“And, It Comes With a Money Back Guarantee”

From time to time, another fee-only advisor writes a post for my blog. This is from Warren Ward of WWA Planning & Investments. I hope you enjoy a new perspective!

Josiah Wedgewood founded his eponymous china company in 1759. He used a range of clever marketing strategies to promote his china across the Western world and among them was today’s title, a selling technique still in common use. These days, such a guarantee is almost assumed as retailers struggle to defend market share. As soon as one product has it, consumers begin questioning the quality of any product that doesn’t. It just takes one producer to start the cascade.

The offer of a “money back guarantee” has accompanied consumer products as varied as clothing, kitchen appliances and even automobiles, so what’s next? Recently, the Wall Street Journal featured an article about colleges that guarantee graduates a job placement or a specific salary. This approach requires a high level of confidence in programs and teachers as well as a willingness to use marketing to stand out from the crowd. Not surprisingly, only a handful of schools have been so bold.

However, there are other ways that tuition costs can be managed. When Indiana ex-Governor Mitch Daniels assumed the presidency of Purdue University, he asked if tuition could simply be frozen. The answer he received was that no one had ever asked before but, yes, it could be done. So far, tuition has remained flat for four years. In the first year, room and board costs were dropped by five percent as well. Another cost-saving option is a work/study program.  Available throughout the country, these offer earnings while still in school, almost immediate fulltime employment afterward and an invaluable network of mentors developed during the program. Many large companies have paired with a range of schools to offer these co-op programs. Here’s a link to an article from the USNW website providing a list of such programs. It is a couple of years old, but narrowing a Google search down to the past year gave me a list of dozens of programs, sponsored by both colleges including Temple, U Mass and Cornell and employers such as American Airlines, GE and Biogen.

For some, an alternative to college might be a better investment in time and money. According to a 2012 report from the Social Security Administration, 10,000 Baby Boomers are leaving the workforce every day. For those of us who are slowing down, this can be a blessing. For companies in need of trained workers, not so much. While the workforce is losing engineers and physicians, it is also losing so-called middle skill positions, such as welders, electricians, diesel mechanics and HVAC technicians. As Boomers retire, the country is going to need to find a way to replace those critical workers who keep our lives (and our factories) running smoothly. In large measure, such education is being provided best by our community colleges and apprenticeship programs. This “earn while you learn” concept thrives in Germany. In the US, it has historically been offered for manual trades, often through their unions.

For those not so mechanically inclined? An industry has sprung-up in the past few years to teach basic software code-writing to those with no computer education at all. Becoming a manager in this field almost certainly requires a college education but coding is being taught in non- and for-profit classes all over the country and graduates generally go straight to work. Typically, there’s a ten to fourteen week course after which grads are prepared for an entry level coding position. The schools generally shy away from the newest programming languages in use by high tech companies, instead focusing on the older languages in regular use by manufacturers and financial institutions.

One of the least well-known options for managing educational debt is loan forgiveness, available only to those that work in the non-profit world after college. Generally, making the minimum payment for ten years can qualify a graduate for the program. There are a number of strings attached so doing adequate research or obtaining assistance from a professional is important. In fact, the New York Times recently reported that not all forgiveness letters are valid.

Why do individuals spend four or more years in school before embarking on their careers? A 2014 report from the non-profit Economic Policy Institute cites two reasons. The report reinforces the lifetime earning differential (approximately double) between high school graduates and college-educated workers and the greater resilience that better-educated workers experience when they lose their jobs. The value of a college education is well-documented.  However, no one wants to become the subject of an article like this one in the Washington Post describing Baby Boomers who are retiring with college debt.

Many parents expend significant effort helping their offspring choose a satisfying career and rightfully so but the diverse paths to get there rarely receive equal attention. Parents and their financial advisors should encourage prospective college students to thoughtfully consider the time and money required to reach their career goals. What amount of debt is reasonable to incur for college? Are there alternative programs of equal quality at lower cost or within a shorter timeframe? How will college debt be repaid? A repayment strategy is critical since college loans – like taxes – cannot be discharged through the bankruptcy process.

Student debt continues to make headlines across the country. Recent research found that over half of American college students don’t even know how much they owe, much less how they plan to repay it. Figuring out ahead of time how to service such a substantial debt serves as a reality check for students and parents, not to mention decreasing the worry factor for both.

Even academia itself is not immune to market forces. According to a recent Forbes magazine article, small liberal arts colleges have begun to fail with some regularity. Another example comes from a friend who teaches packed business classes at the local university. He sometimes hears complaints from colleagues who teach less popular humanities classes that they are being paid less than he is. Knowing business as he does, his response is to suggest they begin teaching classes that are popular with students, thus bringing in more revenue to the school. In fact, he believes his pay is actually less than it should be due to the subsidy his classes provide. Perhaps the phrase “ivory tower academician” has finally become obsolete.

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