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A group of fresh, unemployed lawyers have banded together to sue law schools. 73 alumni have filed at least fifteen class-action lawsuits, alleging the schools inflated employment figures and salary data to attract students and increase rankings. The real goal of the lawsuits seems to be to effect systemic change in the education industry and associations that accredit law schools, like the American Bar Association.

Schools are in the business of generating alumni, and to a great extent, use as many marketing tricks that any company uses in order to influence public opinion. It’s true that a 90% graduate employment rate looks better than a 75% rate on paper, and I’d be more inclined to choose a school with a higher employment rate, with all other factors being equal. But a 90% graduate employment rate doesn’t guarantee that I would receive the job I want after graduation, even if I were in the top 10% of the class.

Furthermore, I’ve come to the conclusion over the years that any statistic used for marketing purposes is subject to manipulation in an attempt to further the goals of marketing. Hard numbers give the impression of fact. From an early age, we’re trained to believe that one plus one equals two, in all circumstances, and numbers are truth. Statistics can be misleading in many ways, and are used more often to try to convince others of a point of view rather than quantify facts in reality.

Law school graduationThe group of lawyers probably can’t prove that the blame for their unemployment situation rests with the law schools. There are many factors that contribute to unemployment, including the overall economy, local job markets, and the effort, skills, and self-marketability of each alumnus. It doesn’t appear as if the former students are suing to have the schools compensate them for the lack of expected income from working, but they are suing to enlighten the public to the issue of misleading statistics throughout the educational industry.

Mutual funds must advertise that “past performance does not guarantee future results.” Even if a graduate employment rate were perfectly measured and accurately reflected exactly what a potential student understood the number to be, a good rate today is no indication that the rate will continue to be high by the time the school awards a degree or certification. If my index mutual fund returned 12% last year and lost 8% this year, I can’t sue the fund manager or the stock market for not providing the dividends I was hoping for. If fraud was involved, it might be a different situation. Perhaps misleading statistics like graduate employment rates are somewhat fraudulent, but I don’t see a parallel as schools do not typically promise that students will be employed at the level they’d like after graduation — and in the case of lawyers, after passing the bar exam.

There might be better ways of raising the issue of misleading statistics in the marketing endeavors in which institutes of education engage. Using the courts to make a point is only one tool that’s available to increase awareness of an issue. When you’re a hammer, though, everything looks like a nail.

Several years ago, while I was completing my Masters in Business Administration degree, I considered attending law school. Ultimately, I decided not to pursue a law degree and to focus my energy on my business instead. I think I made the right decision.

Photo: CubanRefugee
WNYC

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Obama’s Student Loan Plan

This article was written by in Education. 9 comments.

By executive order, President Obama has made a few minor changes to the student loan industry designed to help students and former students with unmanageable student loan debt. Anyone who began their undergraduate studies in 2006 probably did so with the reasonable assumption that they’d have a job after graduation. By the time these students graduated with bachelors’ degrees, the economic situation offered a different reality. The unemployment rate for Americans between the ages of 20 and 24 as of September 2011 was 14.7% according to the Bureau of Labor Statistics.

Last year, the total amount of student loan debt surpassed credit card debt for the first time. Student loans and the value of an education is now such a popular debate that it sparked a discussion at dinner last night with several colleagues. With tuition costs rising much faster than inflation, the only financially responsible path to take is for a family to carefully consider whether the expense of college is worth the benefit. If the only benefit is perceived in terms of financial return on investment (ROI), it can be very difficult in many cases to justify private school tuition.

GraduationOne liberal arts graduate at the table pointed out that there is more to gain from education than immediate high salaries, and this is something that I’ve discussed recently in terms of building human capital. The expense of higher education is subject to Maslow’s Hierarchy of Needs. While citizens of the United States often consider higher education as a right, it is a privilege. While everyone should go to college, or at least have the opportunity to do so, being able to afford a school that matches any student’s skills and desires can be beyond financial reach.

It is possible to earn a degree without going into debt, but when part of the American dream is providing every opportunity for our children to succeed without barriers, finances often don’t stand in the way. To make those dreams happen, someone often needs to sacrifice the future. Today, former students are sacrificing their financial well-being for the opportunity to have completed their degree at their preferred institution.

Last year, Congress agreed to some changes to the student loan industry to help students and former students struggling with student loan debt, and Obama’s “Pay As You Earn” plan expands on these benefits for students with federal student loans, not private loans, with at least one loan borrowed directly from the government and one borrowed from a bank.

  • In 2012, borrowers will be able to reduce their monthly payments from 15% to 10% of their discretionary spending. The original law waited until 2014 to make this change.
  • In 2012, borrowers will be able to forgive the balance of their loans after 20 years of faithful payments, up from 25 years. Last year’s law would have put this into effect in 2014.
  • Student loan consolidation will return, allowing current and recent students to save up to 50 basis points on their loans.

