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Is Academia A Loan TRAP?
Old 08-22-2004, 12:09 PM   #1
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Is Academia A Loan TRAP?

I have friends that are aspiring to be lawyers and doctors.

Most are 25-30, have not had a steady stream of income since undergrad, and are funding their dreams via loans.

Given the "maintenance" and insurance costs associated with these professions, is academia another forum where the path to ER can either take a "normal" or high risk path? *Intuitively it seems so...

Interested in thoughts...Any perspectives from doctors, lawyers, friends of them or otherwise?

TD
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Re: Is Academia A Loan TRAP?
Old 08-22-2004, 12:31 PM   #2
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Re: Is Academia A Loan TRAP?

The "millionaire next door" postulates that the vast majority of these folks will be unable to ER for the following reasons:

- They get a much later start at working and making money
- They're saddled with huge loans to pay off before they can start investing and saving
- They sidle up to a lot of peers during college who will go on to live a lifestyle which is ER prohibitive...the big house/car/clothes/food/wine/vacation lifestyle...and they'll be competing with them and their mcmansion neighbors
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Re: Is Academia A Loan TRAP?
Old 08-22-2004, 12:52 PM   #3
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Re: Is Academia A Loan TRAP?

I don't think Academia is a trap by any means. Just for kicks, I looked up some numbers, and figured out to the IRR for a doctor (4-year college (-12k/year), state med school (-40k/year), residency (+mid 30s))... then the avg doctor salary (+5%/year) from then until age 55. The IRR I came up with was 27%. The IRR for "normal joe" who goes for 4 years, and then finds a job paying $30k/year (+5%/year) is 42%...... the NPV for the doctor (4% discount) is $2.6M (age 55) while the NPV for the typical college grad is $944k. It obviously costs more to become a doctor, but it sure does pay a lot more.

I know several doctors, a few nurses, and a nurse anesthesiologist.... if I had to pick one of their jobs, I would be the anesthesiologist. Why? Regular hours (no pager!), really high pay (avg in 1999 was $100,000/year), and the malpractice insurance isn't anything like a Dr would pay. I don't know any lawyers, so I can't provide any prospective there =)
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Re: Is Academia A Loan TRAP?
Old 08-22-2004, 12:56 PM   #4
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Re: Is Academia A Loan TRAP?

I suspect most doctors and lawyers will do just fine being able to pay-off their loans and still accumulate a stash big enough to Er. I know a lot of doctors, unfortunately none of them seem to be such good money managers...I think they fall into the trap of "I am a doctor so I need to drive a (fill-in-the-blank)" or "I am a doctor I deserve (fill-in-the-blank).

Doctors and lawyers for the most part ,make way above average pay, and yes are saddled with quite a lot of debt from all that schooling, but IMO, they could still ER given the financial pay-off of their occupations...

On the otherhand however, I am really starting to think that the cost of a 4 year education, at a prestigous university, is getting pretty close to the tipping point in terms of cost/benefit; unless you are in one of those high-paying professions...

I went to a state school (UMass amherst), completed two degress simultaneously (BS in computer science and a BA in Management) and gradulated with just a few thousand in debt...sure am glad I didn't start out with $100K or more in loans to payback.

I look at my kids (who are all under 8 still) and wonder if they should be better of learning a skill that can't be sent overseas (i.e. electricans, plumbers etc).

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Re: Is Academia A Loan TRAP?
Old 08-22-2004, 01:19 PM   #5
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Re: Is Academia A Loan TRAP?

Quote:
I look at my kids (who are all under 8 still) and wonder if they should be better of learning a skill that can't be sent overseas (i.e. electricans, plumbers etc).
I worry about this too, not only for my future children (I don't have any yet), but also for my friends and myself.

It's amazing what the internet has made possible... where I used to live, the big thing was to become a radiation tech at the community college.... with a HS diploma, and 2 years of college, you could go make some pretty decent money taking/looking at X-Rays, etc. As more and more x-ray macheines have become digital (no film!), there are companies starting up which will analyze the xray for the hospital.... their rad techs are just as good, but located 1/2 a world away (and paid a fraction of the cost).

