The NBA Analyst/Philosopher

By Keenan Mann

It may be a stretch to call Jeff Van Gundy, the former NBA Coach and current NBA analyst a philosopher, but if you have a philosophy and you share it with others, what do you call it?

For now, I'll stick with philosopher.   But I'll forgive anyone who's not yet ready to bestow that moniker.  Socrates he is not, after all .  But I think even that great ancient Athenian philosopher would approve of some of what Van Gundy comes up with.

The former coach of the New York Knicks and the Houston Rockets makes watching professional basketball games entertaining, even when the actual play on the court is completely lacking in entertainment value. I think it's because he tells it like it is, or at least the way he sees it, good or bad. Take this on-air quote for example:

For the uninitiated, Kyle Korver is one of the best shooters in the NBA but he can't jump very high. The truth can be very funny.

The truth can also be very powerful as Van Gundy's next observation demonstrated.  He made it during broadcast a few weeks ago.  There was a sequence in which a player completely missed his defensive assignment on consecutive plays.  In complete exasperation, Van Gundy said something like, '...this guys is a professional, and he knows better.'  At that point another analyst voiced his agreement with Van Gundy, who wasn't yet done making his point.  After a few more seconds passed, Van Gundy said, "I'm sorry.  If you know better, you gotta do better".  I remember immediately being struck by the power of what he said.  And I also remember one of his co-analysts remarking that he knew Van Gundy was a great coach but had no idea he was a philosopher as well.

After giving a little more thought to Van Gundy's idea in light of real life non-basketball situations, I decided the phrase needed a slight bit of tweaking.  After all, there a very few things you have to do better based on your knowledge.  I actually can't think of any, though that doesn't mean none exist. But I think it is true that if you know better you can do better.

In other words, better knowledge does make better actions (and results) possible, but it doesn't guarantee them. Take the misguided young people in Baltimore for example.  Clearly they knew better and clearly they could have done better, yet they didn't.  The truth can also be sad.

On the other hand,  take ex-NBA player David Harrison who fell so far after his stint in the league that he went to work at McDonald's only to quit after a few weeks because he was so conspicuous.   What if he had known better in the good times?  What if he had known that life is a 99 rounder and it is folly to declare that you've "made it" at such a young age?  What if he had known that not everybody who yells at you and tries to push you  dislikes you?

Or take the many people struggling under credit card and student loan debt.  I would argue that at least some of them didn't know better would have had a chance at doing better had someone shared with them some detailed knowledge about the do's and don't of borrowing money.

So maybe Van Gundy is a philosopher and maybe he isn't.  In either case, the idea of knowing better and then doing better is worth serious consideration.  In that vein, I'm thinking about starting the KB/DB club. Perhaps we'll even get some t-shirts made.

Stay tuned.



KM

IT'S NOT FAIR ... Underfunded and Overpromised Public Sector Pensions Will Overly Burden the Young

We've commented recently about the problems associated with public sector pensions and their largely underfunded status. Some take exception to the call for properly funding in advance the promises of tomorrow. Frankly, I don't understand that thinking. Not at all.


In my view, whether as individual persons or families, companies, communities, states or the nation as a whole, we should pay for what we expect to receive. We should also beware of people bearing false gifts and not expect from government free lunches or free anything else. And if something seems too good to be true, it's likely not to be true.


But it appears that times have changed with respect to how we view all these things, and not for the better. Now it's all about being able to make the minimum monthly payment and ignoring the principal amount of the debt obligation entirely. The common sense approach of paying off what we borrow or setting aside sufficient funds to pay off those promised future payments doesn't even factor into the decision making equation. Instead it's only about being able to make the minimum monthly required payment.


As a result, too many of us are essentially broke and therefore dependent on the rest of us, aka government, to take care of the things we used to consider our own personal responsibilities.


Take public sector pension liabilities, for example. {See the May 10 post titled Illinois Provides a Lesson in Simple Math, American Self Government and Public Sector Unions.}


Today we'll make the case again for a return to good old fashioned individual responsibility and treating young Americans equitably. Young Americans have yet another debt burden says this:


"The following is adapted from “Disinherited: How Washington Is Betraying America’s Young” by Diana Furchtgott-Roth and Jared Meyer (Encounter Books: May 12, 2015).

Look in the mirror. Along with everyone else in America, you owe $15,052 to cover the total unfunded pension liabilities of state governments. Both red and blue states face towering unfunded promises because the defined-benefit pension system allows politicians from all parties to grant something for nothing — and to defer the inevitable bill.

Tennessee is in the best financial shape, with $6,531 per person in liabilities. It is followed by Wisconsin, at $6,720; and Indiana, at $7,304. Alaska is in the worst shape, with $40,639 a person. In the continental United States, the state in the worst shape is Illinois, at $25,740; followed by Ohio, at $25,028; and Connecticut, at $24,080.

States are in this situation because during economic booms they deliver more generous pensions to their employees, but during economic downturns, these increases are rarely pared back. This means that states make promises to public-sector unions that they usually cannot afford.

Absent major concessions, these pensions will have to be paid over time to the 19 million men and women who work for a state, county, municipal or school-district government. If pension-fund income is insufficient to cover those obligations, as is expected, those who will be on the hook to pay will be today’s young Americans, who have college loans, high unemployment rates and lower incomes than the public-sector workers. As they progress in the workforce, they will be responsible for the debts.
                     
This debt has accumulated even though 49 states had balanced-budget requirements in 2008, according to the National Association of State Budget Officers. Forty-four states require the governor to submit a balanced budget, 41 require the legislature to pass a balanced budget, 37 require the governor to sign a balanced budget, and 43 prevent the state from carrying over a deficit.

Even when there are balanced-budget amendments, states are often free to use different funds that are not required to be in balance. The balanced-budget requirements typically apply only to general-fund budgets. This leaves large amounts of revenues and expenditures free from budget constraints. . . .

Prudent planning cannot assume that interest rates will rise to prior levels or that stocks will resume their prior course — state budget projections need to reflect this reality. States must devise ways to reduce their debt so as not to burden their taxpayers, present and future.

Although private plans can reduce employee benefits and increase contributions to bring underfunded plans into financial health, some public-sector plans have been prohibited by the courts from doing this. New employees can be charged a higher contribution rate for lower benefits, but not current employees who were hired under more favorable terms. A municipality in bankruptcy, such as Detroit, can restructure its pension obligations — but not all cities want to, or should, go bankrupt.

In order to take the burden off America’s young, states could gradually raise the age at which government workers can retire. In some states, employees can quit at 50 and start collecting benefits, at the same time as they get another job — and possibly start accruing a second set of pension benefits. Alternatively, states could allow workers to retire at the same age but postpone the age at which they begin to collect benefits.