The student loan industry is dysfunctional. The availability of student loans makes it possible for colleges and universities to raise tuition without significantly affecting demand. By not solving the problem of rising tuition prices, the government gives a boost to the organizations, both semi-public and private, that finance and underwrite student loans. Furthermore, student loan debt is not forgivable in bankruptcy, unlike almost all other forms of debt. In a volatile job market, it’s riskier to have a student loan than it is to have credit card debt.

I’d like to have children at some point, and I’d like for them to have the opportunity to attend college. I would not like for them to need to sacrifice a significant portion of their future in order for them to receive the education that’s best for them. At this rate in two decades, a college education at a private school will be unaffordable for middle class families without student loan debt that requires a lifetime of servitude.

Photo: JoshBerglund19
Bureau of Labor Statistics, CBS News, New York Times

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Increasing your human capital is an excellent way to put yourself in a position where you’re better prepared for life’s surprises, particularly when it comes to money. I’ve written about human capital in the past, but I’m taking a deeper look into ten ways you can boost this important aspect of self-worth — beyond the concrete net worth that garners much more attention.

Although I’ve been in a wide variety of leadership roles since I was a teenager, I’m not always at ease in those roles. I prefer not to step on other people’s toes and to let those assigned leadership roles to enjoy those positions without my interference. This isn’t an approach that I recommend. Organizations don’t pick leaders, the best leaders make themselves known outside of any selection process.

More experience in the workplace

In the workplace, I understand the position that one might only want to do what is in their official job description; after all, if more responsibilities are requested, those responsibilities should demand compensation. Going above and beyond the call of duty is an important piece of getting more experience — the right kind of experience that will increase your human capital. In my last organization, many of the rank-and-file workers were interested in nothing other than putting in their time at their desk, and clocking in and out at the expected time every day. Whenever an initiative arose that required work beyond their typical scope, whether in the nature of tasks or requiring a different schedule, there was friction between management and employees.

Those least willing to put in extra effort are the first to encounter difficulty justifying their job or their salary when the company decides to cut back on salary-related expenses. Those who have shown initiative though involvement with the industry outside the company, the company at large, and the business unit, beyond the scope of their job description, are the employees who are given the first opportunities to share in the company’s successes.

You job should not be the only thing that defines you. It bothers me that in social settings, one of the first questions a stranger might ask when meeting is, “What do you do?” When a stranger asks this question, the assumption is that they want to understand what your job is, as if this were the most important thing about you after your name.

While you’re learning

In college, my classmates who took the extra initiative outside of class to gain experience in their fields had a much easier time finding jobs after graduation. They made connections in the industry, and in some communities, already had those making hiring decisions familiar with their names. As a hobbyist photographer considering the possibility of creating an alternative stream of income for myself and my future, I’ve been spending some time doing some pro-bono work for friends as I learn the ropes of the business.

There’s no need to wait until the learning process is over to start gaining experience in a field, even if this is a second or third activity outside of your primary job, and even if this is a field for which you don’t plan to end your learning process with a degree. I subscribe to the belief that a degree does not signal the end of education. Learning is a life-long process, and more education increases your human capital, as well. You can boost your human capital further by allowing yourself to gain experience at the same time you’re learning about the activity or skill.

Build bridges

Looking beyond your job, searching for ways to gain more experience can help increase your value from an employer’s perspective or a client’s perspective. The people I’ve known whom I’ve found the most interesting have found a way to bridge two different areas. For example, those in my college’s Department of Music who found a way to combine their study of music with something else, such as technology, business, or culture, seemed better prepared to stand out in the community. Standing out among a crowd is a big indication of a higher level of human capital.

The ability to be known within the community from bridging doesn’t come from just being interested in intersecting fields of study, it comes from bringing two communities together through action and direct involvement.

Getting more experience often requires stepping outside of your comfort zone. This is not easy for a lot of people, particularly those who draw strength from internal thoughts and feelings rather than external stimuli. (Jungian psychologists often call these people Introverts.) Some who are pressured to seek experience before they believe are ready are often concerned with the world discovering they are “frauds.”

There is little risk, though, so given the potential benefit of increasing your human capital, it makes sense to gain as much experience as possible.

  • Go the extra mile at your job or for your client, not only to gain more experience but to show that you are committed to being the best you can be.
  • Be a leader in your field by taking leadership roles before they are assigned to you.
  • Acquire experience in your field before you’d consider yourself “ready” by professional standards.
  • Find connections between your interests and build experience bridging the two.
  • Make your name known in your field by getting involved in public.

