Exhibit A on why Financial Literacy is crucial: ‘Financially Hobbled for Life’: The Elite Master’s Degrees That Don’t Pay Off" WSJ Article

Last week the WSJ ran a piece on how some top universities (they single our Columbia a number of times) push programs that leave students with tens of thousands or even hundreds of thousands of dollars of debt while then getting jobs with such low salaries that they are unable to pay off those student loans. The basic issue is this: sky high tuition (with also very rapid YoY growth rates), with little financial aid available, lead students with dreams/passions in fields that are not very lucrative to borrow way too much money relative to their earnings potential upon graduation:

Here are a couple of examples:

• Columbia University film school graduates with a median debt load of $181,000 while upon completion of the program half of those students earn less then $30,000/year;
• NYU graduates with a publishing degree have a median debt load of $116,000 and then earn $42,000 on average;
• Half of Northwestern University graduates in Speech Pathology had borrowed $148,000 or more and landed jobs with a median income of $60,000; etc...

That is a problem.

What is the solution?

• Teach high school and undergraduate students about financial literacy, and how debt loads/compound interest works and whether or not it is worth to borrow a certain amount of money. Borrowing to get a law degree is one thing, those tend to pay off on average. Borrowing to attend a top 10-20 business school for an MBA also generally pays off. Film school, and these other degrees, are much more of a crapshoot and hence should be very selectively chosen by potential students and borrowers alike.
• Force students to take a class that outlines to costs, outcomes, pitfalls of compounding interest, prior to enrolling into such programs. Here is an example from the article: 

Matt Black graduated from Columbia in 2015 with an MFA in film and $233,000 in federal loans. He signed up for an income-based repayment plan that in leaner years requires no remittance from him. With interest, his balance stands at $331,000.

• Governments should not extend lines of credit through subsidized student loans that easily for these types of degrees. These degrees, which are just fine for children from the .1%, should obviously still be offered. However it shouldn't be easily accessible for those that need to take out enormous amounts of debt. Because now the incentive structure is such that these students with dreams of becoming the next great director/producer will still enroll in these programs and take out loans, while the American taxpayer will be left with most of these bills to pay. (recall there is over $1.7trillion in student debt outstanding and that number is growing much faster than GDP and/or inflation).
• Columbia and other universities with large endowments, should probably use some of that money to help reduce or eliminate the tuition for students that would otherwise not enable them to attend without borrowing so much money. Yale recently announced that they would be eliminating tuition for their drama school students. That is a nice first step. But more needs to be done.

Calling all parents and would be borrowers, Caveat Emptor. Be very careful prior to signing up to these types of programs. Do yourself a favor, as well as help the American taxpayer too. Look for alternative careers or make sure you have enough saved up prior to seeking these sorts of graduate.

Thank you!