States could convert their defined-benefit pension plans to defined-contribution plans, thereby eliminating the addition to future pension liabilities. Either older workers and retirees will have to accept lower payments or tax increases will be necessary. The switch to defined-contribution plans has been the trend in the private sector. Only union-managed multi-employer plans are sticking to their defined-benefit status, and many of those are in poor financial shape.

States could also reduce the power of the public-sector unions. . . .

With Uncle Sam strapped for funds, it is extremely unlikely that Washington will bail out insolvent state pensions. For the sake of the young, states need to bite the bullet and do it themselves."

Summing Up

Albeit in  many cases unintentionally, we're being unfair to today's young Americans and future taxpayers by granting and not immediately funding or paying for the promised generous public sector pension benefits.


Several factors are contributing to the maltreatment of the young:

(1) Demographics --- As America ages, more people are retiring than are joining the work force;

(2) Longevity and Health Care --- People are both retiring earlier and living longer;

(3) In nominal terms, pension fund investments will likely earn less in the foreseeable future than historically has been the case, since interest rates and inflation will probably remain low for many years to come;


(4) Public sector pension funds, including Social Security, are currently underfunded by more than one hundred trillion dollars; and


(5) The private sector has already largely transitioned from guaranteed pensions to a defined contribution retirement system.


As a result of the aforementioned 1-2-3-4-5, something's gotta give in the public sector -- and soon.


That's my take.

Thanks. Bob.

A Thug By Any Other Name...

By Keenan Mann

When I was in the 11th grade I spent a very painful week reading and memorizing parts of Shakespeare's Romeo and Juliet in Mrs. Overlie's class.  At the time, I wondered how in the world any of what I was reading would ever be of any practical use to me.  All these years later, after my memory of most of the dialogue has all but faded from existence, I found myself trying to recall some of it - unsuccessfully.  Specifically I was looking for the words Juliet used in the most often quoted scene where Juliet is imploring Romeo on a very serious subject.   Lucky for me, the internet has made the need for memorizing anything passe´.  Below is the part to which I was referring.  It's from Act II, Scene II:

Juliet:

O Romeo, Romeo! wherefore art thou Romeo?
Deny thy father and refuse thy name;
Or, if thou wilt not, be but sworn my love,
And I'll no longer be a Capulet.

Romeo:

[Aside] Shall I hear more, or shall I speak at this?

Juliet:

'Tis but thy name that is my enemy;
Thou art thyself, though not a Montague.
What's Montague? it is nor hand, nor foot,
Nor arm, nor face, nor any other part
Belonging to a man. O, be some other name!
What's in a name? that which we call a rose
By any other name would smell as sweet;

She used a few more words than Paul Pierce might have to make the same point, but I think Juliet nailed the sentiment nonetheless.  You can call a thing whatever you want, but that won't keep it from being anything other than it is.  That's exactly what I would tell Stephanie Rawlings-Blake, the embattled mayor of Baltimore, or anyone else who might feel the need to apologize for hurting someone's feelings or otherwise crossing the red line of political correctness.

Mrs. Rawlings-Blake apparently felt the need to walk back the words she initially used to describe the thuggish behavior that we all saw on our television sets during the riots.in her initial press conference. Here's what she said on her first pass:

"What we see tonight ... is very disturbing.  It is very clear that there's a difference between what we saw last week between the peaceful protests ... and the thugs, who only want to incite violence and destroy our city. I'm a life-long resident of Baltimore. Too many generations have spent their lives building up this city to have it destroyed by thugs, who in a very senseless way are trying to tear down what so many have fought for."

Both the tone and the words she chose sounded appropriate to me.  But not all agreed, as evidenced by this excerpt from a Huffington Post article,

"Many who took issue with Rawlings-Blake's use of "thugs," including some of her fellow city leaders, argued that the word is racially charged. Baltimore City Councilman Carl Stokes suggested on Tuesday night that instead of calling the protesters "thugs," she may as well have used the n-word."  

I know this puts me in the minority (of the minority), but I would argue that even the use of the n-word in this case would have been justified, at least based on the non-politically correct definition of the word that I came to understand growing up.

I can recall often looking up the word and declaring that I wasn't one because it was defined as a lazy, ignorant person.  Still, just to make sure I wasn't mis-remembering, I asked my brother to recall his version of what we looked up in Webster's Dictionary some thirty plus years ago and our definitions are all but identical.  So you'll understand why we both asked, "What the hell happened?" when we looked up the word on dictionary.com.  The definition is completely unrecognizable.  Victimhood, it seems, is in vogue.

With that in mind, you'll also understand why Mrs. Rawlings-Blake followed her initial remarks with a version more acceptable to the so-called community leaders.  It read:  

"I wanted to clarify my comments on 'thugs.' When you speak out of frustration and anger, one can say things in a way that you don't mean.  That night we saw misguided young people who need to be held accountable, but who also need support. And my comments then didn't convey that."

Misguided young people? Really, Baltimore leadership?  

Mrs. Overlie, if you ever read this, you'll be glad to know I found a practical application for my reading of that play.

Juliet rightly admonished Romeo for making a distinction without a difference.  In Baltimore, the Honorable Mrs. Rawlings-Blake tried to make two things that are acutely distinct indistinguishable.  A misguided youth might skip school and go to the mall or spend his days playing video games to the detriment of his studies.  A thug, of any color, might burn down a drugstore, loot a shop, or vandalize police a car.  And the people in that community, including the thugs, are being done a great disservice when their community leaders don't do the one thing that all good leaders must do - tell the truth.



KM

A Tweet For The Ages

By Keenan Mann

On Saturday night, the Washington Wizards beat the Atlanta Hawks to take a 2 to 1 lead in their Eastern Conference semifinal series.  Paul Pierce, who is already a legend, became even more of one with a buzzer beater to end the game and hand the Wizards the victory. 

The shot Pierce took was about a twelve footer from the left side of the free throw line that banked off the glass as time expired.  Most people familiar with game would immediately recognize that the angle from which the shot was taken is not one that is conducive to a purposeful bank shot. It's not that you can't make a shot off the backboard, or bank it, from that angle, it's just that it's not ideal under the circumstances. That's a shot to be used in a leisurely game of H-O-R-S-E with your friends, not as time is winding down in a pivotal game three of an NBA playoff series.

