Student credit cards and young credit

QA with Zac Bissonnette, author of ‘Debt-Free U’


Author Zac Bissonnette argues that the risks inherent in college loans far outweigh any benefit of a degree from a big-name school

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Zac Bissonnette looked before he leaped into the student loan trap that each year shackles tens of thousands of college graduates with massive debt before they’ve drawn their first paycheck.

Zac Bissonnette, author,
‘Debt-Free U’
Zac Bissonnette, author of 'Debt-Free U'

Zac Bissonnette, above, didn’t buy the oft-repeated assurance that a degree from an elite college was a guarantee of future wealth. Debt-Free U book jacketIn the course of researching the connection between top-flight schools and the debt that students have to take on to graduate from them, he discovered the risk of that debt far outweighed any good that the prestigious degree would grant. His research has resulted in a new book, “Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships or Mooching of my Parents.”

While still in high school, Bissonnette challenged the annals of academic research to convince him that attending a prestigious university would be worth mortgaging his financial future.

They failed.

Bissonnette’s research instead revealed the outlines of a high-class con game that uses college rankings as sales tools and high school guidance counselors and college admissions officers as cheerleaders to seduce young people into the kind of debt that changes lives for the worse.

Zac said no thanks and worked his way through school instead. Next spring, he will graduate from the University of Massachusetts without owing anyone a dime.

“Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching Off My Parents” is Bissonnette’s wake-up call to parents and students who might be coaxed down the road to financial ruin by rigged ratings and blowhard boosters. Student loans are widely viewed as a benefit to society. What’s wrong with a little student debt?

Bissonnette: Debt always adds risk to your life, and student-loan debt may be the riskiest form of debt that you can have because you can’t discharge it in bankruptcy. It’s full recourse to you, and there is nothing you can sell off if you realize you’re in over your head. If you graduate from college and you realize, “Oh my God, I borrowed too much money,” there’s nothing you can do. What steered you away from student loans?

Bissonnette: When I looked at all the data of what happens to people who take out student loans, you’re less likely to be able to attend grad school because of that debt and you’re less likely to pursue a career that interests you because you’re more likely to take some high paying job to pay off your loans. When I compared that with the benefit of going to one of these “better” colleges with student loans, the student loans are far more bad than a certain college is good. Speaking of better colleges, many people believe that the more prestigious the degree, the more successful you’ll become.

Bissonnette: Exactly, and the evidence for that is incredibly weak. When I was doing the research trying to figure out my decision, I thought the findings would be much more nuanced; that it’s worth going to this college if you only have to borrow this amount of money. But it turns out the decision is sort of 100 percent to avoid debt and almost 0 percent to go to the best college. I thought it would be more like 50-50. Some have suggested that students limit their debt load to their probable starting salary. Why doesn’t that work?

Bissonnette: The idea behind that is, if you’re going to be an engineer, it’s OK to borrow more money than if you’re going to be a theater major. The problem is, people’s majors change and their career goals change. The kind of twisted thing to this is that the highest paying majors, such as engineering and a couple of the sciences, also have the highest attrition rate in terms of people dropping the major. Much less than half of people who enter college as engineering majors graduate with an engineering degree because engineering is really friggin’ hard. You could also be wrong about your expected starting salary. I know people who majored in finance and thought they were going to have a $75,000 starting salary and then got an internship with Bear Stearns. Needless to say, that didn’t work out. How do student credit cards fit into this mix?

Bissonnette: The whole argument about students abusing credit cards is a total red herring in the context of the problems that kids run into with debt in college. The average college student graduates with $3,000 or $4,000 in credit card debt and about $23,000 in student loans, and yet the media talks about credit cards. It’s just stupid. I’m not an apologist for the credit card industry, but in the grand scheme of things, people should worry a lot less about credit cards and a lot more about student loans.  It’s a lot easier to attack the credit card companies than it is to attack the colleges for loading the students down with excessive debt. No one’s life is going to be ruined by graduating with a couple thousand dollars in credit card debt. You also found that students at the best colleges don’t necessarily rack up the most debt.

Bissonnette: If you get into the absolutely top colleges — Harvard, Yale, Princeton, all of those — they have such big endowments and huge financial aid packages that, as a practical matter, you won’t have to borrow money to go there. Where people get into trouble with student loans is at the second tier of private colleges like NYU or Fordham. I get more e-mails from kids who have excessive debt going to NYU than any other school by far, like four times as much.

Are they going to earn a return on it? Probably not. If you talk about it in economic terms, you could say college is a classic example of declining marginal utility, where you earn very high returns by going to college for the cheapest amount possible, and then once you start investing in college beyond that, the returns plummet very rapidly. That’s the best argument for budget colleges. Some parents would argue that working while attending college decreases the return on an expensive college education.

Bissonnette: Studies show that people who work during college actually have slightly higher GPAs than students who don’t work, and students who work more than 40 hours a week, which is a crazy amount that I would never recommend, actually graduate with the same GPAs as students who don’t work at all. When you consider that the average college student is drunk like 15 hours a week, if you think that you’re doing your kid a favor by taking out a home equity loan so they can sit around and watch sitcoms while drunk, I don’t necessarily agree with that. You say a strong work history may pull more weight than a prestigious degree in today’s job market. Why?

Bissonnette: One of the stereotypes of my generation of workers is that they’re kind of lazy and entitled. What better way to disprove that stereotype than to have on your resume that you worked a ton while you were in college? I interviewed the head of human resources at a big accounting firm, and she said they love hiring recent graduates who worked at Starbucks during college because it shows that they know how to work with people, it’s fast-paced and it’s intense. She said they don’t need relevant work experience, they just need people who know how to work and they’ll show how to do relevant work. What’s the biggest obstacle to graduating debt-free?

Bissonnette: I worry that we’ve kind of trumped up college into something that seems more significant than it should be. People always say college should be the best four years of your life, but I don’t agree with that. College should be about laying the foundation for the rest of your life. The idea that is needs to be this wild, debt-fueled orgy, I don’t buy that. No one is warning kids about the dangers of excessive debt. Colleges tell kids it will all be fine, that college is an investment, which is certainly debatable. I would argue that the investment in college comes from going to college and getting a bachelor’s degree. After that investment, it only becomes consumption.

See related:How to face a student loan debt disaster, Congratulations, graduate, but do you have a post-grad debt plan?, Compare student credit cards

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