Here is a story about a philanthropist paying off the student loans of an entire graduating class. While that is nice, it isn’t the point of this post. What really stunned me was this quote:
In the weeks before graduating from Morehouse on Sunday, 22-year-old finance major Aaron Mitchum drew up a spreadsheet to calculate how long it would take him to pay back his $200,000 in student loans – 25 years at half his monthly salary, per his calculations.
Why would you go to college and select a major where your career would cost you half of your salary for the next 25 years? This proves to me that this college doesn’t teach its finance majors very well. There are a few ways that this quote can be taken, but each of them shows a lack of financial knowledge on the part of Mr. Mitchum.
A simple calculation on a student loan of $200,000 yields a payment of $1400 a month. That means his salary is expected to be about $48,000 a year. If he was hired to work at WalMart for their minimum wage of $15 an hour and started work the day that he would have started college, he would be 55 years old before the college degree put him ahead.
Instead of demanding free college, perhaps graduating high school seniors should be looking at trade school.