College Students In Debt...
Could Become Young Business Entrepreneurs If...
Ask college students in debt whether they'd start a business if they didn't have any student debt and what do you typically hear in reply? The average U.S. college student owes $25,000 or more at graduation, if graduation even comes. That much money could have bought a small business or franchise that could have started generating revenue right away for the young business entrepreneur.
But as matters generally stand today, about half of college graduates, who might actually have a job, are working at jobs that don't require a degree, while at least 40% of students default on their loans.
This year the unemployment rate for students who have gone to college has finally surpassed that of high school graduates. Would borrowing to purchase a business have served these students better than experiencing college or even getting a degree? This is a question every serious student should ask.
Do you think that, if given another chance to start over, these students would reconsider going to college and start a business instead? The best way to find an answer to this is to ask college students in debt whether they see debt burden as an obstacle to becoming young business entrepreneurs. I've done this repeatedly for some time at forums frequented by students and graduates alike.
Their replies are quite wide-ranging but ultimately amount to simply no. Whether it's fear of going belly up, a belief that without work experience they can't make a business work or the notion that their degree must somehow relate to a business opportunity, college students in debt rationalize not becoming young business entrepreneurs, even while unemployment and underemployment raze their futures to the ground.
In and of itself this line of thinking is not surprising. But there is something profound to learn about embracing this way of thinking through thick and thin as part of the college students in debt cohort.
College Students In Debt Need An Excuse For Having Gotten BamboozledIt seems that one theme consistently appears in these replies of would-be young business entrepreneurs. College students in debt insist in saying that they lack experience. Graduates who might want to start a business, though they may consider the weight of debt as somewhat of a deterrent, seem also to look upon the lack of experience as a greater detractor to starting their own businesses. Some older folks, and probably rather risk-averse people, encourage this thinking in the young.
"Postpone starting anything until you've gained enough experience to avoid failing in it," they propose to these college students in debt. "Learn at someone else's expense." Why should anyone with money to invest take a risk on anyone who thinks just like this? It makes no sense.
A secondary concern of college students in debt is cash outlay. There is a perception that to start a business it is necessary to have a great deal of money, though the facts and some simple sense would readily contradict this notion. However, the going belief seems to be that if you're not going to borrow money from someone to start a business, then you need ample savings. College students in debt obviously have none.
But what of opportunity? How much of a price can we place on opportunity lost and on time foregone? A 25 year-old will be 25 only once. (The same could be said of a 50 year-old who still speaks like a 25 year-old college graduate in debt about starting a business.)
It's been said that opportunities are never lost, rather someone else takes the one you miss. Back in 1625 Francis Bacon said, "A wise man will make more opportunities than he finds." This is an old observation, and a rather good one. There are things that a 30, 40 or 50 year-old won't be able to accomplish that a 25 year-old could, if he seizes the opportunity offered and labors toward making that opportunity come within reach of his grip.
Can someone explain to me the mindset that says, "I'm young. I can afford to pass up opportunities," when most opportunities are likely made not found?
When we waste an opportunity at any age and we can't explain why we chose to be prodigal, we need an excuse. This is what college students in debt are doing with the support of their elders. They got bamboozled into spending tons of money that no longer provides a return, while the same amount would have more likely produced it had they thought like young business entrepreneurs and acted like opportunists.
Young Business Entrepreneurs And College: Why Ruin A Good Work Ethic?Because of the region where I live, I've known over the years many Mexicans who have been in the USA without documentation for a long time. They barely know any English and can't even read their own language. Something peculiar to me about several of them has been to see them start dozens of little businesses around their neighborhoods. Their ventures both match their limited skills and local demands in their enclaves. They run these ventures from their backyards, living rooms and street corners, selling pastries, ethnic food, flowers, baby clothes, piñatas, haircuts, handyman and auto repair services, and much more.
Now please explain how is caution keeping these immigrants from being entrepreneurial when the greatest risk they face daily is deportation? No, these types I've described are not living off the public dole.
