Michael Sherman @itsmikesherman: what advice wound you give to graduates that worry about paying off their student loans??
The other day I went to walk around the NYU campus. My sister went to NYU. Both my parents went there for graduate school. I considered going there but went elsewhere. In any case, I’ve been hanging around that campus since I was a kid and playing chess in the SW corner of Washington Square Park.
There’s much less drugs and prostitution there now than when I was a kid. And probably less violence. But at any given moment, the combined debt of the young men and women in the park at any given moment is probably over one hundred million dollars. It’s one thing for billion dollar corporations to have that kind of debt. Debt is the grease that keep the wheels of capitalism moving. But individual and irrational debt is also the cement that keeps our young men and women from becoming creators, inventors, innovators, and entrepreneurs.
People say to me, “well you went to college.” Or “I went to college” Or, “why shouldn’t kids have debt?” The problem is not that we all went to college and kids today shouldn’t. It’s that kids and parents have been scammed into taking on more debt than ever before. And for what? Very few people bring up, “well they read the classics”. I don’t even know what the classics are but presumably they could read those same classics for free on the Kindle and also read as much analysis of those classics as they want. Most people bring up, “they will get a job”.
I will upload this video in a few weeks and we’ll see the real answer to that last question. Suffice to say, it’s pretty scary what actual students at NYU think in terms of how they will pay back this debt and what kind of jobs they are getting right now.
The problem is this: not only are there no jobs…there never will be jobs again. Technology has improved so much that companies are more efficient than ever. They don’t need to hire people. Combine that with globalization where not only unskilled labor but skilled labor can be outsourced for cheap and you are left with a tiny sliver of jobs compared with what used to be out there. Throw in increased managerial efficiency and there is also less jobs for a declining middle management population.
Suffice to say, we’re screwed. And the more student loan debt you have, the more screwed you are.
So what is the solution?
Simple: don’t pay back the debt.
But how do you do that? Even in bankruptcy, the government can still garnish wages to seize your student loan debt. Isn’t that funny? They were perfectly willing to lend you the money so they can make money on your interest payments before you even make enough money to pay them taxes. But when you are struggling, they go after their money first rather than help young citizens, the hope for our future, out.
That’s ok. Everyone needs to make money. Even the government. But I just told you above: there’s no new jobs coming. So what wages will they garnish if you stop paying down the debt?
Here’s what you do: treat yourself like a corporation (uh-oh, is he about to say “corporations are people” the quote that brought down the Romney campaign? No, I’m saying the opposite: people should turn themselves into corporations). Make a company, and start figuring out what services you can offer people. Be freelance, and collect money through your company. And expense all or most or many of your expenses through that company. This way you can pay your bills, and only take a tiny salary. Let the government garnish what they can (it won’t be a lot) but you don’t let that slow you down on building up your ability to innovate, to offer services, to create a product, and so on.
And, if you are “unemployed”, you can work with the government on forbearance programs or even on cancelling your debt.
You might say, “not everyone can be an entrepreneur”.
And that’s true. But EVERYONE can incoroprate a company (go to incorporate.com), and charge their services in a freelance manner, and obey the tax laws on how to take expenses, etc.
Ultimately, though, everyone will have to be an entrepreneur to an extent. Because the concept of “job” which has only existed for about 150 years or so, is going to disappear. And you will need to build your idea muscle, and stay healthy, and become an entrepreneur to succeed in this new and exciting and transforming (and scary!) world.
And when you finally do well and sell your first company do you know you should do? Pay down your student loan debt. You borrowed it, so you have to pay.