I'm currently in IT, so all of this oursourcing really strikes home.... I predict that the next big trend will be insourcing for professions like nursing, and with G.W's proposed foreign worker visa program (he makes it sound like it's targeting unskilled migrant farm workers... don't be fooled, it's not), the barriers for entry will be much much lower.... this is the main reason I want to FIRE.
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Re: Is Academia A Loan TRAP?
Old 08-22-2004, 01:47 PM   #6
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Re: Is Academia A Loan TRAP?

Quote:
I look at my kids (who are all under 8 still) and wonder if they should be better of learning a skill that can't be sent overseas (i.e. electricans, plumbers etc).
I think it is hard to get a high IQ intellectual type person to embrace a trade. Not only because of class factors, but realistically it is boring and or dirty work that just doesn't offer much beyond money.

My personal experience has been that one's kids feel completely adequate to make their own decisions on career matters. My oldest son is set fianancially, the only thing that could give him trouble is poor taste in women.

My youngest, who is also a deverloper came bit late for the large payoffs of the 90s, so although he makes good money, his life is not yet easy.

I have encouraged him to look at work that requires security clearance. He is clean as a whistle, and there is plenty technical work that requires clearance. It appears to me that any federal intelligence work will last forever, at pretty good pay and wonderful benefits.

His answer- I am good enough that I don't need protection. Probably true, but protection is always nice IMO.

Mikey
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Re: Is Academia A Loan TRAP?
Old 08-22-2004, 02:32 PM   #7
 
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Re: Is Academia A Loan TRAP?

Quote:
I think it is hard to get a high IQ intellectual type person to embrace a trade. Not only because of class factors, but realistically it is boring and or dirty work that just doesn't offer much beyond money.

My personal experience has been that one's kids feel completely adequate to make their own decisions on career matters.
I'm not sure I agree with you here Mikey. If you look at the average Doctor (G.P.) day, you will find that it is mostly very boring. Staring down people throats on a good day, Looking up their as*holes on a bad. I've known G.P's and they said they could train me to do their job in a week.

I was also a Software Developer for 30 years, and I must say that when I completed the electrical wiring in my basement, I got a sense of satisfaction equal to any software project that I worked on. There is nothing wrong with trades and they are very necessary! However, with the increase in the labor pool and the intellectual jobs being easily outsourced, the pay for these trades should decline as well. There are a lot of economists making a claim for coming deflation.

Intellectual pursuits can come in the form of Hobbies in the offtime. Bill Clinton does the N.Y. times Crossword Puzzle on a regular basis, now that he is not solving the world's problems.
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Re: Is Academia A Loan TRAP?
Old 08-22-2004, 02:54 PM   #8
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Re: Is Academia A Loan TRAP?

Quote:

I think it is hard to get a high IQ intellectual type person to embrace a trade. Not only because of class factors, but realistically it is boring and or dirty work that just doesn't offer much beyond money.

. . .
Cuthroat has been too kind. This just isn't true. Becoming a doctor or lawyer is more closely tied to your financial status and afluence of your family than it is to IQ. College degrees are more about persistence and the ability to afford it than they are about intelligence.

Almost any job can lead to challenging and interesting possibilities and even those considered "high status" jobs can be very boring.

But here's the problem I see. If very many people decide to go into trades, the competition will become fierce. And who will be buying their services once all our engineers, programmers, medical technicians, etc. are out of work. Supply and demand will not be kind if we have too many tradesmen and too few customers of their services.
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Re: Is Academia A Loan TRAP?
Old 08-22-2004, 03:13 PM   #9
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Re: Is Academia A Loan TRAP?

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Cuthroat has been too kind. *This just isn't true. *Becoming a doctor or lawyer is more closely tied to your financial status and afluence of your family than it is to IQ.
Guru, interesting assertion, absolutely unbuttressed by fact. Steve Sailer collects data on things like this. It seems that there are minimum IQs needed to survive in most areas. What fraction of physicists do you think have IQs below say 140? Plumbers above 140? I am no IQ snob, mine isn't high enough for that. But just like it takes a certain minimum speed to be an NFL DB, it takes a certain basic horsepower to do intellectual jobs.

