It’s Not Math

One of my running buddies is bad at math. Terrible. Truly. Took only the one required math course in college to fulfill the distribution requirement: algebra one. Took it three times. Finally squeaked through with a C-. Promptly forgot what little he had learned. Could no more factor a simple trinomial than I could flap my ears and fly off into the stratosphere. 

Yet, my running buddy is financially secure, has sent three kids through university, has plenty of savings for retirement, makes good choices when it comes to money. Whereas I, a fairly strong mathematician, have made nothing but poor economic choices. Indeed, I have the Midas touch when it comes to investing: everything I touch turns into a muffler.

“You can’t tell the difference between the quadratic formula and a Formula One Race-car,” I said. “You’ve never even taken a course in trigonometry never mind calculus. How do you know how to make good investments?”

“That’s not math,” he explained. “That’s arithmetic.”

Ah. So in the spirit of “if you’re so smart, how come you’re not rich?” here is some simple arithmetic: don’t borrow too much. Financing a college education isn’t math; it’s arithmetic. No formulas, no equations, no scientific calculators needed. Big loans are financial suicide.

A student must not be graduated with more debt than she is likely to earn in a year. That’s it. End of lesson. Move along. We’re done here. If the college graduate is going to be a teacher, she’ll earn $40,000 a year. She cannot owe more than $40,000 after her last final. If she is going to be a pediatrician earning $140,000 a year, she cannot be graduated owing more than $140,000. Any questions?

It’s hard to save 10% of your salary, whatever your salary is. Middle class adults have a tough time earmarking 10% of earnings for retirement. Most people don’t even put away that much. Babies, homeownership, or unforeseen medical care can all cause good people to say “we’ll put away money for retirement next year.” For a 20-something earning $50K, the outlook is bleak if the debt is $200,000. It’s not about choice. It’s not about take-out sushi and big screen TVs. It’s about scrimping to be able to pay off loans just in time to retire. With zero dollars in your retirement account. In the meantime, you missed buying a house, having children, having a life. Your debt service will strangle all other opportunities.

Adults in this country are said to have inalienable rights. Babies have undeniable expenses. Gymboree may be optional. Diapers, food, sippy cup, books, toys, and blankie less so. Faced with a choice of making a student loan payment or buying medicine for a coughing child, no rational person ever thought much about it. Everyone goes to the pharmacy and then suffers as that albatross of a loan continues to get worse.

The rules have changed. Tuition increases have outstripped every other measure. If tuition increases were in a horse race, tuition increases would be coming into the final turn while cost of living, consumer price index, and wages were still in the barn. Generations ago, a college student could borrow a few dollars to finance her education and pay back the loans by working summers. Speaking of barns, that horse has left. Student loan debt is now untenable, crippling. Summer jobs are a valuable experience. Expecting summer earnings to make a dent in debt is not.

But education is a good thing, right? Over a lifetime, a college graduate earns $1 million more than a high school graduate. Why would loans be available from the federal government if education weren’t a good investment? Education loans are available for the same reason that loans are available for luxury cars that you can’t afford. Educational loans are available for the same reason that cigarettes, schedule one drugs, and discount junkets to gambling destinations are available. At least when the Cadillac gets repossessed, the financial hemorrhaging stops. Student loans are the only debt that is not dischargeable after bankruptcy. Student loans are never going away.

There’s something to be said for education. But no one can hear you say it if you are living in your car because student loans have destroyed your life as effectively as cigarettes or opioids. 

Expensive education is magnificent—awesome professors; sparkling facilities; thick crust pizza in the dining hall. Expensive education is totally worth it. But only if you can afford it. Otherwise a $300,000 education is vanity. The good news is that affordable alternatives exist. And that good students do well no matter where they go.
As the yes and no responses from early decision and early action arrive in email inboxes this week, be grateful that an expensive college has smiled upon your child. Then look long and hard at the financial aid package. Will your child be graduated owing more than she is likely to earn in a year? If so, she cannot afford to go to the expensive college. It’s not math. It’s arithmetic.