Opinions On Student Loan Debt

October 28, 2008

Awhile back I read an article about student loan debt from Yahoo! finance and saved it as an article to re-read and write about. The article starts out with a horror story about a master’s student who had $140,000 in student loans and only managed to find a job paying $35,000. A story like this is strangely reminiscent of the current subprime mortgage mess. A young adult takes out loans despite not having the means to repay them. I imagine the student loan credit market will feel the effects of the subprime disaster. If fully educated adults make poor borrowing decisions, I can only imagine young adults will make even worse borrowing decisions. What follows are my opinions on student loan debt.

Plan your College Financing

Just like any other major purchase, you have to research and plan it out. You have to examine every option. What are the costs of state schools vs. private schools? Are there any scholarships available? What are the financial aid packages? What is the projected starting salary for your intended career? Taking out student loans of $30,000 to $40,000 is most likely one of the top 5 most expensive purchases for your entire life. Make sure you put in the same type of research you would as if you were purchasing a house or car.

The Purpose of Higher Education

The article states that college grads make 60% more than those with a high school diploma. Higher education certainly opens doors in your career that might not be possible otherwise. Higher education is for making career paths available that were previously unavailable. Higher education is not for doing what everyone else is doing. I had numerous friends go to college and return a year later with no idea what they wanted to do. They ended up enrolling in the local community college and finding a career path that made them happy and then attending college with a well thought out career path. It’s unfortunate that going to community college is looked down on in our society when it is the financially sound decision for confused young adults.

Assessing Earnings Potential

Student loans can be smart financial investments. I elected to attend a private institution instead of the local state school. The costs would be significantly greater, which would result in my taking out student loans. I was able to pay off my student loans prior to any interest accumulating and am gainfully employed in a career that I enjoy. I knew prior to committing to student loans that my earnings potential would be significantly increased by attending the private school in my instance.

It is extremely important to weigh the potential of increased earnings with the potential downside of 20-year loan payments. When assessing the decision to attend college and take out student loans, it is crucial to be able to determine the future earnings potential as a result of earning a degree from that institution. This should be strictly a financial decision.

Types of Student Loans

The type of student loan is an important detail when assessing the financial package. I took out Perkins loans for the first three years of college. The fourth year I paid in full what was supposed to be a Stafford loan. Perkins loans do not begin accruing interest until after a grace period, which is post-graduation. My Stafford loans had fees associated with them that were large enough that it made financial sense to pay them off with internship earnings. Most federal loans do not begin accruing interest until after graduation. Private loans, on the other hand, begin accruing interest the minute you incur the debt. A friend of mine was forced to take out private loans, which resulted in large amounts of debt when he graduated. It is extremely important to know when your loans begin accruing interest.

Graduate School

I have put significant thought into graduate degrees. I personally feel that graduate degrees should only be pursued if they are completely necessary to open a new career path or significantly advance your career and increase your salary. Also, I will most likely try to find a company who will pay for a portion of my graduate degree, if not the entire degree. Taking on significant student loans for graduate degrees can push retirement goals back instead of bringing them closer to reality.

Conclusion

I was fortunate enough to be able to pay off my student loans before they started accruing interest. According to this article, others have not been so fortunate. I’m hoping that this subprime mess will be a learning experience for both borrowers and lenders of all kinds of debt. Not only should people only take on mortgages that they can afford, but young adults should not take on student debt that will have negative effects on their personal finances for 20 to 30 years.

If you like what you have read please consider signing up for automatic updates via e-mail or RSS


Thoughts On My Future Career Path

September 28, 2008

I have been employed by a small biomedical 8-year old start-up company for just over two years. We have a few FDA approved products and recently went public with an Initial Publinc Offering (IPO). I’m an engineer and spend most of my time working on an R&D team. We’re developing a next generation product that incorporates DNA extraction into our current FDA approved system. Additionally, I’ve been working as a self-employed contractor tutoring high school students for almost one year. I tutor through a company 4-8 hours a week. Recently, I have put significant thought into ways to advance my career towards a higher income and a more satisfying job.

Grad School

I have done significant research in the area of graduate school. There are a few good schools in the area that offer some great part-time graduate degrees. With my family and soon-to-be purchased condo I am unwilling to leave the area for graduate school. One option for graduate study is a masters in product development. I am thoroughly enjoying the product development aspect of my job. I feel as though I would be able to remain in the biotechnology sector and enjoy a career if I specialized in product development.

