Growth of Student Loan Debt over the past decade has been 212.5% greater than wages! This means that a student working a part-time job and earning minimum wage in 1987 could pay for 106.5% of their college expenses. However a student working a part-time job and earning minimum wage in 2016 could only pay for 68.2% of their college expenses.”[i]
This means that in 1987-1988, it was still possible for a student to graduate from college without debt, enter the work force, AND begin saving for retirement immediately. Today, when a student graduates, even though they may have worked while attending school, chances are high that they will still owe money on their education. Therefore, if they are able to enter the work force immediately after graduation, they will still not be able to save as much as someone who has incurred no debt during school.
This has produced a very large gap between wages and the cost of a college education today compared to 1987. Unfortunately, such cost increases have literally consumed the saving power of the majority of American college graduates. And without their saving power, they have been thwarted from achieving the American dream or a bright financial future.
Furthermore, as baby boomers retire at the rate of over 10,000 per day, these lower wages and lack of savings becomes a greater and greater liability to college graduates. This is because the taxes required to pay for the ever-increasing cost of the Boomer’s retirement, will have to come out of these same Graduates’ pockets. In fact, it has been shown that the cost of Medicare and Medicaid alone will nearly double for a Boomer over what it is today.[ii] According to the US Census Bureau, there are 74 million baby boomers in America.
Of course, the answer lies not in new government regulation but in deregulation, much like President Trump is delivering. Deregulation will allow a path for full employment to occur once again in America. Once full employment is attained, then wages will naturally rise as workers will again have the leverage necessary to demand higher wages for their skills. These higher wages will increase taxes collected and those taxes will help supply the need required for the Boomers.
Skilled workers will naturally be the ones who will fill the demand first for those higher paying jobs and occupations than mere college graduates. This is because college and universities are not necessarily equipped to teach these skills. They offer degrees and studies but these don’t necessarily translate into developing new skills.
Which brings up another point…529 college savings plans. Under current circumstance, these government sanctioned savings plans may not be the best method of saving for your child’s future education. Since not all education takes place in a classroom and because 529 plans are (without taxation) limited to be used for college tuition, your 529 savings plan may or may not benefit your child if they are desirous of developing greater or new skills and not necessarily a college degree. Instead, a better option could be to put your money in a participating whole life insurance policy so that the cash values will be available for ANY pursuit your child may have, and not limited to just college or university tuition.
This is because, until wages begin to rise, time spent in college or universities may not be the best for your child’s overall financial well-being. Humbly learning and sharpening the skills that will give your child ready access to those higher wages may be the better opportunity.
And keep in mind, a degree can be earned anytime in the future, but the cost of lost wages and debt incurred are difficult obstacles to overcome once they have begun to compound against you.