That notion wasn't lost on Chris Broussard, who fancies himself a hip sideline reporter, as he asked Pierce during an immediate post game interview if he "called 'bank' on the shot". Pierce's responded with a quote for the ages when he said, "I called game, game!" What he didn't say to Broussard but might have been thinking was this, "Yeah, you can call it luck if you want to Chris.  But the fact is coach drew up a play to get me the ball.  I wanted to take the shot, I took the shot, and I made the shot  I don't care that I didn't swish it. Hell, even in this age of advanced statistics they don't have a 'pretty shot' stat.  So again, you can call it luck if you want and seem like an informed reporter when you file your story, but I call it a made shot and a win.  And the playoffs are about wins, not shot types. Try to keep up Chris."

I suspect that anyone watching who has played the game had an immediate and visceral appreciation for what Pierce actually said and for fact that he had the presence of mind to say it.  It was the most perfectly timed, simply stated, and forcefully delivered four word sentence I think I've ever heard.

And I only speak of it here because his words were the second time this week that I've observed something said so powerfully with so few words. Oddly enough, the first observation was basketball related as well and it came out of a twitter conversation from a few weeks ago, that I only stumbled across this week, from a long time Division 1 college basketball coach named George Raveling.  I'll save Coach Raveling's full story for another time as it is worthy of lots of attention and consideration.  For now I want to focus on the tweet he put out in response to a very serious question.  Here's the question posed to Coach Raveling in an online Q/A session he calls #AskRav:

​

Now for Coach Raveling's response:

Paul Pierce has Coach Raveling beat if you measure by word count.  But in my opinion, Coach Raveling's words were no less timely, simple, and forceful. What he didn't say but might have been thinking was, "Yeah, you can send him to one of the powerhouse basketball schools if you'd like, Chris.  There are a few that come immediately to mind, but you don't need me to rattle off that list for you.  You also don't need me to tell you that one day your five star son is not going to be playing basketball anywhere, even if he is one of the lucky few that makes it to the NBA. Then what will he be prepared to do?  But since he's a five star recruit and since even the most elite academic schools in our country, which happen to be the most elite in the world, have basketball teams too, I bet the Harvard, Yale, Princeton, and Stanford teams know all about your son and would be thrilled to have him. And I bet that your son, if he graduated, would go on to have a very productive and rewarding life with or without basketball in it. So I think the best advice you can give him is to place a high value on getting the best possible education at the least possible cost, not where to play basketball. Lucky for you, it sounds like he's gotten himself in position to take full advantage of that advice so try to keep up Chris."

I could be wrong about what ol' coach Raveling was thinking, but I doubt it.  


Stay tuned though, maybe I'll ask him about it and report back.

KM

Illinois Provides a Lesson in Simple Math, American Self Government and Public Sector Unions

Illinois legislators, with the 'help' of public sector union officials, various other state and and local politicians, as well as complicit governors and naively trusting taxpayers, are faced with a profound yet simple math problem in need of a solution.

With unfunded state pensions of $111 billion, and assuming 11 million citizens, that means each man, woman and child owes ~ $10,000 to fully fund public sector pensions. That, my friends, is indeed a whopper of a bill. But like most whoppers, it began as a small problem, went unattended and now has become the full grown whopper that it is today. And like all whoppers, nobody in politics wants to take ownership and solve the problem.

You see, my friends, simple and easy aren't the same thing --- not even close to the same thing.

Will the legislators and public sector union officials pay their fair share of the bill they have created? Of course not. The taxpayers of Illinois will pay. All the legislators, public sector union officials and local government representatives ever do is promise the negotiated goodies. They don't ever make arrangements to fully pay for them.

We have a constitutional form of government in America, and in the state of Illinois as well. The powers of governance are separated into the legislative, executive and judicial branches.

As by far the most powerful among the three branches, the legislature creates or makes the laws. It also raises the funds through taxes and fees to pay for the governmental functions and activities that it authorizes. The weaker executive branch then enforces those laws and the weakest judicial branch makes sure the constitution and the laws approved by the legislative branch are followed and that the executive enforces the laws and constitution under which those laws are established. It's all conceptually very simple.

We the People, aka the taxpayers, decide by voting periodically which public officials will make the laws and related rules and regulations which in turn are used to govern the body politic.

One more thing is noteworthy -- the legislative branch through its powers also decides to what extent, if any, it will approve or empower public sector unions, such as teachers, police and firemen to represent government employees when dealing with the representatives of We the People. The legislature also decides whether individual teachers, police and firemen can be required to pay union dues as a condition of their employment or whether that choice will be left to the discretion of the individual employee.

Thus, in Illinois (and many other states) we have representatives of coerced government employees bargaining with other government employees to see how big the taxpayers' bill will be. In practical terms, the taxpayers and unwilling dues paying individual employees are told to shut up and pay up. And they have done so in Illinois for a very long time. Now the bills are coming due, and they are really 'whoppers.'

Future taxpayers should beware. So should current taxpayers. And so should public sector employees and retirees as well. Illinois has a mess and it's a really big one at that. But it's not just Illinois, sports fans. It's throughout America.

In Illinois and throughout America today, most public sector workers have generous pay, generous benefits, and generous retirement options. Generosity requires money -- lots of it. And that's where the taxpayers enter the picture. Taxpayers pay for what the governing officials legislate into law -- period. And so in Illinois taxpayers will pay.

And in my view, that's only fair, even if it's crazy and unaffordable. Because in the final analysis, taxpayers make the rules or at least select the rule makers. If they don't like the rules, they can change them. Period.

Illinois Pension Blowup is subtitled 'State judges tell taxpayers to pay for political-union failure:'

"The Constitution is not a suicide pact—except maybe in Illinois. On Friday the Illinois Supreme Court struck down modest pension reforms as a violation of the state constitution in a decision that tees up state taxpayers for years of tax increases.

The court ruled unanimously that pensions are inviolable under the plain text of the state constitution, which holds that “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

The law isn’t that simple, and the practical damage will be great. State pensions are underfunded by $111 billion—a 500% increase from 1995 and up 75% in the past five years. About one in four state tax dollars already finances pensions, which is more than Illinois spends on education. Yet the court accuses politicians of shortchanging pensions.

Politicians are to blame for the state’s fiscal woes, but mainly because they colluded with unions to promise unsustainable benefits in return for political support. Less than 40% of the increase in the state’s unfunded liability since 1995 is due to inadequate payments. The rest is due mainly to benefit growth and faulty actuarial assumptions such as investment rate of return.

The 2013 reforms at issue capped salaries of current workers that are used to calculate pensions at $110,600 (with a carve-out for collectively bargained increases) and raised the retirement age for workers in their 20s to the ripe, old age of 60. Compounded 3% annual cost-of-living increases were also tweaked for younger workers, a modification that courts in nearly every other state have upheld.

In toto, the changes were projected to shave a mere $20 billion off Illinois unfunded liability. Pension payments would still constitute nearly 20% of the state budget.

