Steve Jobs was suspended from high school for playing a salacious prank on the graduating senior class. Biographer Walter Isaacson says Jobs and his friends tie-dyed a bedsheet with the school colors and enlisted one of their mothers to paint a large hand extending its middle finger across the sheet. Jobs hung the homespun banner from a school balcony and flipped off the seniors during their commencement procession.
It was as if the eventual college dropout and entrepreneurial billionaire wanted to say: “Eff formal education. I will learn and earn on my own terms.”
Today, President Obama is effectively giving college students and their parents his middle finger. Whereas Jobs’ prank was harmless and symbolic, the President’s plan to bail out student loans will derail the entrepreneurial dreams and financial security of countless young people.
By executive order, the President’s unconstitutional “We Can’t Wait - Pay As You Earn” plan modifies the existing Income-Based Repayment Plan so that, effective in 2012, graduates may cap their loan payments at 10 percent instead of 15 percent of their discretionary income. Anything remaining after 20 years (formerly 25 years) becomes fundamentally the taxpayers’ responsibility. And, if a student wants to become a public servant (i.e. work for George Soros) his loan will be forgiven after just 10 years.
Jobs dropped out of college because he was worried about wasting his parents’ money. He also told Isaacson he had: “no idea how college was going to help me…” Jobs self-started Apple by selling his Volkswagen bus so he and Stephen Wozniak could pool together about $1,300 of initial capital. Jobs could have squandered his parents’ money. Instead, he used his money and their garage to build a company that would create countless jobs and terrific products for people all over the world.
If Jobs had frittered away four years of his life in college instead of pursuing creative opportunities, I wouldn’t have written this column on a Mac and you wouldn’t be tweeting it to your friends from your iPhone. And, if Taylor Swift had gone to college you wouldn’t be playing her music on iTunes because she’d be an unrenowned member of a college choir.
I think young people and their parents deserve to know the truth about the President’s program.
First, the program deceptively leads students to believe they will advance and save money by taking out big loans for four years instead of skipping college altogether or taking steps to graduate debt-free—like working part-time and maintaining academic scholarships with good grades. The average student will only save between $4 and $8 a month on this program. Upon graduation, they could end up with unmarketable skills, a poor education and a 10 percent excise tax on their income for 20 years. Awesome.
Second, Pay As You Earn encourages college graduates to pursue jobs they don’t want. Students will accept lower-paying jobs in public service simply because they can get their student debt written off in 10 years—not because their skills or interests fit public service.
Third, this program discourages natural entrepreneurship. Inc. Magazine reports: ‘As part of the “We Can’t Wait” initiative, the White House also announced an unusual partnership with Gen Y Capital Partners.’ Basically, once students qualify for Pay As You Earn, Gen Y will help them with up to three years of their student loan payments and potentially help them find free room and board for up to two years on a participating college campus. Gen Y’s founder, Scott Gerber, defended the partnership in The Huffington Post as necessary during “a time when our nation is in desperate need of economic stimulants…”
Huh? Natural entrepreneurs do not need free housing from a college that will over-structure their life or possibly try to take credit for their ideas.
Realistically, I see this partnership encouraging young people to set their sights low and develop stupid companies with meager growth prospects in order to get their student loans forgiven. A calculator on the U.S. Small Business Administration’s website reveals that if a young entrepreneur reports an income under $20,000 a year, their monthly student loan payment would be $0.
The President should be encouraging entrepreneurial youths to ditch college and pursue a private Peter Thiel-style fellowship rather than pushing them to spend four years of their life accruing needless information and burdensome debt. Extreme innovators like Steve Jobs, Taylor Swift, Rush Limbaugh, Michael Dell, Bill Gates, and Ralph Lauren helped themselves and society by “selfishly” skipping overpriced, cookie-cutter experiences like college.
Pay As You Earn lets colleges get off the hook for rising costs and failing educational programs and hangs young people out to dry. I think students and their parents deserve more than the President’s middle finger in exchange for their votes in 2012.