Caveat Emptor for Higher Education

Caveat emptor is one of only a few Latin phrases that I know, and you probably know it too.  From time to time I throw a Latin phrase out there just so that people know that I am smart.  The direct translation for caveat emptor is – let the buyer beware.  It is often used when considering buying something that is used and sold “as is.”  If you are buying a used car with 300,000 miles on it, caveat emptor is very appropriate (I almost used the word “apropos,” but I feared that it would look like I am showing off).

I believe caveat emptor should be used for a pursuit of a degree from a university or college.  It seems that I am not alone in this thinking.  Ten states have recently begun creating databases that would be publicly accessible as high school students and their families consider, perhaps one of the biggest decisions they will make together.  Sadly, Michigan is not one of the ten states.  How can the buyer beware if the buyer has no information from which to evaluate their options?

My opinion is that these institutions of higher education have no desire to help consumers prudently consider their options; they are money hungry institutions that are partially responsible for the burden of debt under which their graduates lumber.  The average undergrad packs their car after commencement with over $38,000 in debt.  Student loans are the fastest growing segment in lending and cumulatively, they exceed one and a half trillion dollars.  Meanwhile, the U.S government gets our young people hooked on debt and they charge between 200 to 300 % higher interest rates than the 10-year Treasury.  They are treating our young people as profit centers and it is obscene and wrong.

You may be thinking that no one is making them take out these loans, they are doing it voluntarily.  Yes and no.  As an example, my son (while in college) received an email from a government lender suggesting that if he needs money, simply click on the link and he would be pre-approved for thousands of dollars of cash.  It is not paid to the university, it would have been direct deposited into his account.  He could buy groceries, books, new skis, airplane tickets, or tuition with this money.  Fortunately, we have raised our children to be skeptical of these offers and to fear debt.  How many poor unsuspecting young people take the bait and get hooked on debt?  Millions, in a word.

So I go back to my original point of letting the buyer beware.  The student and prospective student should have access to data from which they can make a sound decision about their future.  The data that is on these websites in other states includes important information such as:  first year average salary, average salary after five and ten years, average debt per major, jobs in the highest demand in the state and much more.  Some states have even included the same type of information relating to trade schools, vocational schools, and military-first enlistments.

We are living in the so-called “information age” and it seems, more than suspicious to me that this information has not already been collated for students and families facing these enormous and consequential decisions.  There is no shortage of data.  I applaud those states which have started this process.  One of the most recent additions has been the Florida “student right to know” bill that was put into effect last year.  As of this writing it only refers to the 12 state universities, but other states are including private universities as well.

I have met and counseled plenty of young people who are trapped under the gargantuan levels of debt they carry.  One had a law degree, was practicing law, eking out a modest salary under a debt load that was not sustainable to their current earnings, unless of course they chose not to eat or live in an apartment.  Anecdotally, I recently came across a story of a PhD graduate that had an obscure degree with a half a million dollars of debt who could not find a job in their discipline and was working at Wendy’s.  I don’t know if having information before accumulating that much debt would have prevented the problem, but I have to believe it may have helped.

I have met and counseled people who had so much despair over their vast number of loans. They had no possible way to pay them off before they were well into their 50’s.  Each semester they were provided another round of funding that was so nebulous and in the future, that there seemed to never be a consequence to the borrowing.  I am sure they imagined themselves gainfully employed making tons of cash and magically all of these debts would be paid off.

There are consequences to this bubble of debt and burden being placed on our young people and it will likely have lifetime repercussions for many of them.  Some of you may be thinking about how kind and generous it would be for the government to forgive all of that debt and wipe it away.  Believe it or not, there are serious adults in Washington who are pushing for that outcome.  This is also grossly unfair to those who worked their way through or have borrowed reasonable amounts and have since paid them off.  Any parent of a toddler can tell you that when you reward a behavior, you get more of it.  The lesson will be, when I create a problem, someone else will take care of it.  Rubbish.  If we want a generation of dependent citizens, this would be a very good start.  On the other hand, I would have no problem with the government providing loan forgiveness plans in exchange for some sort of public service until the loan is paid off.

I believe the best way to solve a problem is to prevent it in the first place.  Having adequate information for high schoolers and their families would be the best way to start preventing the problem before it begins.  In addition, changing the messaging about higher education as the answer for everyone would be another place.  I have encouraged many young people to pursue the trades.  When you look at that data, it is profoundly compelling.  When their high school classmates are graduating college with forty grand of debt, these trades people will have already been working in their field under full benefits making above average salaries and arrived there debt free.  Push that date forward ten years in the future and they will have a six-figure retirement account and a career path laid out before them. Fast forward another 20 years and they will be eligible for retirement in their fifties.  I know this to be true because I witnessed it firsthand and have enjoyed dozens of them as clients retiring early.

So caveat emptor indeed.  But they can only beware when they have adequate information upon which to evaluate their options.  Let’s turn this information age towards the millions of students who are considering and trying to figure out their future.