|Debtor's Prison is alive today - click on this picture.|
Sadly this seems to be an overwhelming common occurrence these days - leaving children the legacy of debt.
I started to wonder about this model when the first of my children wanted to go to college. It was expensive - probably about $5K a semester where she wanted to go. Figuring five years of college, depending on the major and screw ups, times $10K a year times five years leaves about $50K - not counting books, food, and other ancillaries.
Plugging these numbers into this website yields a monthly payment of around $600.00 US paying about $19K in interest over ten years. My child would be left with this debt. How you she get buy on this? You can't work at Wendy's and afford that payment...
But wait, you say, she won't need to work at Wendy's - she'll have a college degree!
You're a fool if you believe this - particularly in today's economy. Though my child graduated into the go-go economy of the post 9/11 housing boom finding a job was still not easy because education doesn't really count for all that much when compared to experience, credit worthiness, demonstrated work-based responsibility, and other similar things.
Fast forward to today - this particular child has a degree in biotechnology from a well recognized state university. After a couple of years of scratching around she finally got work making something like $40 - 50K a year all told in her field of study. A $600/month payment is nothing to sneeze at - especially if you are just a 22 year old kid without a job and without experience.
Where I live now that's at least a house payment.
Most end up refinancing these loans at least once, rolling them into housing loans and so forth; and these loans take over your life. I know many people in their 40's still saddled with these debts.
Now why, you might ask, would this be "my debt" my child is being left and not my child's debt?
There are several of reasons. First mom and dad are often involved in signing for a loan like this. Second, my generation (and my parents generation) created the expectation that to be successful in life you must have a college education (see this). Prior to the last 60-70 years most male children followed in their father's footsteps: construction, plumber, farming, etc.
I trained another child in one of my professions. (This one spent a little time in school - long enough to realize they were not really interested in it.) My cost for this training was negative, i.e., I made money on the deal. The child learned a trade and I benefited from that because though I paid them I paid them less than the prevailing wage. Today that child probably makes more money than me. No debt was involved - no government - no tax dollars. This child was able to follow thier passion and pursue their dream career.
The child I trained continually relates interesting stories to me about his peers graduated from college. How little they know, how little experience they have, how bad their work ethic is, how narrow their knowledge base is, how childish and inexperienced they are, and how much more experienced and qualified he is. Its fascinating to me because I did not set out to do this - I merely attempted to teach him a trade. However, its now apparent that giving him real customer responsibility at a young age taught him to be be a real grown up person long before his peers.
College today teaches less than high school did in my day (though it teaches much more about irresponsibility). And not just in the technical area - with one year of high school biology my wife was able to easily follow, understand and even critique everything my other child learned on her way to a biotechnology degree.
So why do many people pass the "debtor lifestyle" on to their children - credit cards, loans, houses and cars they cannot afford?
Personally I think its an "entitlement" mentality. People believe that they are entitled to an education, a car, a house, whatever they can borrow money to acquire. I suppose its the same legacy of debt passed on to our country by the many baby boomers. (The "ends" justifies "means", as it were - debt is okay for education).
But if you really are entitled to something why is borrowing money involved?
And worse, at least from the perspective of education, what's being sold is less than a 1975 rural high school education. Worse still, its become a lifestyle.
Placing my children into debt does not give them a better life than I had. While "giving their children a better life than they had" was the mantra of my parents generation it does not work in the world of today or with the baby boomer mentality. My parents did not suggest I should go into debt to have a better life than them - but apparently that's not the case today for the most part.
The problem we now all face is that we have "front loaded" our future with debt - probably 60-70 trillion dollars counting it all. Debt we cannot afford. Not just for our country as with unfunded social security and medical liability, but with personal debt (loans, credit cards, all the rest) as well. We have destroyed our the future of our children.
I have not done this but far to many others have based on misguided thoughts of entitlement and education and my children will be saddled with this burden.
I have also written here about retirement. Starting your child in a world were they are free from debt to pursue their dreams and interests is an investment in a future as an old man. Government and social security will not care about me in my twilight years - but my children will - especially if they have not been encumbered with the burden unnecessary debt for most of their lives.
Debtors prison is making a comeback...
I just hope you aren't planning to send you child there.