Monthly Archives: October 2011

Student Loans: Expense or Investment

Posted on by Bill Ryan

The burden of student loan debt on individuals, particularly young unemployed ones, is certainly starting to get a lot more attention in the media. College costs have experienced higher rates of inflation than for most consumer areas. The American Institute of CPAs for example reports that for the 2010-2011 academic year alone, 4-year state colleges for in-state students rose 7.9%, while for out-of-state students the rise was 6%. The inflation rate for 4-year private colleges was 4.5%. This compares to a general consumer rate of 3.9% for the past twelve months, according to the Bureau of Labor Statistic’s Consumer Price Index, a measure of U. S. inflation. 

Among the economic complaints raised by recent protests of the Occupy Wall Street movement is that student loan payments are creating too high of a debt position for young people trying to enter the workforce. In fact, it could be said that this issue is one of the significant catalysts of the movement. Starting out adult life faced with ten or twenty years to pay off tens of thousands of dollars of debt in this economy with no job is enough to make anyone scream. 

In my own personal life, I sense the anxiety. My daughter recently graduated with a 4-year degree and between my Parent PLUS loans and her Stafford loans we are looking at substantial debt. For my portion alone the Federal government is giving me up to thirty years to pay this off and from where I sit right now, I’ll need that much time. If it takes me thirty years to pay off this loan, I’ll be 88 years old! I have real doubts that I will live that long. 

My situation is indicative of a situation facing the generations right now. I am a Baby Boomer who has always believed that education is an investment. I have bought into the notion that there is a direct correlation between the level and quality of one’s education and the number of career options and earning potential one has throughout life. 

Even recent statistics have supported this view, such as the fact that of the 9.1% unemployed in September 2011, 78% have only a high school diploma. My daughter on the other hand is looking at her amount of student loan debt more as an expense right now and is truly questioning whether the B. A. was worth it. Time will tell. I still think the college education gives her a higher launching pad for her career and hope the debt will not diminish that advantage. 

I was chatting with a businessman from Belgium a few years ago over lunch. We were in Boston being trained to administer and interpret the Myers Briggs Type Indicator. I asked him about the income tax level he lives with in his country, and he did say it was quite high, if I remember correctly close to 50%. 

But he did not seem that upset after seeing my jaw drop. When I asked him why he was not outraged he cited two reasons. One, he does not pay any medical expenses and felt that he and his family received good medical care. The other reason was that one of his children, who was at the time enrolled in a university, could attend at no additional expense. He seemed content with the concept of receiving quality service for the high taxes he was paying. 

I do not know which system is best, the European or the American. But I do know this. The system that promotes the greatest amount of education for the most people will be in a better position to compete in the 21st century global economy. If higher education is not pursued by more and more Americans because it is seen as too much of a crushing expense, then it will diminish our talent pool and our competitiveness. This is a situation to be avoided. 

A Commitment to Job Growth

Posted on by Bill Ryan

As a career counselor during the Great Recession, I hear a lot of sad stories, see deep frustration among otherwise productive people, and sense the fear resonating among many displaced workers and those who are afraid to leave less than satisfying jobs. 

We are all realizing that the descriptions given in 2008 of “economic meltdown”, “economy falling off a cliff”, and other hyperbolic clichés were indeed accurate. This has been a terrible recession for many and the climb out of it, especially for those looking for stable and decent employment, has been arduously slow and painful. 

Like many Americans these days I am ready to push aside my social and political wish list in favor of only one overriding priority — the creation of jobs. Too much unemployment diminishes us as a people. Personal depression, anti-social behavior, anxiety, stress, and apprehension for the future are among the negatives affecting too many of us. This results in widespread social despair. If ever there was a time when Americans needed to come together and work cooperatively on lifting the employment picture, it is now. 

But this does not seem to be the case. Instead, we see the following: 

  • A President who is calling for bipartisan solutions and instead is running into opposition from a Right and Left who both think they each have all the answers. 
  • A Tea Party opposition, which has taken over the Republican Party and that is obsessed with only three things, the Federal debt, making government inconsequential, and limiting President Obama to only one term. 
  • Corporations that are reportedly flush with cash, but which do not want to hire because of the uncertain economy. 
  • Lenders who do not want to lend, because they are afraid they will not get their money back. 
  • Investors who by and large do not want to invest, because they see too much risk. 

Yikes! So, who is going to step forward and break this logjam? I wish I knew. But given my lay economist perspective here is what I see. Money, whether in the form of direct cash subsidies or tax incentives, needs to be injected into the economy to encourage companies to hire.  

Money comes in two forms, private capital and government expenditures. Now private capital seems to be in a self-imposed escrow or lock box and God knows, spending any more government money is akin to treason these days. 

So, we have a choice. Do nothing and blame each other for incompetence and lack of vision or reach some sort of public/private sector compromise. As I see it, government and the private sector need to each contribute in a collaborative fashion to a stimulus that results in job creation. 

Solutions must be practical, they need to save everyone face, and as they say in politico-linguistics, speak to their base. I am sure that people smarter than me can come up multiple options, but here are two examples of what seem attractive: 

One, give tax breaks to corporations that hire. Instead of incentivizing corporations to send dollars to foreign governments to escape our high corporate tax, let us change the schematic and encourage them to hire Americans instead. And what about small business start-ups, one of the greatest sources of hiring historically? Let us give steroids to the sluggish time-wasting U. S. Patent Office to spur innovation and examine ways to reform the Sarbanes Oxley Act, so that it does not discourage highly skilled start-ups while continuing to provide regulation and oversight designed to discourage crooked and narrow-minded boards of directors. 

Employment relief will not come from just the public or private sectors alone, but from joint participation. Of course, collaboration requires a spirit of working together. What we have right now are too many radicals for whom compromise is a dirty word. 

The best decisions come from consensus. As an electorate we need to demand that our elected leaders work together to find solutions that result in increased job creation. If that is not their top priority, then it is time to get rid of them.