I admit that I was initially fond of Lambda, but there has been growing coverage of the challenges that the startup faces and of what the company really is about. Here is one of the most damning articles: THE HIGH COST OF A FREE CODING BOOTCAMP
Student debt in the US reached $1.6 trillion, yet graduates are having the hardest time ever to find employment
Unemployment among Americans aged between 22 and 27 who recently earned a Bachelor’s degree or higher was 3.9% in December — about 0.3 percentage point above the rate for all workers.
Masayoshi Son and SoftBank struck again, this time with Oyo. Given the magnitude of capital involved, it’s incredulous to read this kind of shocking articles.
There were missteps at Oyo from the start. The Japan hotel team, led by a transplant from India named Prasun Choudhary, figured they could get to as many as 75,000 rooms in the first year, which would put them ahead of the Apa Hotels chain in the No. 1 spot. But they took as their starting point an inflated addressable market of 1.6 million rooms based on numbers from the local tourism authority: They included campgrounds, bed-and-breakfasts and pay-by-the-hour love hotels, which weren’t part of Oyo’s business plan, according to people involved at the time.
Oyo Life, the apartment rentals business led by another Indian lieutenant called Kavikrut (who like many Indians goes by one name), set the goal of 1 million rooms in part because it was a stunning, round number that would exceed the capacity of the Japan market leader, the people said. That was the target that caught Son’s attention in March.
The Walls Street Journal had an unbelievable and scary article on the state of student debt in this country
A record $89.2 billion of student loans was in default at the end of June, New York Federal Reserve data show. Of the $1.48 trillion outstanding, 11%, or $160 billion, was at least 90 days behind on repayments—and the true rate is likely double that, because only half the loans are currently in repayment.
It never stops amazing me how students in this country can get into so much debt by trying to acquire education and the means to make ends meet. A high school friend of mine has a 6-figure student debt with monthly INTEREST payment of $500. I personally know people from my university in Omaha who accumulated debt and struggle to find jobs. Jobs may wait to meet us, but the bills and interest usually can’t wait to break us.
There is a proposal from some politicians to wipe out student debt. It’s impractical and what problem does it solve? The debt will fast pile up again for the next generations. I don’t think anything will change unless there are solutions to the issues:
Ridiculously expensive tuition fees for degrees that fast decrease in value
Laughable expensive books that benefit no-one but publishers and professors who work with them
Lack of knowledge on personal finance by students
Of course, the reality is highly complicated. Yet, I believe it would be hard to think of a worse scenario than what we currently face. Real solutions should be in place, yet the graph above shows that none has been since 2004. Else, the amount would have gone down instead of going up. If other countries such as those in Nordic countries, France or Germany or many other in Europe can get it done, why can’t the US?
I came across some disturbing facts today. According to the USAToday, below are a few ramifications from the most recent shutdown:
Almost a quarter reduced or eliminated spending on health or medical expenses for themselves or their family
One in four visited a food bank
Forty-two percent took on new debt to pay for day-to-day expenses and bills. Two in five turned to family or friends, while one in five borrowed from a bank or credit union
Meanwhile, the Federal Reserve Bank of New York released the following:
Auto loan and student debts reach 1.265 and 1.442 trillion dollars respectively. Trillion with a T and one trillion is a thousand billion. Astonishing numbers. Clearly, something is horribly wrong right now when many Americans are living paycheck by paycheck and saddled with debt for things that are supposed to make their life better, namely education and cars. That’s not to mention mortgage or healthcare in emergency cases yet, but you should get the picture.
The facts above mean that many Americans will have little to almost no safety net. If a paycheck stops coming, all hells break loose. Debt payments wait for no one. Food must be put on the table. Utilities bills must be paid. Consequently, all the best years of our lives, theoretically, namely our 20s and 30s, are dedicated to just work and pay our debt. I mean, if we have to spend hours to just survive with little freedom, how is it different from modern slavery? How sad is it that we can’t afford to take time off to enjoy life because of the debt over our head? Or how frustrating is it to not have the freedom to choose and do what we want for the same reason?
I am no policy expert and I understand that it’s complicated to fix any of those issues. But there are things that we can definitely do, in my opinion, on an individual level because I totally believe that some efforts and adjusting our lifestyle can steer us away from a giant amount of debt.
