You are currently viewing Why Student Lending is Broken:  Part 3 of a Series

Why Student Lending is Broken: Part 3 of a Series

Is Pursuing Your Passion Worth the Financial Pain

By Chris Keaveney

This blog series explores the various factors contributing to the student debt crisis including:

  • The reality that colleges are unintentionally incentivized to raise the cost of attendance, and students are willing to pay these high costs, due to the easy availability of student loans from the federal government (Part 1)
  • The largest driver of the crisis is low completion rates of students pursuing post-secondary education (Part 2).  According to the Department of Education, only 57 percent of first-time college students graduate within six years of starting. This non-completion trend only decreases the probability of the borrower having both the willingness and the ability to repay the debt.

In this post, we’ll explore another key factor of the student debt issue – the fact that for many students, the cost of their education doesn’t match the employment and income opportunities on the other side of graduation.

For a lot of people, the choice of where to go to school and what to study becomes more of an emotional decision rather than an investment decision – which isn’t necessarily a bad thing. I myself consistently encourage my own kids to pursue their passions and find what makes them happy. When this decision can become an issue is when there are structural inefficiencies that force students and their families to choose between passion and a return on investment. Pursuing one’s passion is a wonderful thing, but only if it is balanced with the realities of paying for that passion.

Take for instance Veterinary School. The cost of any program in the U.S. is at or near the cost of medical school; however, starting salaries for veterinary doctors can be half that of medical doctors. So right out of the gate, the vet’s ability to pay back his or her student loans is significantly less than that of a medical doctor, all things being equal. Even with government-based relief programs, the burden is a significant one and results in the accumulation of large amounts of interest that may or may not be forgiven after 15 or 20 years and may or may not trigger a taxable event when it is.

A smart educational funding strategy aligns student loan debt with the occupational expectations for employment and income to ensure a better match with debt and the ability to repay that debt. An important goal for today’s students is to make sure to examine carefully their option sand to expect to be able to comfortably support their student debt with the profession they have chosen – including being realistic about job availability and starting salaries.  Longer-term, I believe that there needs to be an alignment of costs of an educational program with the employment and income outcomes. This will take time to accomplish, but I see the beginnings of movement in this direction.  It will be a great day when college graduation ceremonies across the country are attended by students and families who feel confident that the means through which they financed college will lead to employment that not only results in a sound return on investment, but allows them to follow their passions without worry.