This is legally relevant because the U.S. Supreme Court in 1934 ruled that states can invoke their police powers to impair contracts in an emergency. The High Court has since established a balancing test that requires judges to consider whether state contractual impairments are substantial, serve an important public purpose and can be achieved through less drastic means.

Yet the Illinois court blows right through this judicial standard. Based on its prior rulings, the court opines that “neither the legislature nor any executive or judicial officer may disregard the provisions of the constitution even in case of a great emergency” or “for economic reasons.”

If pensions can be modified, the court opines, then “no rights or property would be safe from the State. Today it is nullification of the right to retirement benefits. Tomorrow it could be renunciation of the duty to repay State obligations. Eventually, investment capital could be seized.” This irony of this slippery-slope fallacy is that by shielding pensions the Illinois judges are making it more likely that the state will renege on debt or other obligations. . . .

All of this means that Illinois and its municipalities may soon have little choice but to raise taxes or restructure debts to pay for pensions. Chicago, whose credit rating is two notches above junk, faces a $20 billion unfunded liability for pensions and $1.1 billion balloon payment next year. Unions ... will probably beg Washington for a rescue.

Republican Governor Bruce Rauner has floated an alternative: a state constitutional amendment allowing pension modifications, which would require a public referendum and two-thirds vote of the legislature. Barring that, Illinois taxpayers may want to start contemplating Indiana or Florida residency."

Summing Up

Yogi Berra said that it ain't over 'til it's over.

Of course, the problems in Illinois ain't over. Not by a long shot. In fact, they've only just begun.

And now the legislators, public sector unions and taxpayers will have a whole lot of work to do coming to grips with the reality of this ugly and could-have-been avoidable pension debacle.

For those keeping score, Illinois is underfunded by ~$111 BILLION (with a B) and counting.

Throughout America (including such entitlements as Social Security and Medicare) we're underfunded by ~$111 TRILLION (with a T) and not even bothering to count it yet. Talk about a whopper!

Looked at in its entirety, Illinois is small potatoes.

That's my take.

Thanks. Bob.

College Majors, Grades and Expenses ... Choose Carefully

Yesterday we wrote about the value of 'Getting That Valuable College Degree While Avoiding Student Loans....' Today we'll add the rest of the important things to consider for our students and their families when preparing for and entering the college years.

For those interested in reviewing a comprehensive assessment of the benefits of graduating from college, majors of study, and getting good grades, A college degree is worth $1 million contains a link to the 'study' published by the Georgetown University Center on Education and the Workforce:

"College graduates earn $1 million more than high school graduates over their lifetime, and the income gap between the highest-paid college majors and the lowest-paid is more than $3 million dollars. This is all according to a study released Thursday by the Georgetown University Center on Education and the Workforce. The study analyzed wages for 137 college majors to discover the economic benefit of earning an advanced degree by undergraduate major.

“Not all bachelor’s degrees are created equal,” the report concluded. Among the 15 groups of college majors studied, architecture and engineering majors are paid the most and education majors are paid the least. Graduates with degrees in top-paying college majors earn $3.4 million more than those with the lowest-paying majors over a lifetime. Not surprisingly, STEM (science, technology, engineering, and mathematics) and health and business majors are the highest paid, leading to average annual wages of $37,000 or more at the entry level and an average of $65,000.

Others don’t fare as well, however. The 10 majors with the lowest median earnings include childhood education (with an annual median salary over their lifetime of $39,000 a year), human services and community organization ($41,000 a year), studio arts, social work, teacher education, and visual and performing arts ($42,000 a year), theology and religious vocations, and elementary education ($43,000 a year), drama and theater arts and family and community service ($45,000 a year). . . .

Student debt is still a heavy burden for the average college graduate. As of May 2015, the average student loan amount was $32,956 per borrower, and it remains the largest source of household indebtedness next to mortgages, according to Federal Reserve and U.S. Census data crunched by personal finance site NerdWallet.com. College graduates were carrying a total of $1.3 trillion in student loans as of December 2014, up $912 million from five years earlier, Federal Reserve data found."
....................................................................
{NOTE: With that summary background and reference to the detailed study, now let's look a little closer at the issue of college and its importance to future earnings.}
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As we remarked yesterday, a college education is a good start to adulthood, and graduating without debt is an absolutely great beginning.

That said, that's not all there is to the story. What we learn about showing up, acting right and developing the habit of improvement are each and all important as well.  And what major we select for study and our class ranking upon graduation (how good our grades are) will prove to be critical to getting off to a good start for our young graduate and his future success in adulthood.

College Majors Figure Big in Earnings has this to say about all that, and you are encouraged to click on the link to view the article's various tables comparing compensation for the different majors and how the student's class ranking affects that compensation:

"Want to make a good living? Go to college. Just be careful what you major in.

On average, college graduates earn about $1 million more in their lifetimes than do adults who only completed high school. But long-term earnings prospects vary widely by subject, and the income differentials across certain majors dwarf those between graduates and non-graduates, according to a new report from Georgetown . . . .

The findings . . . add fuel to an already heated debate over the value of a college education amid skyrocketing student-loan debt and a still-tepid job market for fresh graduates. . . .

The latest Georgetown report shows that sweeping statements about college graduates’ earnings—whether based on first-year outcomes for an entire school or even averages within fields of study—say little about prospects for individual graduates. . . .

The top 25% of earners who majored in finance can expect annual earnings of more than $100,000, while the bottom quartile may bring in just about $50,000 a year.

“When people see a median, they think it’s destiny,” Mr. Carnevale (of Georgetown) said. “It’s not. There are people above and people below.”

Similarly, the Brookings Institution’s Hamilton Project found last fall that lifetime earnings for economics majors at the 90th percentile are nearly triple those at the 10th, reflecting the range of destinations for such experts in government and the private sector. . . .

Melissa Kearney, an economics professor at the University of Maryland and director of the Hamilton Project, said salaries should factor into, but not necessarily dominate, decisions on majors.

“People have to think very carefully about what they’re good at,” she said. “Yes, engineering pays very well. But that’s not going to serve someone who really struggles with quantitative skills.”. . .

Ms. Davis, 21 years old, hopes to land a full-time job working as a community organizer at an environmental nonprofit, where she expects to earn $35,000 to $40,000.

“I’ve found my calling,” she said. “I know the money’s not lucrative, but I couldn’t see myself doing anything else.”"

Summing Up

College degrees are definitely a nice thing to have.

Getting one takes both considerable time and money, however, and it's perhaps the biggest and most worthwhile investment many of us will make in life.

Sadly, too many young people don't treat it as the life changing experience it is and should be for the better.

