Earlier this week I highlighted a radical approach for college funding that I recently read about in the New York Times. Mr. Luigi Zingales, a professor at the University of Chicago, proposed using venture capitalists to fund young people’s college education. In return they would promise to repay using a percentage of their future earnings. I give Mr. Zingales a lot of credit for trying to come up with a unique solution to a real problem. At its heart though I think this is still just debt repackaged in a different way, and the resultant servitude amounts to the same thing.
That said college loan debt has become a major problem. We are graduating far too many of our young people with a mountain of student loan debt that will take them years to repay. Worse still are the students who do not complete their degree for whatever reason and then are saddled with debt but without the degree that will help them earn the income to pay it.
I would like to propose a really radical idea for funding college. What if you were to cash flow college?
What????? Well now you’ve went off the deep end for sure. That’s just crazy talk.
But is it? Or has debt just become such a normalized part of our culture that the thought of cash flowing college seems ludicrous?
It is interesting teaching Dave Ramsey’s Financial Peace University. One of the lessons talks about funding college. When we talk about the idea of possibly cash flowing college, there are always a few people in the class that just see this as an impossible dream. You can see in their eyes and in their tone of voice that they simply don’t believe it can be done.
However, I have met many people who have done just that. It can be done. It’s not easy. But it can be and is done by many people every day.
So how do we do it?
What if you worked for a year or two after graduating from high school?
Especially if you have the option of living at home so you can cut your expenses to the minimum. What if you were to get a job and work your tail off for a year or two, saving 60 or 70 percent of what you made? Would it be possible to enter college with a several thousand dollar head start? Just be careful that you don’t lose the desire to continue your education.
What if you applied for every scholarship you could find?
There are literally thousands of scholarships that are available every year. Some big. Some small. But you say your academic track record isn’t that outstanding and you weren’t a star athlete? Actually, there are many scholarships that don’t require either of those characteristics. What if you applied for 1,000 scholarships and were turned down by 99% of them? You’d still have 10 scholarships that might amount to a few thousand dollars toward your education.
What if you attended a local community college for the first year or two?
Community colleges are great values. Often much cheaper than a 4 year university. If you carefully choose courses that will be transferable, you may be able to get a couple of years under your belt at an extremely reduced rate. If you went to a community college for a year or two and then transferred to a 4 year school to complete your degree, your diploma will look the same as if you had attended the 4 year school all along. You’ll have just saved a little money in the process. Just be very careful that you will be able to transfer your credits. I would discuss this with the 4 year school where you intend to transfer just to make sure your credits will transfer as expected. Most community colleges are very good, but I have heard a horror story or two about a few that promised credits could be transferred, but in truth they couldn’t. You want to make sure you won’t fall into that category.
What if you worked while in school?
What if you got a part-time job and worked while you were taking classes? Is it hard to do that? You bet it is. College is difficult and working while in college adds to that difficulty. But many people do it and have survived just fine.
What if you turned your 4 year program into 5 or 6?
This one goes with the last one. What if you reduced your course load just a little so you could work that part-time job. Or perhaps even took a semester or quarter off to work full-time. Perhaps it might take you a little more than 4 years, but you would have the money then to cash flow your college.
What if you got a job at a company that would pay for your schooling?
Many companies offer partial or full reimbursement of tuition as one of the benefits of working there as long as your degree will relate to the job you are hired for. This is a terrific way to get an education without incurring mounds of debt. Again, it is likely you may not be able to complete your degree in just 4 years, but if you take a couple extra years and graduate debt free, it will be very much worth it. This is a great way to get a post-graduate degree as well.
What if you chose a state university instead of a more expensive private school?
Lastly, what if you were to choose to attend an in-state public university instead of a private school? In-state public universities often cost a half to a third of what a private university will cost. I got my degree from a private university and I think I got a great education there. However, I believe there are many terrific public universities. You can get a degree from one of them that will often serve you just as well and cost significantly less if you don’t have unlimited funds. The truth is there are very few occupations where the degree from the private school will significantly benefit you over the degree from the public school. The bottom line when you are applying for a job will be whether or not you have the skills to perform the task well not the name on the sheet of paper.
So can it be done?
Is it really possible to graduate with a degree and limited, or better yet, no debt at all? Yes it can be done. Is it hard? Does it require a lot of work? Do you need to commit to not having much of a life while you are getting there? Yes on all accounts. It is very hard to work and go to school at the same time. But consider this. How hard is it to repay $100,000 in college loans?
What would it feel like to graduate from college and get that first job knowing that you had no debt following you and your income was all yours? Is that worth a few years of sacrifice? I think it is, and I believe it can be done. When you cash that first paycheck knowing there are no chains of debt, you’ll be so glad you made the sacrifice.
So what do you think? Is this a pipe dream or is it possible to graduate with a degree and no debt?
Photo credit: bredgur