A shocking statement
The three of us were driving somewhere when we got on the topic of good companies to work for. My husband mentioned how back in the dot com era, there was a company where he lived that paid out huge bonuses to their employees. About $20 million in bonuses were given to the 1000 employees of Kingston. Naturally everyone wanted to work there.
So then we got to talking about what we would do if we received a large bonus like that. I don’t remember what my husband or I said, but I was definitely shocked at what my son said:
“I would use it to pay off debt.”
“WHAT?!” was my response. “I would hope you don’t ever HAVE debt!”
I am so debt adverse that the notion of my 15 year old son, who doesn’t owe any money to anyone, assuming that he might acquire enough debt that it would take a large bonus to pay it off just freaked me out.
His response was well but that he might have student loans…
I’m sorry, I don’t see any reason why he would need to have student loans. We immediately jumped in with “but you can live at home, and apply for scholarships, and work for part of it, and I will help with some, and maybe your dad might too…”
Are student loans so normal now that it’s just assumed that if you go to college, you’ll have loans?
Ugh.
It IS possible to pay as you go for school and graduate debt-free. It’s not even all that difficult where we live, because there are SO many options and price ranges for classes.
The first step, I think, is not assuming that debt is required. Or at least not automatically envisioning your future encumbered by debt.
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September 22nd, 2008 at 6:06 am
Debt has become so ingrained into people’s lives that it is sickening. I was watching some personal finance show on TV the other night and a caller called in asking how he could protect his HELOC because that was his source of liquidity. The show’s host “explained” to the viewers that a HELOC was a source of liquidity and it made me sick. The best liquidity is cash and/or liquid investments. A HELOC is just a potential debt, granted it makes sense to keep one open and not use it, just in case of big emergencies at least you have access to the funds. But unfortunately data shows that when people have HELOCs they use them. According to the ABA 92% of HELOCs available over the past 5 years were tapped into.
Anyway, as far as bonuses go, I get most of my pay in the form of a bonus. I work on Wall Street where that is the norm. My bonuses have been in the low to mid six figures while my base salary is low six figures. Most of my colleagues tend to live the lifestyles affordable by their entire compensation, however I live the lifestyle affordable by just my base salary (and actually less than that). So my bonus is just pure gravy that I invest. Even though I don’t make as much money as many of my colleagues, I have much more money than them in cash and investments. For me that is the ultimate luxury, not having to worry. I’m 29 and can lose my job right now and continue living the same comfortable lifestyle for over a decade without working.
September 22nd, 2008 at 6:23 am
umm… maybe your son was just trying to give the answer he knew that his parents would like/have trained into him? it just sounds like you might have gotten all over him for trying to say the right thing! if he were in debt, he’d use the windfall responsibly. that said, it’s awesome that you were able to have the conversation about college and paying for it right then; now he knows what he’s working with as he goes along. i feel like that conversation didn’t come up with my parents really ever… and i’m still paying off my loans!
i love your blog!
September 22nd, 2008 at 6:52 am
Graduating with student loans, sadly, is the norm nowadays. Even if you do live at home and work part-time it is so hard to come out debt free. I mean, he’s going to have tuition, fees, books, gas to and from school, parking (my school was over $500 a year just for that), food, and miscellaneous other expenses associated with obtaining an education. What if he goes to a really good state school…those are getting very expensive now…god forbid if he went to a private school (where I go it is over 50K/year). Junior colleges are cheaper, but only last 2 years.
Also, scholarships are VERY VERY hard to get nowadays. I got several in college, but it was hard work and very competitive (and I had a 4.0). Unless he is an athlete, school-sponsored scholarships are neat-to-impossible to obtain so he’ll have to compete for private scholarships.
I don’t mean to be Debbie-downer….but it is very very very hard nowadays to graduate with student loan debt of some kind. I paid my way through 2 years of junior college (no debt), but the last 2 years at a large public university I managed to incur about 25K…and it was almost all tuition.
September 22nd, 2008 at 7:02 am
I agree with Twiggers. Here it Canada, accumulating student is unfortunately, also very common. It IS possible to live debt free, but not everyone can do it. For example, he may have a lot of schoolwork and find he can’t work as many hours as at his pt job. He may end up going away for school and have higher living expenses. That said, your son may have just been trying to say the responsible thing and meant he would use the money to pay off debt–IF he had any.
September 22nd, 2008 at 7:21 am
I have to second Twiggers excellent response. A college education can be expensive and if you do graduate work, REALLY expensive. Twiggers said it perfectly, I can’t add much more to the expenses listed. Scholarships are getting more and more competitive, graduate assistantships and teaching assistantships are ultra competitive, public universities are raising the cost of tution, as the cost of living rises, so do those miscellaneous expenses. If you son is lucky enough to end up in a field where his employer will help offset the cost of post secondary school education, great, but what if he decides to pursue a career in a field where he will need at least a BA if not an MA? Or wants to study in a field that is a bit esoteric? Or is a good student, but not a great student and is by-passed for those competitive scholarships?
