A few days ago, I was digging through the NPR Talk of the Nation archives when I discovered one–featuring NYC-based writer, Melody Serafino–that I found particularly interesting. The topic was Melody’s article in News Week a few months back, Subsidized in the City, which touches on the fact that a good majority of twenty-somethings still receive significant funds from their parents to pay for rent, utilities, and superfluous spending.

A young man had called in to say that times have changed and young adults are coming out of college with $50K in student loans. Those minimum payments tacked onto rent, utilities and other spending was simply putting their expenses over the edge, thus creating the need to rely on their parental units to help pay the bills. This statement bothered me for a few reasons.

College grads nowadays are completely misinformed about their expected post graduation lifestyles. They’re also ill-informed in regards to how adequately choose a school that’s going to be affordable and beneficial. His comments made me realize that this is the sub-prime debacle happening all over again. Young men and women are taking out enormous loans to pay for school and school-related expenses while not having the foresight to realize that paying these off with their proposed career choice may or may not be realistic plan for starting out. And universities, much like many of the banks involved in the sub-prime crisis, are more than happy to take the loanees money–even if they’ll have trouble making payment.

Fortunately, the solution to this monetary pitfall is simple: just like a mortgage or any other significant expense, if you can’t afford it don’t get it. For fear of sounding overly harsh, I’m not saying that all schools are overpriced. There are plenty of institutions that offer affordable educations. However, I do think that a lot of middle class students are far too quick to jump on board with a school asking for a $10K-$15K annual tuition fee rather than a more affordable institution.

Obviously this is all conditional. If you’re going to study finance at an Ivy League, have done your research, and know you’ll be able to start out at 80K a year with a prestigious degree, by all means, go pay Harvard your $35K a year. But, if you’re studying say, general business administration and aren’t sure what industry you’ll want to focus in on, a viable alternative is to attend a school in your native state (if you don’t receive any significant grants or scholarships that will help subsidize some of your costs out of state).

With Bachelor degrees as commonplace as they are, I don’t see any reason for someone to spend 50K for a college education. There are plenty of good schools – mainly state schools – that are far more affordable than private colleges. It seems to me that students are rapidly choosing schools based more on status and stigma rather than on financial viability, and it’s hurting them greatly after graduation. There’s nothing special or impressive about being $60K in debt. High schoolers, and their parents, must not become so enraptured in attending a “prestigious” instituion if it will put the student in a major hole that will impact the next decade (or more) of their lives. We have got to start making financial education a priority with our students. Otherwise, we’re just doing our students a disservice.

Related posts:

1. To Charge or Not to Charge: Should Credit Card Spending be Restricted for Young Adults?