Avoiding a high tuition tab
I met a few guys at UNO who dropped classes after already committing tuition fees for those classes’ credits. Two people in particular considered dropping out after two years into their degrees at the time. Understandably, there are some cases in which we all consider changing majors and hence, future career paths, but such cases are not the majority. Dropping out of classes is just an irresponsible use of money and time. Hence, finishing out classes and degrees will help us avoid getting more debt
I came to the US in 2016 with a graduate assistantship at school. In exchange for 20 hours working at school, I had all tuition fees and around 70% of my insurance waived. At University of Nebraska at Omaha, it meant around $7000 a semester, including summer courses. In total, I saved $49,000 of tuition fees after 7 semesters at school, let alone the insurance subsidy on top of that. If you don’t have a better alternative (a paying job), such a position can mean a lot of money saved and debt avoided.
Lower your textbook expense
High textbook prices are ridiculous in the US and Canada. Brand new textbooks which are usually required by professors for 4-5 courses a semester can amount up to $1,000. Being smart about how to spend on books can lead to significant savings. I wrote about two ways to save on book expense.
Take advantage of disruptions in education
Recent developments in the industry bring about more opportunities for affordable education for students. I wrote a bit about Lambda here. Basically, Lambda allows students to have intensive courses in IT with no down payment in advance. Upon graduation and after securing a job paying more than $50,000/year, students will pay back 17% of monthly salary for two years. The cap is $30,000 and if for some reasons, you get fired, no payment is required until you are employed again.
George Tech offers a $7,000 Master degree in Computer Science while WSJ reported the rising popularity of free college programs in certain states. If possible, take advantage of these affordable options. In fact, if you are an American or a permanent resident, you are luckier than immigrants like I am. The option above from Lambda is only available now to US Citizens or US Permanent Residents or EU Citizens. The rest has to make a down payment of $20,000.
Hold off on that new car
I traveled to Philadelphia last summer. A friend there told me about her roommate getting an auto loan for a new car on top of her 6-figure student debt. While I don’t think the story is typical of every student, it’s not an outlier either. It just doesn’t make sense to get a loan on something that doesn’t create value and instead diminishes in value over time. If a guy like Warren Buffett can live well and happily with an old car, I think broke students or graduates should be fine with driving used cars.
Study personal finance
It’s a pity that we don’t get to learn much about personal finance at school. I personally believe that it’s one of the most important things we should get out of college. Nonetheless, it will be immensely helpful to learn it in your free time and apply it to our life. A lot of our financial trouble comes from the lack of knowledge on personal finance and financial planning.
The traditional education system is broken, at least in the US. The thing that we expect to help us land a well-paying job is getting ridiculously expensive. According to Forbes, student debt in the US is $1.3 trillion, behind only mortgage debt.
If we pay so much for the education, is it worth the time and money? I recently graduated with an MBA and MIS. To be frank, the MBA degree at my university offers little in value, yet it costs $10,000 per semester. The MIS is much more helpful, especially given that I didn’t have much technical background. Nonetheless, some courses are repetitive, but since they are part of the degree, I had to waste my time on them. I am pretty sure I am not the exception in this.
A college degree used to represent the credibility a student had. The more famous the school that issued the degree, the more credibility. It is still true to this day. Besides that, going to school does offer certain values in several cases. Some people learn more effectively from listening to a professor. Team work at school prepares students for team work and communication in real life.
Technology today allows all of those to take place in the digital world. Online courses are usually cheaper than in-class sessions at universities. Sites such as Lynda, Udacity or Coursera let learners absorb skills and get certified by a fraction of the tuition fees. With MOOCs, which is used to refer to those websites, students can study at their own pace and become qualified for employment without breaking their bank. That’s improvement. If employers only worry about skills, then what is the reason for going to a traditional college?
MBA applications have fallen for years in the US. Some universities even abolished their MBA. It goes to show that having an MBA and the debt that comes with it is not appealing or beneficial to students any more.
Recently, I learned about another innovation in education: schools such as Lambda. Lambda offers live online classes that are structured in specific curriculums, mostly in IT. Introduction classes are free, while advanced classes are not. The cool thing about Lambda is that students are not required to pay upfront (only for US citizens, US permanent residents and EU citizens). Students only need to pay 17% of monthly salary for two years if they get a job that offers higher than $50,000 in salary after taking graduation. The cap payment is $30,000. If you don’t get that salary or you get fired, the payment stops.
