Monthly Archives: April 2013

Lifestyle Inflation and Greedy College Students are Driving College Tuition Higher

The news is filled with stories and data of rising tuition on college campuses. I have written about this very fact a number of times here on the blog. The talking heads on every major news channel mention it at least once per day and each person you listen to may spout out a number of various reasons why college tuition is continually on the rise.

“Experts” are so divided on this issue because there is not a clear cut answer. There literally could be a million internal factors that influence the cost of a colleges’ tuition, as well as the external factors of our national and global economy.

In researching this phenomena and from working on a college campus, I have a hypothesis of why college tuition has risen so dramatically in the past decade: Lifestyle Inflation and Greedy College Students!

Lifestyle Inflation

I believe that “lifestyle inflation” or the 21st century version of “keeping up with the Joneses” is to blame for driving college tuition prices to unprecedented heights. College students are simply no longer satisfied with musty dorm rooms, and uncomfortable classroom chairs. College students expect to have multiple Starbucks locations on their campus. They want manicured grass and climate controlled buildings. They want spotless restrooms, and state of the art laboratory facilities.

Today’s college students expect to have sports stadiums which rival (or far surpass) professional teams. They want to have a gym facility with an indoor climbing wall, olympic size swimming pool, Zumba classes, and enough ellipticals to entertain an entire sorority.

College students also expect to have a car on campus, they expect to have access to social activities at every hour of the day, they expect their professors to bend over backwards to accomodate them within their office hours, and they expect to have private showers.

None of these conveniences and amenities are cheap.

To attract new students, colleges are forced to cater to these demands. The sad thing is that you will likely never get a student to admit that they crave the above luxuries. Even though they may not voice this opinion, their voice is heard loud and clear through their actions. They choose to go to colleges and universities which offer these amenities. The better the amenities, the higher the enrollment.

A Vicious Cycle

Many colleges are driven by their enrollment. Their budget is directly determined by the number of students they admit each year, and they do not receive funding from the state or other external entities. Colleges who live and die by the number paying students they have on campus each semester must do whatever is takes to attract their quota of students. Attracting new students means building bigger and nicer facilities, and providng all of the amenities mentioned above.

When college students (and parents!) walk onto campus for their college tour, they expect to find these things. Unfortunately, many students base their college decision on the level of the amenities offered by the college and not on their academic prowess.

Here is the vicious cycle: Colleges must provide these high priced amenities to attract new students, these amenities and facilities cost a great deal of money, thus driving up tuition costs, parents and students complain about high tuition costs and demand that colleges find ways to lower their costs.

The standard of living on a college campus has expanded to a level that colleges simply cannot keep pace with. Their attempts to keep pace have resulted in the skyrocketing of tuition rates.

As college tuition prices are driven higher by the insatiable desire of students for high priced amenities, student loan debt also continues to skyrocket. This is the predicament that we find ourselves in today.

Let’s take a step towards halting the rise of both college tuition and student loan debt, by eating more ramien noodles and accepting a moldy dorm room as your right of passage!

The Pay As Your Earn Calculator for Student Loans

The Bottom Line

This new repayment program only scratches the surface of the real problem with student loans: high college costs and students having zero financial sense.

It does however, give some respite for families who are struggling under the burden of student loan repayment. It may not help you pay off your student loans any faster, but it may help ease your monthly budget. Especially if you have a large family size, as your discretionary income fluctuates based on the poverty guidelines for family size.

If you are wavering on whether to switch to this new repayment plan or not, you can use the handy calculator at the Department of Education’s website, and it will tell you if this new repayment plan will save you any money or not.

Do you think this is worth a try? Or this just another government bailout is disguise?

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Payoff Student Loans with a Business Mindset

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I will assume that we are all aware of the current student loan crisis. You might have heard the term “student loan bubble?” This term was created because, just like the housing bubble, student loans were given out in excess to students who had no means of paying these loans back. Now these students have graduated and are struggling to find a job in a sluggish economy. Students are behind on loan payments, and student loan lenders are buckling under a mountain of defaulted student loan debt. Just as the housing market did in 2008, the student loan bubble is on the verge of bursting.

Unfortunately, I do not think there is any way to stop this “bubble” from bursting. The damage is already done. Billions of dollars in student loans are now on the books, and unlike a mortgage, many of these student loans cannot even be discharged in bankruptcy. In fact, student loan debt just recently surpassed the total credit card debt in the United States and continues to rise to shockingly unsafe levels.

What have we gotten ourselves into?

A Way Out?

When the bubble bursts, and I don’t believe that event is too far into our future; students, legislators, lenders, and colleges and universities will all be clamoring for a solution to the problem.

The clearest solution I see to this problem is for colleges and universities to find an intersection of education and business.

In practice, I think that colleges and universities should be a hotbed for economic innovation. College students should be encouraged to develop their entrepreneurial mindsets while on campus. Corporations should be given access to students, and vice versa, so that both can learn from each other. After all, the point of a college degree is to get a job, right?

College career centers spend time and money trying to attract businesses to their doorsteps to hire college graduates, but what if these same corporations played an integral role in the fabric of the university.

I am not proposing that colleges and universities adopt a profit centered business model, but rather that students themselves adopt a business mindset.