Therefore, how would caution benefit a privileged class as is college graduates from starting better businesses than those of fearful aliens when you'd have far less to fear around you than deportation? How, furthermore, is college giving these immigrants "an extra edge" in entrepreneurship, if most don't even know what the word means, much less spell it?
There's a serious disconnect here between what college students in debt expected debt to buy them and what is really necessary to become actively engaged with your local community in being productive in some startup business operation.
Now, some might say "How can you possibly compare clandestine operations to traditional business? If college students in debt didn't have to worry about licenses, permits, taxes, or liability insurance, they would bring competition to those local ventures."
When I was a kid I was taught an old proverb that read: "The lazy man says, 'There is a lion in the road! A fierce lion is in the streets!'" It was meant to teach me that for those who don't want to work there may be a thousand and one lame excuses for not doing the work required of success.
How clandestine is an operation that happens in plain sight at a street corner?
The issue here is not the State and its regulations. The issue here is the revealed willingness of a group of people to serve the local demands of a community despite State regulations.
I'm not condoning law breaking but neither am I speaking in terms of breaking the law. I'm speaking of a class of people - college students in debt - who, having been more privileged than uncultivated immigrants that don't even know local laws but understand the needs of their immediate neighbors, choose instead not to be entrepreneurial.
Why do graduates do this?
Licenses, permits, taxes or liability insurance may not have kept ignorant immigrants from starting their cottage industry ventures in their local enclaves because the community norm in the enclave is to pay no mind to any of these statutory requirements until survival practices come into direct conflict with local government. Are college students in debt in survavilist mode yet? When might they reach this point? Ever?
Neither have licenses, permits, taxes or liability insurance kept members of the larger community outside of these ethnic enclaves from starting their own small businesses, when the enterprising capitalists truly want to start a business.
Where there's a will, there's a way.
The only traditional aspect of business that matters in this discussion at this moment is the tradition of meeting demand with appropriate supply. With so much unemployment among college graduates today, is it truly debt or ignorance that keeps them from starting their own businesses? Demand is still out there waiting for someone to supply for it. Is debt the problem or is it ignorance? Or worse, should we now include sloth?
Former Dean of the Faculty of the USC Business School and VP of Leadership Development and Chief Learning Officer for General Electric Dr. Steven Kerr came up with an observation generalized as the 70/20/10 rule of professional development and leadership.
It speaks of 70% of learning as happening on the job, practicing what has been learned from coaching and class instruction, while 20% of learning happens through mentoring and coaching received from others, and a mere 10% of learning happens from classroom or formal activity, such as lectures.
Now, if the typical college student has spent 17 out of 24 years of existence stuck in a classroom, and this span of time represents 71% of that person's life played as a student and not a practitioner of anything, how old would that person need to be before those 17 years represented only 10% in formal learning?
That person would have to be 170 years old. But I'm merely trying to make a point through hyperbole.
You'd be correct to say that the stuff a student learns in school is nothing compared to the stuff that the same student will learn and see in a real world job. But that's not the worst of it. The worst of it is that so much of what a student learns is a total waste of the most precious non-renewable commodity there is -- TIME.
The typical college graduate or college students in debt have already spent an inordinate amount of this precious time sitting down just getting lectured year after year rather than putting knowledge to work through application and by being competently mentored, which is how most learning is accomplished in life.
Call it apprenticeship. Call it guided hands-on instruction. What is the fastest way to get a well rounded education in business as a practitioner than by being a business owner under some decent periodic coaching? Generally speaking, employees make lousy entrepreneurs, because they're trained to be cogs in a wheel. But the entrepreneur and business owner is in a constant learning ride that focuses not on formal training but in practicing the business-building craft, getting involved with value-adding, community edification, developing a holistic experience that no employee with a sheepskin would be able to match.
Why would someone who wants both experience and eventually to start a business opt to play the employee rather than the entrepreneur? What's missing in this person? Well, what's missing is what school never put there yet it prevented from getting planted, germinating and giving fruit. What's missing is the courage to be responsive to the promptings of the community. College and much schooling ruins the young business entrepreneurs' drive to mature into a professional entrepreneur by the time this person hits the mid-twenties.