Also, there are a few great part-time MBA programs within a reasonable commuting distance. As much as I enjoy the science nature of my job, I think a natural career progression demands that I am able to manage other people as well as have a thorough understanding of the business aspect of a company. One of the programs even allows for me to specialize in biotechnology management.

The only problem with the local graduate programs is the cost. My current employer would only pay for $3,000 of my education in a calendar year. If I maximize this contribution, the most I could expect from my employer is $9,000. I may have to switch jobs in order to have more of my graduate education paid for by an employer.

Cons of my Current Job

Although I enjoy most of my tasks, I am learning a significant amount about product development and I am generally happy with my compensation, I do not see a future with my company. Throughout my two years at this company only three people have been promoted within. There are not a lot of layers within my company and I don’t see new layers being created in the near future. Also, my company does not offer a 401k match and will not really help with furthering my education.

Other than the slim chance of career growth within my company, the biggest problem with my current job is the lack of communication from my bosses. I currently have not had a performance review in my two years with this company. This is my first job out of school and I am not being aided by anybody to help me improve my professionalism. If it were not such a small company with many opportunities to experience all aspects of product development, I would have switched jobs a long time ago. I did not even get an explanation as to why I received a 4% salary increase at the beginning of the year. Also, I know some of the engineers at my company received a bonus, yet I have never been told what I needed to achieve or how I needed to perform to receive a bonus. All of these company aspects are extremely frustrating.

Potential Future Jobs

I really enjoy working in the biotechnology sector. I don’t necessarily need to be in a laboratory to enjoy my job, but I do enjoy being in a company that is working with cutting edge technology. There are a few larger companies that specialize in biotechnology and pharmaceuticals that might be willing to help me gain a graduate education, while still keeping my interested in a job. Also, there are a handful of smaller biotechnology companies that might provide me with a more professional and less frustrating atmosphere. The number of job openings are not abundant, but I will be keeping my eyes open for quality job opportunities that provide a step up in responsibility. I do think it might be worthwhile to remain with my current job until the new product passes clinical trials, as that is the only remaining aspect of product development that I am unfamiliar with.

Recently, I was contacted by a recruiting firm that places people in companies that specialize in hedge funds and proprietary trading. He claims that people in the biomedical field have a similar development environment and technical skills to the financial industry. I will most likely follow up with this contact to get more information on the opportunities in the financial investing sector. I really enjoy personal finance and investing. This might be a totally different career path that has the potential to be very satisfying, especially if I am able to find a job with a niche investing in the health and biotechnology sectors.

Self-Employed Expansion

I currently do my tutoring through a company. They do all of the leg work and I basically sit in a room and kids come to me for tutoring. Although it is very convenient, I am missing out on a significant amount of income. Recently, I have been thinking about tutoring on my own. This would require using my old high school math and science teachers, in addition to my current teacher friends for referrals. Advertising for tutoring is significantly based on word of mouth, however, my first students would have to come strictly from teacher and counselor referrals.

In order to start tutoring on my own I would have to set up a website detailing my credentials to put on fliers at libraries, schools and grocery stores. I would have to develop a system of scheduling and maintaining files on students. Also, I would need a place to tutor. I will most likely look into the local libraries, park districts and churches to see if rooms are available for free or rent. The work would be significantly more, however, the pay off is most likely worth it. I will be able to charge three times what I am currently making on an hourly basis. As of right now I will most likely try to start tutoring on my own beginning in 2009 with the spring semester. I will continue to tutor through the current company to maintain my current income with a goal of tutoring completely on my own for the beginning of the next school year.

If I continue to enjoy tutoring and find myself being extremely profitable, I may try to turn it into a full-time gig by working 40 hours a week and hiring other tutors. This idea is far in the future as it would only be possible if the demand for tutoring services is overwhelming and constant. I have not even begun to think about logistics such as health care, especially with a future family to consider.

Conclusion

As much as I currently enjoy my current career, I am looking forward to my future career path. I feel as though there are some exciting and prosperous paths in my future.

If you like what you have read please consider signing up for automatic updates via e-mail or RSS