The Business Mindset

A business, whether large or small, has to protect their bottom line. Any business owner understands that they have to meet certain profit margins to maintain a profit, and they need a certain gross income to meet their financial obligations. They cannot leverage themselves too thin, or they will not be able to pay their bills.

This same principle can be applied to students who are borrowing way more money than they need to fulfill their college goals. They are essentially leveraging themselves too thin, with no hope of being able to repay their bills.

College students with a solid understanding of business principles could easily relate their personal financial situation to that of a business. They will quickly see that they need to view their education and their student loans as an investment. If they treated themselves as a startup company, would they be able to secure funding to complete their education?

This simple shift in perspective could open up the eyes of many college students. I love NBC’s show “Shark Tank”. The “sharks” are brutally honest with the entrepreneurs who come on the show because they know what it takes to succeed in business. They understand what constitutes a good and profitable investment. College students need to have the same view of their education and their future career goals.

The question is: “How can you as a college student ensure that your education is a solid investment?”

This question should drive your education, and be the basis for the decisions you make in your career. After all, you likely have a mountain of student loan debt following you that is more than happy to bury you if you stumble.

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The Washington Monthly: A New College Ranking System

Antithesis of US News and World Report

The US News and World Report college ranking system has become the industry standard. In recent years however, their methodology has come under fire as being to much of a “good ‘ol boy” system. For example, within the methodology of determining their ranking system, they give a full 25% to peer rankings. So for example, if you me and 3 other of our buddies were all college presidents, we could all get together and be sure to vote each other’s colleges very high. This rating would then be used as 25% of the overall score for the college. Does that seem fair to you?

Methodology aside, the US News and World Report does not address the ability of a college to get their students employed. It does not measure the effectiveness of teaching. Like Bill Gates previously said: “The control metric shouldn’t be that kids aren’t so qualified. It should be whether colleges are doing their job to teach them. I bet there are community colleges and other colleges that do a good job in that area, but US News & World Report rankings pushes you away from that.”

What is Your Criteria?

If you are currently evaluating college admissions letters what are your top criteria for choosing which college to go to?

Be sure to think about how good of a job your college does at giving back to the community.

How well will they prepare you for the work force (that is after all, the main purpose of getting a college education right?)

Do they excel at teaching?

What is the average student loan debt of graduates?

Use Crowdsourcing to Payoff Student Loans

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2012 was the year that crowdsourcing became mainstream.

Massive crowdsourcing ventures like Kickstarter, TaskRabbit, or My Gengo have emerged as viable businesses to facilitate the model of crowdsourcing.

Crowdsourcing is essentially the use of large numbers of people to support a common goal. On Kickstarter for example, people can begin a project such as releasing a new studio album. They would then raise the funds they need to complete their album through donations from hundreds or thousands) of people. Each person would only contribute a small amount, but the collective (crowdsourced) efforts would generate the needed capital to complete the project.

If you were a child of the eighties/nineties like I was you may remember “With out powers combined….I AM CAPTAIN PLANET!”

Maybe a lame reference, but you get my point!

Crowdsource Student Loan Payments

How would you feel about raising funds from a large number of people to payoff your student loans?

Do you think you could get friends, family, coworkers, or random strangers to donate to your cause?

What if you provided an incentive. For example, if you contribute $5 towards my “student loan payoff fund” I will bake you cookies, or I will give you a hand painted watercolor.

Do you think it’s viable to harness the power of crowdsourcing to raise enough money to payoff your student loans?

The website GoFundMe.Com is doing exactly that.

They are not specifically a student loan payoff crowdsource site, but education is the second most popular cause to support. It’s legitimate and people are really making this happen.

Corporate Crowdsource Student Loan Payment

If you are not on board with asking for donations from your loved ones and perfect strangers who are contributing out of the goodness of their heart, what if you sought out businesses to do the same thing?

Businesses spend a lot of money on advertising each year. Their goal is to get the word out about their company, product, brand, etc.

To build a brand, many companies spend a lot of money to paint themselves as humanitarians, loyal to their customers, servants of all mankind. What better way to put these words into true action than to spend their advertising dollars to pay off someone’s student loans?

What would you do if a company gave you $5,000 to payoff your student loans?

I imagine you would shout that from the rooftops, right?

You would tell all of your friends and family. You would most likely post something on Facebook, Twitter, other social media. You would spread the word as far as possible.

If done correctly, the business would likely get much more out of their $5,000 investment because of the positive publicity resulting from their donation.

What are your thoughts?

Would you consider this as a business owner?

Would you be happy to be a spokesperson for a business fi they paid off your student loans?

Bubba’s Hover Craft with Oakley for Golf Courses – April Fools Prank?

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So this post is just for fun.

But for those of you who have not yet seen the video of pro golfer Bubba Watson driving his Oakley hover craft around a golf course, you need to see it!

If this is real, sign me up!

I don’t even play golf, but this would make me pay money to go to a golf course.

Being a designated driver has never been more fun!

If this is an April Fool’s prank; hat’s off to Bubba and Oakley. This is one of the more elaborate pranks I have see in awhile.

But also, kudos to them for thinking of an incredible ingenious idea that may actually work. If this is a prank I can guarantee that someone will run away with it, and make it into a profitable business idea. Not a bad way to profit off of an April Fool’s prank (although, here is to hoping we will see it out on the back 9 next time we play!)

Money for College Project

An Unconventional Guide to Paying for College