How do you suggest gaining more experience in your field?

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This is one of my biggest financial mistakes. My failure to learn some basic skills and my willful ignorance of the trouble I was in cost me thousands of dollars and major inconveniences.

When I was younger, I didn’t have that much of a positive track record with cars. In high school after receiving my license and throughout college, I drove my parents’ car, but I drove infrequently and was never really responsible for maintaining the car. After I graduated with a bachelor’s degree in music education and found my first teaching position, I needed a car. My parents were kind enough to buy me one as a graduation gift — a 12-year old Toyota Celica in good enough condition.

Well, I made a stupid mistake, though it’s a mistake that befalls many people who don’t take the time to learn about basic car maintenance when owning their first car. I never added any oil to the engine, and certainly never changed the oil. Even if the 3,000 mile “standard” for changing oil is too aggressive for modern cars, letting the motor run dry will quickly damage the car. The mistake of not learning the bare minimum for owning a car got me into trouble.

I replaced the motor after it was destroyed and the car ran well for another few years, but I made more mistakes. These were of a more financial nature. My car seemed to attract police, who seemed almost delighted to pull me over for speeding.

Although it had a rebuilt motor, the Celica was unreliable. Before it was completely undrivable, I used it to trade in for a slightly used car, a Honda Civic, and a three-year loan to make the purchase more affordable for me. I might have changed my driving habits, or the car might not have attracted police as much, but I was pulled over less frequently for speeding. But I continued to ignore the tickets.

Although speeding tickets are expensive and I had no money, it would have been more manageable in the end had I paid the fines and moved on. I was working for a non-profit, and I was broke. For some reason, I thought my life would be better if I stuck my head in the sand and ignored the tickets and fines. I was also moving around a lot in this period of my life, and I didn’t receive notices from the DMV letting me know my license was suspended for my failure to pay these fines. Since I didn’t know my license was suspended, I kept driving, blissfully ignorant of the situation I was in.

One day, soon after I left the non-profit job I had after my short stint teaching after college, a police offer pulled me over for speeding. Since my license was suspended, they impounded my car. My biggest concern was no longer finding a new job, it was determining if and how I could avoid jail time. Good news: I didn’t go to jail.

From this point on, I needed to redesign my life so that I could survive without a car. This was soon after I left the non-profit job I started after teaching, and I was in the process of looking for a new teaching position. My search was on hold because there weren’t many schools in New Jersey I’d be able to travel to without a vehicle. I did find a job, working for a financial company, and moved somewhere that would allow me to have a convenient commute using mass transportation. I gave up my Civic to a relative.

Eventually, I had my license reinstated and the relative returned the Civic. As a result of my problems, though, I still had large auto insurance bills that plagued me for years. Through this debacle, I learned a few lessons about responsibility. Today I can look back and be glad I’ve been able to make better choices this past decade.

Here are some things I’ve taken away from my earlier mistakes, and maybe they’ll be appropriate for you.

  • When you first get a car, learn how to take care of it.
  • When someone sends you a bill, don’t ignore it.
  • If police are involved, take care of the problem as soon as possible.
  • If you owe money to the courts, it’s not going away, and it could become a legal issue.
  • If you have no money to pay traffic fines, find the money.
  • Keep your address current and on file with the division of motor vehicles.
  • Don’t speed.

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Financial Tips for College Graduates

by Flexo
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College graduation like when you beat Ganon, the resilient bad guy at the end of the classic video game, The Legend of Zelda, for the first time. You’ve been through many levels of challenges, perhaps even used a few “cheats” along the way, and did anything necessary to grow your knowledge and skills, many of ... Continue reading this article…

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Student Checking Accounts Comparison, February 2012

by Flexo
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As we head into summer, thousands of young adults will be heading to college for the first time. It’s important to get started on the right financial foot, and a free student checking account is an essential tool, particularly when combined with a savings account. Obtaining a student checking account that’s convenient for both students ... Continue reading this article…

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Seven Great Gifts for College Graduates

by Flexo

If there is a college graduate in your life, he or she is about to receive a number of gifts. The first gift will be the realization that it can be difficult to find a job in this economy right now if the goal is to get a job in the same field of study ... Continue reading this article…

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Podcast 100: National Financial Capability Challenge

by Flexo

Today’s guest on the Consumerism Commentary Podcast is Carrie Schwab-Pomerantz, President of The Charles Schwab Foundation, which is sponsoring the National Financial Capability Challenge as well as the Make Change Count program. Consumerism Commentary Podcast #100 National Financial Capability Challenge: S04E22 / 124 Adobe Flash required Download – RSS – iTunes Table of contents [00:00] ... Continue reading this article…

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