Dangerous Times
The first two-to-three years in school is a dangerous time for students.  They are typically still feeling the invulnerability of their teen years.  They are largely free from family responsibilities.  And the temptation to make slightly more in the short-term, without a degree is real.    Unfortunately the temporary boost in pay by working full-time is typically short-lived.  From my experience – I know that if students don’t finish school it gets much harder for them to make the real bucks over the long haul of their careers.  Take a look at this chart:

Stay in school kids!

So it’s best to finish school.   I had one of my students recently share with me that in the hey days of the real estate boom, she made close to 400,000 in one year.   She put off plans for school (I probably would have too!) and then the real estate market crashed (ouch).  She was starting back up at community college, trying to buildup her professional skills, but now she is thirtyish and a single mother.   It’s going to be a hard road for her.  I wish her the best of luck.

Consider another story about a honest and truly great executive I know.  This woman has immense integrity and was an inspiring leader.  Despite her great people skills, she was laid off from the mortgage industry in 2008.   Now this person has been out of work for more than a year.   Part of her dilemma is that she never finished college.   Many of the filtering tools used today by recruiters in large companies pretty much automatically route non-degreed management candidates right into the garbage bin.

Student Loan Shenanigans
Of course, at the other end of the spectrum, I don’t advocate going to school by borrowing either.  Borrowing with a 1-in-2 chance of finishing is a double whammy.  But consider this as well; the entities that lend money to those students are fully aware that about 1/3 of all undergraduate loans will go into default.   That’s a pretty high default number.   By comparison, home equity lenders manage their loan portfolios with a only a 2% default rate.  Why would banks lend money to low-income producing students with such high default rates, you ask?   Is it because “someday” they know these kids will earn lots of money?  Nope.

It’s because student loan debt is not bankruptable.   The banks will eventually get their money from the borrower.   I’m all for people paying back what they borrow, but this spells disaster for too many young Americans, especially the ones who are not graduating with their degrees. Students, even ex-students, do not have the same bankruptcy protection that works for other types of consumer loans.  These products are marketed to a somewhat unsuspecting audience, and the disclosure rules are not as tough as they are for credit card lenders (which means smoke and mirrors for the borrower).

This was a heinous bit of lobbying effort which was passed into law about 10 years ago.  If this makes you angry, StudentLoanJustice.org can give you a list of people to blame.  Perhaps if enough parents, educators, students and concerned citizens will band together, we can demand that this be changed, but I’m not holding my breath.   Just to have full disclosure, I don’t have any student loans, never did, but I definitely have had family members and people I love stuggle with this.

So, remind yourself the next time you are staring at a “financial aid” package for yourself or someone you care about, that the average college graduate has $20,000 in student loan debt.   And then ask how much student loan debt do the dropouts have?  Or consider the two students in James Scurlock’s documentary Maxed Out, who committed suicide because they got in over the heads in credit card debt.

The Right Balance
So, I advocate for going to college, but having students working part-time and paying for it as they go.  If parents or relatives can help out, great.  But the family should not be taking out loans either, not unless they like horse track racing.  If you are a proud and anxious parent and you are tempted to co-sign a loan to fund junior’s college, remember those default rates for students – they are very, very high.

If students stay on task, pace themselves and develop the ability to finish what they started, that will lead to the best scenario.  If you are a parent, friend or relative of someone who you think is struggling — offer some encouragement, or perhaps pay for a textbook.  They will be educated, experience long-term success and the income will follow.  I’m sorry – I don’t know when they will move out though.

If you want to try this, my suggestion would be to build an emergency fund, of 1-2 months living expenses. Take a little bit of what you earn each week and put that aside in an cash emergency fund.   I attribute this idea to Dave Ramsey and his Baby Steps.  In his plan, he wants you to put $1,000 in an emergency fund as soon as possible.   The fund is cash, not stocks, bonds or other investments.   This money is stored in a bank or money market account.   He recommends that you be able to access without too much time delay, but not make it so easy to access that you are tempted to spend it on pizza.   He sets the emergency fund at $1,000 for his initial baby step, but I found that I did not get all of the wonderful fruits (especially on the job) until I had 2-3 months of living expenses covered, which for us, was a little higher than $1,000 in the bank.  Even just the $1,000 achievement felt great though.

Make a commitment to build your fund up then don’t touch it (unless an emergency does happen).  I was amazed at how relaxed and confident this made me feel at work.   I had more peace of mind and less fear.  That’s good.  What happened next though, was unexpected and transformational.  That little boost in self-confidence and peace of mind translated into me being a little more willing to speak the truth, or inspired me to take tougher challenges, and to take some risks.  And you know what?  The increase in pay and other rewards followed.   Since establishing my emergency fund, I saw my pay go up by 20%  in about 14 months — powerful stuff.  Thank you Dave Ramsey!

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1) I believe the journey to prosperity is a messy affair, and never quite works like the books say.  There are stumbles, embarrassments and bouts of occasional diarrhea.  There are also times when I have epiphanies, moments of exhilaration, bliss, complete loss of time, space and self.   There is tremendous satisfaction to be gained from the journey.  It’s definitely worth it.  Most people won’t even try.   If you want to begin, at least we’ll get our lumps together as we travel down this road.

2)  I like helping people.  I’ve have experiences to share that might make a dramatic difference to you and your level of prosperity.   My recent day job (human resources manager) unfortunately put me in a position where I had to tell  over a 1,000 people they no longer had a job…while I was doing that it become my personal mission in life to help as many folks as I could.  And it worked – by meeting with people and talking about their resume, how to network, or how to get out of debt, even how to apply for unemployment, I managed to get nearly half of those 1,000 people into new jobs or opportunities.   And even though I don’t have to lay people off anymore, I still love helping people.

3)  This is a labor of love — what I count on is offering up some suggestions, advice, anything that I’ve picked up during my 15 years of career, work and human resources experience that might make a difference for you.    When I listen to someone describe how their work has become depressing, demoralizing or disgusting,  I happily jump in to share what I know about careers, financial advice, surviving a layoff or starting a business.  People are at least amused by what I have to say.   I like to entertain.  I will continue to offer up my knowledge so long as someone out there is still reading.