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.