Where we go, how much we spend, whether we borrow, work part-time, graduate on time or take another year or two to get that degree, what we major in, how solid our grades are, what extracurricular activities we pursue, the lifetime friendships we develop and lots of other factors enter into the value of the college education we earn.

It's up to us, in other words.

Let's encourage our young friends to make the most of their time and opportunities. They'll be the better for it.

That's my take.

Thanks. Bob.

Getting That Valuable College Degree While Avoiding Student Loans is a Great Plan for Those Approaching Adulthood

Properly preparing for and then attending college is a good thing. Graduating from college with a worthwhile degree is an even better thing. Having no debt or as little debt as possible upon graduation is a great thing.

Much of the debt students owe upon leaving college is avoidable. The student didn't have to enroll in an expensive out-of-town college, the student didn't have to withdraw prior to graduating, nor did the student have to not take college seriously, perform so poorly or choose a low paying field of study. Those were all choices and related to getting in position, sustained effort and developing the habit of improvement.

Most importantly, that student could have and should have known more about the financial hardships which can seriously and negatively impact the quality of adult life for those graduating with burdensome student loans outstanding.

Some valuable tips for students attending college are provided in Things They Wish They'd Known About Student Loans. Here's a sampling:

"The problem with a lot of the advice that teenagers and their families get about higher education debt is that it’s totally, utterly bloodless.

The federal Department of Education takes its shot in its role as the de facto provider of advice to people borrowing their first federal student loans and repaying them. That counseling is mandatory for borrowers, but because the topic is dense and the department’s content is devoid of anecdotes, it’s tough to make the lessons stick.

So in my column last week, I asked readers to share their own stories and offer the most important thing they wish they had known before they borrowed money and began to repay it. The comments painted a troubling picture of clueless teenagers, frazzled parents and college administrators who may not always take students by the shoulders and question their debt levels. . . .

THE CHECKUP The one complaint that I heard repeatedly was this one: Given the hopscotch manner in which students take on debt each year, loan by loan, it is much too easy to lose track of your running total. Shannon Doyle, a financial counselor with Lutheran Social Service in Minneapolis, says families often come into her office with no idea how much a student owes and with mistaken ideas about how parent loans can be combined with student loans after graduation.

She advises students and families to keep score on three pages of a spreadsheet that they update each term. The first one should have federal student loans, divided into subsidized ones (where the government covers the interest while the student is enrolled) and unsubsidized ones (where the interest accrues during school). The second page is for private loans, if any, from entities like Sallie Mae, and the third is for any loans the parents take out themselves. . . .

My conversations with Ms. Doyle ended with a plea of sorts to the schools: Please, do your best to provide a running total of debt on the financial aid statements you send out each year. “There should be no barriers to students knowing how much they have borrowed,” she said.

THE DAILY INTEREST Before Kim Liao’s enrollment at Georgetown, the story of her family had been one of downward mobility. Her father had died, the family had struggled and there was pressure on her to work part time as an undergraduate — not to pay her way but to send money home.

She considers herself lucky to have graduated with just $22,500 in student loan debt in 2006, but that didn’t sit well with her. What really flipped the switch in her head was when a phone representative at her loan servicer told her that she would be paying $2.23 in interest each day. “So you start out with zero dollars to your name, and you’re going negative by that amount every single day,” she said.

For people repaying their loans, it may be worthwhile to confront that figure when they make their daily spending decisions. “The calculators will tell you how much interest you’ll accrue over 10 or 20 or 30 years,” said Ms. Liao, who paid her debts off much faster than that and now works for the Federal Reserve. “But the fact that I was spending $2.23 each day without actually buying anything for myself resonated with me so much more.”

Summing Up

Worthwhile knowledge is essential.

Learning with an open mind about important and relevant matters is an essential element of acquiring worthwhile knowledge.

College degrees are helpful to an adult's job opportunities and standard of living.

Borrowing more than what is absolutely required to attend college and then unnecessarily delaying repaying what is borrowed can be harmful to an adult's standard of living.

Students and their families should take the time and make the effort to be prepared and forewarned about the perils of student loans and unnecessary accumulated debt levels.

It's not that hard to become knowledgeable about the perils associated with borrowing prior to taking on debilitating debt.

That's my take.

Thanks. Bob.

The Affordability of Government Programs .. Pitting the Youngsters Against the Oldsters

If we have one dollar to spend today and actually spend two dollars, we'll need to borrow one dollar. If we continue to do that day after day, the dollars owed will pile up. If we also commit to spending additional dollars in the future and don't set aside sufficient funds to pay those future dollars due, we'll need to borrow even more dollars in the future. How many dollars we'll need is presently unknown.

As a society, we spend lots of money on educating our young. Most educators and other government officials say we need to spend even more. And that spending includes both K-12 and college attendees as well, again according to our free spending 'leaders.' How to pay for all this doesn't receive much, if any, attention.

We also need to protect the promised entitlements of Social Security, Medicare, ObamaCare and so forth, again in alignment with the politics of the situation. Again, how to pay for this doesn't receive much attention.
And by the way, we need to provide adequately for the nation's defense as well.

In order to do all these things, we need to maintain a growing economy with good jobs, higher wages and investments in order to be able to implement productivity and infrastructure improvements throughout America. There's also talk about reducing the highest tax rate in the world and stimulating additional private sector investment. To repeat, how to pay for this isn't receiving much attention.

Meanwhile, public sector unions remain a dominating influence in our local, state and national politics. Public sector unions bargain on behalf of government employees with the representatives of government, aka the taxpayers, for higher pay and benefits for those of our fellow citizens who serve as policemen, firemen and teachers, as examples. But how future citizen taxpayers will be able to afford to pay for what's been negotiated doesn't seem to have been a major concern at the taxpayer funded bargaining table.

If all this sounds to you like a huge problem in the making for America's future well being, it does to me too.

3 out of 4 retirees receiving reduced Social Security benefits tells us about the current problem with oldsters having enough money to live on and the coming Social Security affordability crisis that lies ahead:

"Growing numbers of workers expect to rely heavily on Social Security as a major source of income in retirement, but almost three-quarters of current retirees are receiving reduced benefits, according to two new reports.

According to a recent Gallup survey, 36% of adults who are not yet retired expect Social Security to be a “major source” of retirement income. That figure is roughly 10 percentage points higher than a decade ago and higher than any response in the past 15 years.

Of course, the best way to maximize Social Security is to delay claiming benefits until “full retirement age,” which is climbing gradually to 67, or beyond. A person due to receive a benefit of $1,000 at a full retirement age of 66 would receive only $750 at age 62 (the earliest age at which most people can claim benefits) – and $1,320 at age 70.

But that math isn’t stopping many workers from claiming benefits early.