What Then Is College Student Debt Good For?College students in debt for the most part vainly use time. It is devoid of real value to them, unprofitable, vacated from useful effect because, having spent it, there is no guarantee whatsoever of recompense to match the time spent.
Let me put it this way to you.
The most fundamental subjects in the natural sciences, such as calculus, and most definitely all disciplines in the social sciences like psychology a typical college-age student could study and become proficient in FOR FREE and likely in much, much less time than what's typically spent clocking in and out of classrooms. How's that for spoiling your day, all you college students in debt?
It is personal discipline that is required to accomplish this, not a college campus. Today it is nearly inexcusable that with 2,000 FREE college courses offered by an institution such as MIT, for example, or with tens of thousands of students getting the same from Stanford or Harvard someone would say that it is imperative to attend a university for the sake of acquiring book knowledge at the cost of tens of thousands of dollars per year for practically half a decade, on top of a heavy, likely life-long indebtedness, on top of already having spent two-thirds of your existence sitting in a classroom since the age of 5.
It may be normative. But it isn't wise. Life is very short and not guaranteed to be a long one to any one individual. With so much to do in this world to help one's neighbors, the young and allegedly brightest among us our college students in debt are choosing to postpone doing something useful with their youths by dutifully sitting on their rear ends accumulating information for the next exam year after year.
It's information 90% of which they will forget a few days later, and for which they'll end up in hock at least $25,0000 on average and no less unemployed than they were 4 or 5 years earlier when they first filed into campus without any practical experience about anything but half a decade younger no less. This is the meaning of being stupid and getting bamboozled.
Barring the exceptions, was this a sound use of time for these college students in debt? And what of those who don't graduate, which make about half of the entire freshman class? They leave with even less to show for. Is all this not wasteful? Are college students in debt also insane?
Just as there is no shortage of college students in debt, there is a glut of college graduates. Only a couple of years ago 70% of high school graduates were on their way to college and the trend isn't shifting. The quantity of graduates has risen and will continue to rise, therefore wages are dropping and continue to drop in an economy that isn't growing. Demand graduates has also decreased with the Great Recession since 2008.
Is it any wonder college graduates are in such dire straights economically? And without any real work experience, they have no skills to atrophy. They only have a lot of book knowledge that loses its luster with every passing day. They're just stuck not knowing what to do, mired in debt, living back with mom and pop, getting older, diverting careers, delaying marriage, postponing starting a family and raising the next generation.
A 22-year old student graduating this year with a consolidated $40,000 loan at 6.125 percent will need to pay $243 a month...until he is 52. By that time, he would have paid $47,494 in interest alone. A recently well publicized sociology graduate with $200,000 in student loan debt will be paying $1,600 per month for at least 20 years starting next year. I know mortgages going cheaper than that!
Within the cohorts of college students in debt I also know of a 21 year-old who had $90,000 in college loans for a Master's in education. Her loans are at 6.8% interest. She would be paying $1,036 every month for the next ten years. She decided to use the last of her loan money for a 3-week trip to Thailand with her girlfriends right before graduation. Her fiancé did the math.
He had a 50 year-old friend who went broke after nearly paying off all his student loans but getting sunk by credit card debt, because along the way he missed some student payments and put them on his American Express card which, when you don't leave home without it, never forgets, never forgives. It went down from there for him. The fiancé estimated the odds of divorce at his age, which were high. His girlfriend's debt-to-asset ratio was astronomical and she had just given indication of how well she handled money by taking off to Thailand. So what did he do?
He broke up with her. Here's what a colleague said to him about it:
"I don't think that you are alone in doing what you did. Last year, I attended a career fair for the trade schools with my girlfriend. There were lots of recent college graduates who could not find full-time jobs or jobs within their major and were attending these trade schools with their parents.
"I overheard a couple of mothers say something to the effect that they had told their daughters, "I sent you to an expensive private school and you couldn't find a suitable husband?" By suitable the mothers meant someone with a high income and employable skills.
"The assumption was that the man came from money because he attended a prestigious university. Apparently, in these two cases that I overheard, the prospects had their own student loans and could not pay off their own debt and that of their brides-to-be at the same time. So they chose instead to pass up these women and opted for dating high school graduates that did not go to college and had no debt.
