Economic Flexibility and the Many Problems with Student Loans: An Economic Profile of 'John'
by Charley Ward
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| This is my photo to represent John's economic state. He has an incredible amount of economic flexibility and prides himself on avoiding debt. In the coming years, he will likely quit and travel the world. |
“I’m an outlier,” John told me before we’d even begun.
A 38 year old, John has worked in education for his entire
life. “I don’t identify as an adult,” he said, referring to the fact that he’s
always worked on the school year calendar.
John grew up in Washington and spent his four undergraduate
years at the University of Washington, paying in-state tuition. While he
graduated debt-free, teaching options were limited directly out of college. He
returned for a fifth year to get his masters and left with a degree—and
savings.
John’s experience with college and student loans informs his
economic advice for young people. “Don’t go into debt in college,” he said
simply. Today’s student loan problem remains expansive and complex: seven in
ten seniors who graduated from public and nonprofit colleges in 2015 had
student loan debt, with an average of $30,100 per borrower. John questions
whether or not students should take on debt in order to go to an elite
university. “It’d be interesting if someone would run the numbers on that,” he
said, referring to the return on investment of attending a premier university
versus the loans necessary to attend such a university.
No study that I found matched the goal John identified, but
there have been numerous analyses of colleges’ return on investment. Generally,
the prestige of the school matters less than the school’s focus in the results
of these analyses: Caltech, MIT, and Harvey Mudd, all technical schools, scored
first, second, and third respectively in PayScale’s report on best value
colleges.
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| This chart compares college's tuition to the average starting salary of it's graduates. NJIT, another technical school, ranked first according to their metrics. Georgia Tech and Michigan Tech were close behind. |
John's returns—after graduating from a
large public university—were low at first, but that can also be attributed to
his profession. John first taught history at a high school in Redmond,
Washington, before moving to the same position at a school in Phoenix, Arizona.
High school teachers’ salaries are generally between $45,000 and $50,000, and while
John worked at elite private schools, he said that his salaries were in that
range.
John said that entering professional work without debt
afforded him a measure of personal and economic flexibility. John greatly
values economic flexibility—he rented apartments in both jobs and had the
ability to “quit [his] job whenever [he] wanted.”
John’s innate desire for economic flexibility is unique—but
there is something to be learned from his transience. He rarely takes on debt,
and when he does, it’s only for a very short term. But that doesn’t mean John
is unwilling to pursue his passions: he led summer trips and wrote guidebooks
during his years in Redmond and Phoenix.
John then moved back to the Northwest to teach history in
the high school at another independent K-12 school. He made roughly the same
amount—until he was promoted to lead a scholarship program, viewed as an
administrative role in the school and paid accordingly. While I’m unable to
disclose exact figures, John’s salary rose substantially.
John views his current wage as comfortable. While he was
also comfortable on a teachers’ salary, he said it was only because he was
single and hyper-focused on work. He said he is unsure how teachers raising
families manage to pay their bills.
Research that I’ve done led me to conclude that it is
practically impossible to raise a family on one teacher’s salary. As mentioned
previously, high school teachers, on average, make between $45,000 and $50,000 (middle
school, elementary school, and substitute teachers all make significantly
less). This puts them at the very bottom of the middle class and in danger of
slipping into poverty. Studies have found that middle class consumption amounts
to between $38,200 and $49,900 annually per household (CNN). This is without
including health care and education costs, which, if included, would increase
consumption—possibly pushing teachers and their families into debt.
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| Here's the average middle class salaries. |
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| Average middle class consumption. |
John views his current wage as “firmly middle class.” This
makes sense, and it is within the parameters CNN sets for “middle class”
(between $46,960 and $140,900). “Middle class,” however, has historically been
defined as a home in the suburbs, with secure heath care and retirement funds,
the occasional family vacation, and a college education for the kids. John’s
economic situation involves none of these things. When I asked him about this,
he said that he’s still young for all of that, and that the “middle class” is
defined just as much by lifestyle as it is by education. If you have a college
degree, you’re said to be “middle class,” he told me. This was interesting to
me, particularly because America’s “shrinking middle class” has been in the
news so much recently. What if the way to reinvigorate and grow our middle
class was to encourage more people to go to college? Could the government
subsidize tuition and financial aid, in hopes of expanding our middle class?
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| Everyone has heard that the middle class is shrinking. Here's a stat to back it up. |
Again unlike a typical home-owning member of the middle
class, John recently invested in a condo. He has nearly paid off all of his
debts already. He said that the condo he bought wasn’t a great investment—there
were others that were better—but that he bought it because it’s contract
allowed him to pay off his debts the quickest. John, as mentioned before,
avoids debt at all costs. While this strategy isn’t typical, it’s affords John
a unique economic freedom.
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| John is among 24% of Americans living without debt. Average debt in America is nearly $80,000. |
The retirement plan the school offers John is run through a
company called Principle. John is allowed to add a percentage of his salary
into a fund and the school matches whatever he puts in. John always puts in the
maximum amount he can. “It’s free money,” he said.
John doesn’t plan to retire after teaching at his latest
school, though. He now has the pedigree to apply to head of school jobs across
the country, but that’s not what he wants. When I asked him what the next step
was, he said, “quitting.” Whenever he becomes bored, he will move on, travel
the world for a few years, and return, likely to another teaching or
administrative job. He can do so because of his extreme economic flexibility,
which he has maintained throughout his life.
Sources:
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