be vague about your choices. Find out what jobs are in demand, and then what qualifications are necessary for those jobs. This will help give your education a sense of direction.
4. Exhaust all other financial aid options before borrowing. According to the College Board, the average student at a four-year public school only pays about a third of the published sticker price after scholarships and grants are considered. The government website www.FAFSA.gov is a good place to start finding out about your financial aid options.
5. Look at a repayment schedule before signing up for any loan. This goes for student loans, and any other borrowing you do for the rest of your life: Before you borrow, look at what it’s going to take to pay the money back, and figure out whether you are realistically going to be able to do that.
6. Expand your job search. Employment conditions vary greatly from state to state, and even from town to town. Before you assume that going back to school is the only option for you, consider whether relocating would improve your job prospects.
7. Don’t use school to hide from reality. A tough job market has made the contrast between the sheltered environment of college and the harsh realities of the workplace all the more severe. In some ways, leaving school is like the final end of your childhood — but once you get over the shock, most realize that’s a good thing.

The world of knowledge offered by academic institutions is a wonderful thing, but perhaps one of the best lessons you can ever learn is how to be a smart consumer. Making responsible financial decisions about college is a good place to start.