It is an innovative approach to education. It is designed to specifically help students get a better-paying job without worrying about student loans. The freedom from thinking about paying installments after graduation is huge. In the current system, if you have a significant amount of debt, your freedom is much limited. Regardless of whether you have a job or not, you still have to make payment. Student debt is not written off in bankruptcy. Everything you do in life, you have to take into account the debt you have. If you don’t like the job, you still have to suck it up and keep on going.
With Lambda, you still have to pay installments, but the total is capped. More importantly, you have more freedom. If you somehow get fired or sick and can’t work, you don’t have to make payments.
I am not affiliated with Lambda in anyway. I am excited about what the school has to offer. I wish universities would take note of this trend and rethink their approach.
This phenomenon is crazy to fathom. Students go to school to get the knowledge and skills to start a career, earn a paying job and be independent. We definitely do not go to school to be saddled with debt. But apparently, it’s exactly what is happening now. Going to school or earning a degree doesn’t guarantee a good paying job nowadays. What it does guarantee in many cases is student debt. The debt is attributed to rising tuition fees, ridiculously expensive books that are used in only a few weeks and a plethora of administrative fees. Seriously, it’s quite shocking when it costs quite a significant amount to attend your own graduation and request an official diploma. I paid $75 to request my official two diplomas and $100 for the graduation gown. Students; however, are not faultless by no means. I have seen first hand some students dropped out of class after committing to paying a course for a variety of reasons. Some dropped out of school because they didn’t like the school any more.
When I was in Finland, every year I only had to pay 92 euros for the whole school year. Nothing else. The most expensive book I ever bought in Finland was 57 euros for a Spanish class. In the US, books can run up to $300 or $400 each and the book is only used for a few weeks. A semester with 4-5 courses can amount up to $1,000 in books. Something needs to change.
Our 20s and 30s are arguably the most productive period of our life in which we have fewer commitments or burdens than when we have a family of our own. It should not be spent on paying the debt that we get on our way to get a degree and to earn a shot at a career. Our choices in life should not be restricted by student debt that shouldn’t be there in the first place. If I have to pay more taxes to have free healthcare and education like what they have in Finland, in a heartbeat. Because each of us should not start our adult life and career from the place of anxiety and fear caused by student debt.
This piece can be helpful to everyone, but it will be more to college students who have to pay hundreds of dollars every year for books that are useful for only 8 or 16 weeks. Understanding that finding digital version of books on the Internet is a controversial issue, I’d like to stay away from that and focus on two tactics that have helped me tremendously and hopefully will do the same for others.
Buy International/Global version of books
In case you have a burning desire to own physical books for future references or a dominant preference for ink and paper, this tactic is for you.
In my experience, books share essentially the same content across versions. The biggest difference perhaps is examples and redistribution rights. Despite sharing the same content, International or Global version is much cheaper than the North America version. Take the book below for example. Same edition. Same authors. Same content. The price difference is a staggering 100 dollars
This is a book I had at school. I have nothing against it or no relation with the author or the publisher. This is just to give an example
As a student, I can speak from first-hand experience that students don’t find much motivation to actively resell books. Even if one manages to resell a book, it will be at a significant discount. Given that much knowledge nowadays is accessible thanks to the Internet and people’s willingness to share via blogs and social media, I don’t think it’s worth it to make a sizeable investment upfront in books and likely a loss eventually.
With International/Global version, there will still be expenses involved. However, the damage is much smaller and if you don’t have the time or will to find a buyer for your books, you probably won’t have to lose much sleep over it.
Public libraries
I have borrowed many books from the public library and saved hundreds of dollars in the process. Books, even some latest releases, are available for free for a few weeks. Renewals are possible, depending on the availability of the books and how coveted they are. At some libraries such as the public one in Omaha, you can even suggest titles for the library to purchase. Of course, the library’s management retains the discretion to approve or decline such suggestions. As part of your taxes goes to funding for public libraries and you can save a lot of money, there is no reason not to take advantage of that.
As students in the US are saddled with a lot of student debt/loans, every dollar saved on books can count tremendously in the future due to a little thing called “compound interest”. Do yourself a favor and find a way to save as much as possible!
Minh Quang Duong 