Among the 37.9 million Americans receiving Social Security retirement benefits as of December 2013, fully 73% were receiving reduced benefits “because of entitlement prior to full retirement age,” according to a new report from the Social Security Administration. . . .

Currently, the Social Security Administration is tapping the interest on the program’s trust funds to pay beneficiaries and, soon, will begin drawing down the assets themselves. At the moment, the trust fund is scheduled to run out in 2033, after which Social Security recipients would receive about 75% of their benefits.

Against that backdrop, a recent Wells Fargo/Gallup survey found that only 28% of non-retired investors are very confident they will have enough savings at the time they decide to retire. An additional 48% are somewhat confident.

The latest Gallup survey concludes: “To the degree [workers’] savings are not sufficient to fund their retirement, [they] will have to make up the shortfall somehow."

Summing Up

The promises made by politicians and the funding of those promises by taxpayers are two entirely separate things, regardless of what the politicians may say --- or not say.

And Social Security benefits for many of the current American oldsters will have to be funded by future American workers. That's the only way today's unfunded promises will get paid.

Meanwhile, our U.S. educational outcomes continue to deteriorate compared to many countries around the world.

Yet the 'solution' is said to be more money and less testing with respect to how we stack up competitively with other nations.

It's a train wreck in the making with absolutely little being done to avoid it.

That's my take.

Thanks. Bob.

"The Great Society" and America's "War on Poverty" From Appalachia to Baltimore ... Race, Poverty, Government 'Help' and 50 Years of Equal-Opportunity Failure

President Lyndon Johnson declared the 'War on Poverty' in the 1960's. Well intentioned, it consisted of federal government programs intended to end poverty in America.

Based on the facts accumulated during the past half century, however, we're losing the war. In fact, as a nation we have failed miserably to achieve the intended purpose.

In 2015 Baltimore and the problems of the inner cities, race relations and poverty are very much in the news. While the issues are presented by the media and politicians as inseparable, they're not.

Help is definitely needed for our citizens in Baltimore and similar cities. How best to deliver that help is the question in need of an answer. Sometimes knowing what not to do is more important than knowing what to do. This is one of those times.

Government wants to continue to provide that 'help' by pouring more money into more government assistance and generating even more dependency on government programs. That's a very bad idea.

Baltimore Is Not About Race is subtitled 'Government-induced dependency is the problem, and it's one with a long history.' The editorial addresses the issues in Baltimore, race and government 'help' in a straightforward fact based historical manner:

"For those who see the rioting in Baltimore as primarily about race, two broad reactions dominate.

One group sees rampaging young men fouling their own neighborhoods and concludes nothing can be done because the social pathologies are so overwhelming. In some cities, this view manifests itself in the unspoken but cynical policing that effectively cedes whole neighborhoods to the thugs.

The other group tut-tuts about root causes. Take your pick: inequality, poverty, injustice. Or, as President Obama intimated in an ugly aside on the rioting, a Republican Congress that will never agree to the “massive investments” (in other words, billions more in federal spending) required “if we are serious about solving this problem.”

There is another view. In this view, the disaster of inner cities isn’t primarily about race at all. It’s about the consequences of 50 years of progressive misrule—which on race has proved an equal-opportunity failure.

Baltimore is but the latest liberal-blue city where government has failed to do the one thing it ought—i.e., put the cops on the side of the vulnerable and law-abiding—while pursuing “solutions” that in practice enfeeble families and social institutions and local economies.

These supposed solutions do this by substituting federal transfers for fathers and families. They do it by favoring community organizing and government projects over private investment. And they do it by propping up failing public-school systems that operate as jobs programs for the teachers unions instead of centers of learning.

If our inner-city African-American communities suffer disproportionately from crippling social pathologies that make upward mobility difficult—and they do—it is in large part because they have disproportionately been on the receiving end of this five-decade-long progressive experiment in government beneficence.


How do we know? Because when we look at a slice of white America that was showered with the same Great Society good intentions—Appalachia—we find the same dysfunctions: greater dependency, more single-parent families and the absence of the good, private-sector jobs that only a growing economy can create.

Remember, in the mid-1960s when President Johnson put a face on America’s “war on poverty,” he didn’t do it from an urban ghetto. He did it from the front porch of a shack in eastern Kentucky’s Martin County, where a white family of 10 eked out a subsistence living on an income of $400 a year.

In many ways, rural Martin County and urban Baltimore could not be more different. Martin County is 92% white while Baltimore is two-thirds black. Each has seen important sources of good-paying jobs dry up—Martin County in coal mining, Baltimore in manufacturing. In the last presidential election, Martin Country voted 6 to 1 for Mitt Romney while Baltimore went 9 to 1 for Barack Obama.

Yet the Great Society’s legacy has been depressingly similar. In a remarkable dispatch two years ago, the Lexington Herald-Leader’s John Cheves noted that the war on poverty sent $2.1 billion to Martin County alone (pop. 12,537) through programs including “welfare, food stamps, jobless benefits, disability compensation, school subsidies, affordable housing, worker training, economic development incentives, Head Start for poor children and expanded Social Security, Medicare and Medicaid.”

The result? “The problem facing Appalachia today isn’t Third World poverty,” writes Mr. Cheves. “It’s dependence on government assistance.” Just one example: When Congress imposed work requirements and lifetime caps for welfare during the Clinton administration, claims of disability jumped.

Mr. Cheves quotes a former grade-school principal who says this of Martin County’s children: “Instead of talking about a future of work, or a profession, they talk about getting a check.”

Yes, Washington’s largess has done some good. Even the federal government can’t spend billions of dollars without building a decent road or bridge here or there. But it all came at a high human cost....

Meanwhile, President Obama says the rioting in Baltimore means “we as a country have to do some soul-searching.” He’s right about that . . . .

Because to look at urban black Baltimore and rural white Martin County and conclude that the answer is more cradle-to-grave . . . isn’t soul searching. It’s denial."

Summing Up

If we're doing the wrong thing, we're probably doing it poorly.

And we've been doing the wrong thing to address the issues of poverty, education, effort and self-reliance in America for more than fifty years now.

Doing the same thing over and over and expecting a different result is the definition of insanity.

What we've been doing in both the inner cities and rural Appalachia hasn't worked, isn't working and won't work. Yet the insanity of government to the rescue continues.

And that's all I have to say about that.

Thanks. Bob.

Student Loan Delinquencies Are Much Worse Than Our Political 'Spinners' Want Us to Believe

Lots of articles have been written about the high level of burdensome outstanding student loans and the problems they are causing. Both troubled debtors and our slow growing general economy are being negatively impacted in a big way as are jobs and income levels. It's not a pretty picture.