"These women who went to college and incurred the debt, are now back at home and the parents do not view this as a positive development and now realize that pumpkin needs to support herself. That was their reason for exploring the trade schools."
Now, please tell me, looking at these results, were these young people wise with their time, spending all those years in college? Would they have been any worse had they imitated the Mexican immigrant? Would a college student in debt have had a better chance had she been a young business entrepreneur instead of a wannabe preppy?
Action Steps For College Students In DebtStarting one's own business does not necessarily require much capital nor is there a law that says you can't have a job while starting your own business. I would argue, in fact, that any employer who resents its employees having a side business that does not compete against the employer nor impacts the employee's performance during the 40 hours per week that the employee owes fidelity to the employer has larceny in his heart.
This notion running rampant around professional circles today, influencing college students in debt to think that we must beware of letting our employers know that we have businesses of our own operating outside our work commitment to our employers is rooted in a shameful fear that says "My employer owns me," when the fact is that the employer owns only the labor paid for. Is it not enough that college students in debt are slaves to debt already? Must they now be in bondage to the fear of an employer?
More than once in my career I've encountered and battled the presumption in some employers to assert their "rights" to my time beyond an agreed upon period necessary for producing the results that are feasible to deliver upon and within that agreed span of time. They insist that we must "give it all to the company." So family suffers, personal health suffers, corporate culture suffers by becoming slavish and self-perpetuating of this subservience.
In the worst cases that I've encountered, the only people who I've seen rise above this abjection to a mindset of corporate servitude are the contractors, who run their own businesses and, of course, the big boss, who runs the operation and sets the rules.
This is sufficient reason to consider early in one's career that whether as part of college students in debt or otherwise if there is sweat to be poured out working for someone (and there is!), then it is best that it be poured in developing sweat equity toward your own business.
Sacrifice is surrendering something good for something better, since there is no credit in giving up doing what is not good. Thus, anyone willing to surrender the sense of (false) security that comes with having a so-called permanent employee position in exchange for the benefit of being in control of an operation that can be called one's own is making a sacrifice worth making.
And there is no need, college students in debt-to-be, to get into debt to make this sacrifice; quite the contrary.
Nevertheless, what would I recommend to young college students in debt as steps to take to move in the direction of making such a sacrifice now that they're nonetheless in debt?
- Acknowledge that you made a mistake with your finances. The sooner you come to terms with your error, the sooner you can eradicate your denial and move toward realizing a solution.
- Student debt is a blight, not anything to gloat or laugh about. It's got teeth. You're going to bleed. So know that you're going to have to confront it sooner than later. Resolve to do so today.
- Investigate the Income-Based Repayment (IBR) Program for federal student loans and prepare for the feds to get a bigger control of your life, if you use it.
- Remember that diamonds are made from lumps of coal that have undergone immense pressure over time. Coming out of the mine they're "diamond in the rough," a rare find in nature. Expect tribulation to polish you into a gem of rare quality. But if all you do is dirty people's hands when they attempt to polish you, remember then that you're no "diamond in the rough" but simply a lump of coal. Do the hard work assigned to you. Make the tough, correct decisions.
- College students in debt are in debt because they didn't work instead for wages. Now is the time to realize that the work week lasts 6 days, not 5. Work 6 days a week, 10 to 12 hours a day. You're young.
- Highly Important! Stop living a lifestyle that you cannot afford. Create a frugal budget and stick to it. This point cannot be overemphasized.
- Moonlight working in a cash business involving manual labor. You'll get less competition because few in your age group want to do such work.
- Sell anything you have in storage. Move to smaller quarters with roommates or with relatives to reduce expenses. And don't blow your money on stupidities. You already did this. So learn your lesson.
- Always pay far more than your minimum monthly loan requirement.
- Become entrepreneurial at every turn. Look for ways to make money quick. It's possible. Here's proof.
- Read Wiping Out $90,000 in Student Loans in 7 Months and know you can also make this happen for yourself!
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