By ParentingPatch via Wikimedia Commons

College is nothing more than a small business loan

College is a wonderful experience. It’s a place to learn, explore, discover yourself, and to get away. However, it was conceived as a way to educate the population and make everyone a more productive member of society. In that vein, college is failing. It’s not failing because of educational content offered. It’s failing because it costs too damn much and the reward is not guaranteed.

College is your small business

Before a child finishing high school embarks on college, they might as well draft up a business plan and head into their local Small Business Administration office. The importance of this college business plan is as important as a real business plan, but for different reasons. At the ripe old age of 17, children are expected to understand exactly what they want to do for the next 50-plus years of their life. They are expected to know exactly how to make it happen. And they are expected to do it in the upcoming four years.

Oh, and to make things even more interesting, these teenagers are also expected to devise a plan so spectacular that they will instantly be able to afford the debt necessary to bring their plan to life. You see, when starting a small business, a business plan helps determine the viability of a potential company and how much it might get in business loans. That’s college. Entering college is the birth of the business. It’s the exciting period in which the entire future looks bright and the funding is all there. However, when college is over, that’s when things get real. That’s when the business better start producing.

At the end of a student’s four years — if they are so lucky to have finished in four years — that initial small business loan comes due. Sure, there’s a grace period. Go find a job quickly, children. Make sure it can pay for life, for family, for fun, and for your debt. If the student hasn’t accomplished this to perfection by the end of the grace period, guess what? It doesn’t matter. Your business has failed, but you still owe repayment on your small business loan. Yet there is one significant difference.

A small business loan can essentially be erased with bankruptcy. A student loan cannot.

Is it so wrong to honestly tell high school kids that financing college is inherently much more risky than financing a business? Let’s review the facts:

1. The average cost of college tuition for an in-state school per year in the United States is $8,655. That, of course, does not cover room and board. But hey, let’s assume this is best case scenario and the students in question surely have a wonderful place to live with Mom and Dad.
2. For the 2007-08 school year (your kidding yourself if you think it’s better now), only 0.3% of students received enough scholarship money to cover the full cost of their education.
3. Only 1 in 10 college undergraduates receives any scholarship money at all. Those average to about $2800. Who’s paying the remaining $5800?
4. As of 2011, only 59% of students who began a full-time course work load at an undergraduate school finished within six years. Disclaimer: It took me three schools and seven years to get my Bachelor’s Degree.
5. Nationally, 12% of students starting at one four-year university finish at another university. Because of varying educational and credit requirements, this likely leads to higher costs.
6. Finally, the class of 2013 graduates average over $32,000 in student loan debt.

The first problem is that high school students are not prepared for college when they enter. How in the world is a teenager expected to plan the rest of their life and choose the appropriate vocation when they probably can’t even clean their room? This leads to the second problem. And that is students take longer than ever to graduate. Most do so because they struggle out of high school with the differences colleges present or they simply don’t know what they want to do and end up bouncing around between majors.

So as we think about the student loan debt crisis that is barreling down on us harder than the tech bubble in the 90's and the housing bubble just a few years ago, it’s important to understand what students are doing when they embark on obtaining a college education. They are writing a business plan — if not on paper, in their head — they are financing that plan, and they are expected to capitalize on that plan immediately and in a fashion that allows for prompt repayment of the plan.

As a result, that small business loan many students took out for college has gone on to finance a business much different than the student originally set out to start. Math majors working in call center, history majors stocking grocery store shelves, business majors working in public service. Unfortunately, when the failed business plans come as they always do, student loans are far less forgiving than business loans.