But the fact is that the student loan problem is even worse than is being publicized or generally recognized --- much worse.

The Student-Loan Problem Is Even Worse Than Official Figures Indicate sets forth the ugly truth about the student loan fiasco:

"Student loans are proving to be a much bigger burden on households than previously thought.

Nearly one in three Americans who are now having to pay down their student debt–or a staggering 31.5%–are at least a month behind on their payments, new research from the Federal Reserve Bank of St. Louis suggests. That figure is far higher than official delinquency measures reported by the Education Department and the New York Fed. And it’s also likely the most accurate.

Here’s why: The official measures reflect delinquencies as a share of all Americans with student debt, but millions of borrowers aren’t even required to make payments yet. Many are currently in college or grad school and thus don’t have to make payments until six months after they leave. Others are out of school and past that grace period but have received permission by their lender—the federal government in most cases—to suspend payments for a range of reasons, such as being unemployed.

Including these borrowers in the broader pool of student-loan debt makes official delinquency rates artificially low. For example, figures from the New York Fed’s quarterly report on household credit shows roughly 17% of all student-loan borrowers were at least 30 days behind on a payment at the start of this year. That’s still a very high number, but misleading nonetheless.

A more precise way of measuring delinquencies is to just look at borrowers who are required to make payments. . . . as of Jan. 1, more than half of student-loan debt – 55% – was held by borrowers who were in repayment. The remaining 45% weren’t in repayment.

Stripping out the borrowers not in repayment . . . 31.5% of Americans with student debt were at least 30 days behind on a payment at that time. This matches up with previous research from the New York Fed suggesting the actual delinquency rate is likely double the official delinquency measure, when excluding borrowers not in repayment.

Delinquencies on student debt are far higher than those for other forms of consumer credit, including credit cards, mortgages and auto loans. For example, 8.5% of all auto loans were at least 30 days delinquent . . . ."

Summing Up

Q -- So how bad is the student loan problem?

A -- It's very bad and getting worse each day.

In fact, delinquencies are about twice as high as they are 'officially' represented as being.

And here's another point of reference. Delinquencies for student loan payments are almost four times as high as is the case for past due auto loans.

Facts are stubborn things, and the student loan fiasco is a big problem getting bigger.

But no matter how ugly the reality is (and for student loans it's truly ugly), we're better off knowing the truth. 

That's my take.

Thanks. Bob.

To Whom Much Is Given, From Whom Much Will Be Required ... Education, Choice, Freedom, Politics, Teacher's Unions, Hypocrisy and Inner Cities

To whom much is given, from whom much will be required. We the People have given much to President Obama, teachers' unions and the Democratic Party leadership these past several years. More on that later. But first, let's look at some relevant facts.

Baltimore has been in the news all week. See my post about free choice and educational opportunities for young Americans of April 28 titled 'Baltimore Today, Where Tomorrow ...."

This connection between a solid education and a good job is especially relevant today as the global economy and technological progress combine to make education the key to our citizens' future economic well being and our nation's overall prosperity.

President Obama has said that he wants Americans to do some soul searching about the problems of our inner cities and policing. While we're at it, how about doing some soul searching with respect to freedom of parental choice about where kids attend school and how they are educated?

In other words, what about giving parents and kids in Baltimore and elsewhere the opportunity to remove themselves from bureaucratic top down teachers' union operated schools where safety and a solid learning environment have long been absent? And how about reflecting on why allowing kids and their parents to opt out of bad schools and instead choose to attend good schools has long been actively discouraged by President Obama and his Democratic Party allies? Yes, let's all do some seriously needed soul searching.

President Obama, Are You Listening? is subtitled 'The president wants to zero out a program that is saving poor kids from bad schools -- the kind of reform that could work in Baltimore too:

"The scenes of Baltimore set ablaze this week have many Americans thinking: What can be done to rescue families trapped in an inner-city culture of violence, despair and joblessness?

There are no easy answers, but down the road from Baltimore in Washington, D.C., an education program is giving children in poor neighborhoods a big lift up. The D.C. Opportunity Scholarship Program, which George W. Bush signed into law in 2004, has so far funded private-school tuition for nearly 5,000 students, 95% of whom are African-American. They attend religious schools, music and arts schools, even elite college-prep schools. Last month at the Heritage Foundation in Washington, I met with about 20 parents and children who participate in the program. I also visited several of these families in their homes—which are located in some of the most beaten-down neighborhoods in the city, places that in many ways resemble the trouble spots in Baltimore.

These families have now pulled together to brace for a David vs. Goliath fight to save the program. For the seventh straight year, President Obama has proposed eliminating this relatively tiny scholarship fund, which at $20 million accounts for a microscopic 0.0005% of the $4 trillion federal budget.

The parents and students point out that the scholarship program has extraordinary benefits—they use phrases like “a godsend for our children,” “a life saver” and “our salvation.” . . .

Virginia Ford, whose son escaped the public schools through a private-scholarship to Archbishop Carroll, now runs a group called D.C. Parents for School Choice. She tells me that “kids in the scholarship program have consistently improved their test scores, have higher graduation rates, and are more likely to attend college than those stuck in the D.C. public schools.”

The numbers back her up. An Education Department-funded study at the University of Arkansas recently found that graduation rates rose 21 percentage points—to 91%, from 70%—for students awarded the scholarship vouchers through a lottery, compared with a control group of those who applied for but didn’t get the scholarships. For all D.C. public schools, the high-school graduation rate is closer to an abysmal 56%. . . .

Amazingly, these energized parents are opposed by almost every liberal group, even the NAACP, and nearly every Democrat in Congress . . . .

There is little question what stirs this opposition. The teachers union sees the program as taking away union jobs, and it is so powerful that the Democratic establishment falls in line. “It is so sad that our public schools aren’t doing what’s best for the kids,” laments Ms. Ford, but instead are looking out for “the adults.”

The D.C. Opportunity Scholarship Program turns conventional politics upside down. President George W. Bush created the program . . . .

Mr. Obama won’t even meet with these parents. A few years ago the voucher supporters held a rally with 3,000 minority and disadvantaged families in front of the Capitol to protest President Obama’s proposed elimination of the program for all new students. Republicans in Congress, including House Speaker John Boehner, one of the program’s strongest supporters, stood in solidarity with the families, while Nancy Pelosi and her Democratic colleagues were nowhere to be seen. . . .

While most affluent and middle-class parents worry if their children will make the travel soccer team, or whether the local school is good enough to get their child into a top university, these poor parents worry every day whether their children will come home safely. A 2009 school-safety report from the Heritage Foundation noted that in that year the Education Department “found that 11.3% of the District’s high-school children reported being ‘threatened or injured’ with a weapon while on school property during the pervious year.”. . .

