During the heyday of the Occupy Wall Street (OWS) movement, the story was told of one young activist who had quit his tenured job of teaching drama in a New York City public school to pursue his passion for puppetry. But the Great Recession intervened and the newly minted puppeteer was unable to find work in his chosen profession. Reluctantly, he went back to his old school but found that the financial crisis had taken a severe toll on its budget; they offered him his former job, but at half the pay and no benefits (i.e., he was to perform the same work, but now as a substitute teacher). The young man reluctantly took the job because it was still the best job he could find, but his newly reduced means coincided with the added burden of student loans totaling $35,000.
To OWS supporters, this young man's tale of woe was a symbol of all that was unjust with the system; to OWS critics, he was a symbol of the improvidence of those who fail to look before they leap.
But politics and philosophy aside, the issue's impact spans a whole generation today. A survey released last month shows a majority of millennials who took out student loans regret the amount they took out. If one drilled down I'm sure that students' majors play a role. And I doubt that liberal arts majors are alone in feelings of remorse; just a few years ago, a number of surveys touted the benefits of degrees in petroleum engineering. I'm sure the crash in the energy industry has greatly diminished the prospects of students who chose the then trending top-of-the-list major.
I thought of all this when I read Evan Powers' well-researched article, "Who should pay for your kids' college tuition?" Among his many excellent points:
"All too often…the kids thus make their college decision in a financial vacuum, choosing their educational destination based only on the academic and lifestyle factors, with financial figures deliberately omitted from the equation."
Powers cites research indicating that kids who help pay for their education are higher-achieving. But I think the bigger point is that everything in life involves a trade-off. Colleges are often the scene of big parties, where only the post-party hangover is available to teach the value of sobriety. Young adults generally have one season in life during which they pursue a higher education. Do they not deserve a lesson in cost-benefit analysis before they find they are starting out their professional lives with the shackles of debt?
Anybody else have thoughts on millennials' new debt servitude and how financial literacy and early intervention could help? Please comment below.
Now for the day's news and views:
- Mitch Anthony: It's not just the right number, but more importantly the right outlook that assures a successful retirement.
- Kevin Wilson suggests a possible portfolio that tightly constrains losses while simultaneously allowing for big gains -- yet one that is tough to explain to clients.
- Mark Hebner says the Oppenheimer Fundamental Alternatives fund does not live up to the claims made for it.
- Michelle M. Waymire completes her informative three-part series on what advisors need to know about social media compliance.
- Ian Bezek on how to prepare for interest rate hikes likely to commence this summer.
- Missed the big oil rally? Now it's retail's turn to bleed in the streets, says Eric Parnell, CFA.
- Roger Nusbaum questions a higher recommended allocation to alternative investments.
- Behavioral finance experts make the case for the ill-fated influence of human psychology in investing.