A student in the us is in extreme debt as they pass out from higher studies. They could have anywhere between $ 200k to $ 400k in educational loans which they need to pay over the next few years.
A student could make anywhere between $60 -$80k per annum as they get into their first jobs. With income tax rates as high as 40% in the us , it would take them a really long time to be education loan free .. even before they can start saving for the rest of their lives.
The above scenario is one of the key points in the next American election where a few of the presidential hopefuls are promising waivers on student loans if they get elected.
As you can see it would be something very popular and could be the winning edge for the elections.
In India something similiar is emerging.. in line with the theory that India financial structures would copy the west as it happens.
Today an MBA from the IIMs which are actually state sponsored would cost around 14 to 16 lakhs for a 1.5 yrs programme. Consider this vs the 1.5 lakhs i paid for my MBA in 2000s... a 10x increase in 20 years. Much much higher than the regular rate of inflation that we see published from the GOI every month.
In my days passing out at least got me a 2x-4x salary of what i spent for my education.. so the ROI was fantastic. Now days one would be lucky to get 1x of your investment.. even from the best colleges if you are a fresher.
The government of course is enabling student loans ( coincidence with the way us works?) And more and more students are making use of these facilities.
All that we will do is as a society get into more and more debt .
Recently i was watching a video of how professionals are living in hongkong.. and it shows how difficult it is for people who are so qualified ( see here). Hongkong is one of the most premier locations in the world... however having significant constraints in land space. India is facing similiar situation with its high population growth ( towards which there is no proactive control measures initiated ).
Student debt will in the future create significant headwinds for our children and their future generations.
The big difference lies in our culture. With the Indian family system parents would like to plan for their children's education as much as possible.
All these point towards how even more important financial planning will be in the future. Start now and help your future generations.
Thats simplefinancialsense
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