The most common objection to vouchers is that they drain public schools of resources. But Ms. Ford notes that when the Opportunity Scholarship program was created, the feds gave $20 million for the vouchers and an extra $20 million for the public schools. This meant more money for the public schools—and unionized teachers still opposed the program. “They aren’t afraid that the voucher program won’t work,” she says, “but that it will.”

The left’s rote response to rotten schools is to call for more money, but the D.C. scholarship program shows that a quality education can be had for less money. The Census Bureau reported in 2012 that Washington spent $18,667 per pupil in 2010. The scholarship amounts are $8,500 for elementary-school children and $12,000 for high school. So the voucher program gives kids a better education at about half the cost to the taxpayer.

Several parents point out that President Obama and his wife Michelle shopped around and chose the prep school Sidwell Friends for their daughters. Several of the Opportunity Scholarship children also go there. Now the president wants to end the program for children who sit next to his own daughters in the classroom. “He lives in public housing too,” says Mr. Kelley, half joking. “Why should he get school choice just because he’s rich and we’re not? If it’s good for your children, it’s good for our children.”

Public education has traditionally been the great equalizer in America. The tragedy today is that the decline of public schools is one of the leading contributors to generational cycles of poverty. Democrats say they want to make the 2016 election about income inequality, but they stand united in opposition to one of the most effective ways of reducing the gap between rich and poor: better education. . . .

The Education Department’s spending for K-12 education will soon reach $50 billion. For what? How about a GOP plan that would take that money from the bureaucracy and distribute five million vouchers of $10,000 each to the lowest-income Americans—like those who live in Baltimore?"

Summing Up

To repeat -- To whom much is given, from much will be required.

President Obama is the first African-American U.S. president. He has been 'given' the nation's leadership reins for two consecutive terms. He is also a well educated man who was the beneficiary of many opportunities throughout his life. Now he's the political leader of We the People and the entire free world.

None of the above is disputed. Nor is it controversial. So here goes.

Q -- Why doesn't he fight to give We the People a chance to make our own educational choices instead of deferring to the powerful teachers' unions and Democratic Party leaders? A -- Because of the political situation, when educational opportunities are being discussed, our 'leader' isn't leading.

Giving all individuals freedom of choice is the accepted American way -- except when it interferes with the politics of the situation, that is.

And fighting the good fight for income inequality is the American way -- except when it interferes with the politics of the situation, that is.

And guaranteeing to each individual the freedom to choose how to pursue a solid education is the American way -- except when it interferes with the politics of the situation, that is.

Politics sucks. And talk is cheap. And when that talk is political talk, it's harmful as well.

Meanwhile, the poor in the inner cities of America continue to suffer, as does our entire nation, while the politicians play their stupid and self serving games in order to placate their political allies. And then they tell us to do some 'soul searching.'

That's my take.

Thanks. Bob.

Financial Literacy Woefully Lacking ... We Have 'Implanted' in the Young a Lack of Knowledge Concerning the Financial Basics ... As a Result, Major Life Problems NEEDLESSLY Lie Ahead for Them

Most young people (too many oldsters as well, but that's another story for another time) are lacking in basic financial knowledge. That's likely to be harmful to their financial health and general well being as they progress through adulthood. In other words, they will encounter a lifetime of financial headaches without a proper understanding at the outset of what they are doing to themselves.

When young, they begin making wrongheaded life altering financial decisions at an early age, become needlessly heavily indebted (underwater car loans, underwater home mortgages, home equity loans, needlessly burdensome student loans and super expensive credit card balances), and never acquire an understanding of the freedom associated with having unencumbered assets and being debt free.

As a result, too many of our young adults become older adults wishing that they would have known 'way back then' what they now so painfully know. But by then lots of damage has been done, and there's no realistic way to quickly and easily undo the damage.

Due in large part to a poor educational system and a government that encourages too much personal debt, our young people aren't able to save and invest for the long haul. They become early lifetime debtors instead.

Why financial literacy isn't a basic part of our educational system has long been a mystery to me. Perhaps it's because most teachers and other well intentioned adults don't know enough about it to teach it. If so, that means even more trouble lies ahead for our nation's young people.

College freshmen flunk financial literacy 101 has this to say about the troubling topic:

"The same teens saddled with thousands of dollars in debt to attend college have little understanding of how to put themselves in the best position to pay it back.

On average, freshmen at four-year colleges could only answer about two out of six questions correctly about topics like the right amount of money to set aside in case of a financial emergency, the conditions placed on student loan borrowers and how long a late payment remains on your credit history, according to a study . . . . of 42,000 college freshmen {which} found that just 39% of four-year college students use budgets and 12% don’t even check their account balances because it makes them nervous.

Young people living on their own for the first time often learn basic financial lessons by over-drafting on their dwindling accounts to buy a slice of pizza or forgetting to pay a bill and discovering the late fees later....

But this approach doesn’t suffice for many in an era when 71% of students graduating from four-year colleges have student debt, which they’re expected to pay back at risk of losing future wages or tax refunds if they default.

“All college students are stressed financially, regardless of their experience or knowledge or behaviors,” said Mary Johnson, the vice president of financial literacy and student aid policy at Higher One. “The one area that seemed to make it worse is the level of student loans.”

The debt makes having the financial wherewithal to get through school particularly important. Students who make the investment in their education, but ultimately don’t get a degree, are the most likely to default. . . .

At Tyler Junior College in Tyler, Texas, officials are including financial literacy as a component of the school’s core curriculum and holding workshops on topics like budgeting around Christmastime and what to do with a tax refund.

“We saw a need to hit them both inside and outside the classroom so they can really understand how finances can impact their future and how it impacts their education specifically,” said Ashleigh Lewis, a professor at the school and the chair of the financial literacy committee. . . .

Many are using some kind of financial assistance, Lewis said, so her program tries to help students better understand their aid. Many need a primer on the difference between a grant and a loan or when and how to pay them back.

The workshops focus on “really understanding the impact. This federal money, this federal loan, this does not go away ever,” Lewis said. “You can’t just run away from your student loans.”"

Summing Up

Student loans are a huge problem facing young Americans.


Car loans, credit card balances, home mortgages, home equity loans and other forms of indebtedness are a big part of the 'underwater indebtedness' mix as well.

Financial literacy represents both a huge and unaddressed issue for both young and older Americans.

Not knowing the easily knowable basics of personal finance has been, is, and will continue to be harmful to our financial health and future prosperity, both as individuals and as a nation.


Don't borrow the money if you don't know how and when you're going to be able to pay it back.

That's my take.

Thanks. Bob.