You have posted in the past that you are very anti-student loan and you consider student loans bad debt. I personally have to disagree. The only time it’s bad debt is if you take the loan money and use it to fund spring break trips, dorm parties, a car, totally drop out of school and flounder for two years trying to “find yourself”, or do a 180 turn in your choice of a major and end up having to do additional study (and take on additional tutition) because of the switch.
You have stated there are lots of options locally for your son, but what if the program he wants is in a different area or just not available? Or if your son wants to try life in a different area to broaden his horizons?
I have student loan debt and do not regret paying any of it back. It enabled me to go to not one but two schools, allowed me to study in the field of my choice, I got a great education in my field and for many years worked in the same field. I also worked in a field where I needed a BA/BS to even be considered for an entry level job. Not an option to work in my field and gain experience while working towards that degree. I would have never been able to do that without the student loans from both the schools I went to and the federal government. I have never once considered it bad debt, I considered it an investment in me and my future.
September 22nd, 2008 at 9:51 am
I’m with Idub. Your son could have responded to that in a variety of ways, and he picks paying down debt, and you’re upset? He sounds a whole lot money smarter than most his age, although as Idub pointed out, he may just be regurgitating something he knows his parents want to hear.
It’s a shocking statement all right- shocking that a 15 year old would say that rather than buying clothes, video games, movies, etc. I know what I would have said at 15, and it wouldn’t have been pay down debt.
As for the whole student loan thing, I agree that everyone should avoid student loans like the plauge, but often that’s not possible. I don’t want to see anyone NOT get an education because they’re too risk adverse. If student debt is needed, it should be viewed like Bouncing Betty views it.
September 22nd, 2008 at 11:46 am
JD, it sounds like you’re doing great. And wow, nice bonuses.
Idub et al – I think that if he was just repeating something he’d heard us say, it would have been that he’d use the money to pay off the mortgage. We don’t talk about paying off debt otherwise, but that IS a very common response to “what would you do if you came into money”. We talk about paying cash for things instead.
And yes, college is expensive. And I know that not everyone can get scholarships, etc, but really? to have student loans be the first thing that pops into your head as THE method of paying for college? Or to automatically assume that loans will be required?
Nelson, I agree. I’d have expected him to say “Buy a car!” or something like that instead.
Hopefully he doesn’t feel like I jumped all over him.
September 22nd, 2008 at 1:18 pm
Debt is a completely ingrained part of life, even at public universities. Too many parents are unwilling or unable to contribute anything towards their childrens’ educations, and leave us to struggle on our own. Personally, my parents are unable to help a lot, so besides financial aid (a significant portion of which IS loans), I still have a large chunk of tuition to come up with. My parents are unwilling to let me work while I am at university, and it would be nearly impossible anyway with my curriculum (year round, 20+ credits, etc), I have little other choice. Switching to a cheaper public university wouldn’t help, because I would lose a significant portion of my accumulated credits. Even if I could switch, I wouldn’t. University isn’t just an education, its a way of life, a social group, and I’ve made my place at this one, it would be devastating to me personally to switch.
I knew when I decided to go here that I would graduate with debt, but I’ve done well, and will have $100,000 in debt. I just didn’t ‘fit’ at the public universities I visited, and the with my engineering degree I should be debt free within 2 years anyway.
September 23rd, 2008 at 7:11 am
katherine, you’re totally right. even with getting scholarships, working three (yes, three) jobs in college, and managing to get more degrees in four years than my peers (wanting the most bang for my buck), i had plenty of student loans (both federal and private). it’s a tough road, even when you know you’re consciously choosing a pricier education because it’s the education you want in the place you want to get it. i don’t regret my educational choices at all, and i’m happy that i’ll be able to retire the debt soon, about 7 years after graduation. i’d guess that, with the rate of rising tuitions and the rate of inflation, many more students will be forced to take out loans in the coming years if they want to attend schools and get educations comparable to those their parents were able to get.
September 23rd, 2008 at 9:41 am
It could be worse! When I was fifteen I would have wanted to spend a big bonus on a fantastic night out in Blackpool!
September 25th, 2008 at 7:41 am
I think it’s not about assuming that student loans will be required but about being practical/realistic. Student loans are a very real possibility, and I think it is great that your son is being pragmatic and open-minded about maybe having to go that route. Even more importantly, he’s already thinking about how to deal with them after the fact. And for that matter, if you’re gonna accumulate debt, better to do so for school than a fancy car!