As to my claim that many trades are dirty (eg. plumber) either you have never done any plumbing, or you are not very good at observation.

It's also true that my assertion that trades are boring is personal. Some might find them enthralling. Like Cutthroat I rewired my house, and found it very challenging. A lot of high school physics involved, and some simple carpentry. Although I liked the job, I would much rather go back to my profession(assuming that were possible) than continue with wiring other's homes. I also rebuilt my old Volvo B18 engine. It was really fun. Once.

Mikey


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Re: Is Academia A Loan TRAP?
Old 08-22-2004, 04:36 PM   #10
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Re: Is Academia A Loan TRAP?

Quote:

Guru, interesting assertion, absolutely unbuttressed by fact. . . .
Sorry. Here is some pertinent information about IQ and occupation:

IQ and jobs
http://www.sq.4mg.com/IQ-jobs.htm

From the link:
“Note the wide range of IQ scores for each job. You might think that those with the higher IQ's in a given profession would earn the most. This is not often true. Ability to get along with other people and ambition each have at least as much to do with income as does IQ. IQ scores can act more as a gatekeeper as to who is able to pass tests to get into a profession.”

If you look at the data and this last statement, you can certainly rationalize a position that average IQ correlates to profession. But as you can see, people with IQ well above average are found in all professions. This is true despite the fact that modern IQ tests are known to be culture biased.

Career success
http://www.sq.4mg.com/r_iq_ei.htm#z

From the link:
"The chart at right is from The Bell Curve by Herrnstein and Murray. It shows a correlation of 0.33 between a person's annual income and his years of education, which is related to his IQ. .The spread of dots shows that other factors are more important for income."

Although the original statement was about professional choice rather than about income, the correlation between plumber vs doctor and income is presumbly very strong.

Genius’ through history
http://iml.jou.ufl.edu/projects/Spri...igas/facts.htm

This one is interesting only because it speculates about occupations the authors were interested in as they tried to look at accepted geniuses through history. The list of occupations is not one we would necessarily be interested in today.

corruption, IQ and GDP
http://www.sq.4mg.com/corrupt.htm

I liked this link although it doesn't have too much to do with this discussion -- except that it does point out that other factors than IQ are significant to ultimate job earnings.
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Re: Is Academia A Loan TRAP?
Old 08-22-2004, 05:04 PM   #11
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Re: Is Academia A Loan TRAP?

As one of those who went 120k in debt to pay for dental school, I can tell you it is a very tough row to hoe if you want FIRE. Mostly for the reasons stated above. The pay is good, but the late start coupled with making up for deprived years with toys syndrome can put you behind the 8-ball. I just this month finally paid off my student loans I will be FIRE in 10 years at the age of 47, mostly because I am in the service. My roommate through college and dental school is an OB/GYN, we graduated at the same time, but he has not even ***started*** any retirement savings (or any other savings for that matter) and he is 38, 300 to 400k in debt. He does have a nice house, car and barbie doll wife who likes to spend his money. He is making 175k per year and just barely making it.

So, I guess it may be a trap if you follow the wrong path as with anything in life. The upside is you have the potential to catch up real quick. I love doing what I do. It is a blast and it is anything but boring, but when my 20 years are in I should be done.
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"The Bell Curve"?!?
Old 08-22-2004, 10:40 PM   #12
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"The Bell Curve"?!?

SG, I was reading along just fine until you quoted that "reference". There's a reason those guys never got published in a peer-reviewed forum...

http://www.apa.org/journals/bell.html
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Re: Is Academia A Loan TRAP?
Old 08-23-2004, 10:26 AM   #13
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Re: Is Academia A Loan TRAP?

Oh boy, more studies.

I admit to only spending about 10 minutes on the methodologies involved before it became plain that they data mined the hell out of a bunch of information in order to make the points necessary to write a controversial book...
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Re: Is Academia A Loan TRAP?
Old 08-23-2004, 10:46 AM   #14
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Re: Is Academia A Loan TRAP?

Academica can be a trap, but so can the path to many other things. I work and breathe in Academica daily and have 54k in student loans. My husband has more than I do. My education didn't come cheap...was it worth it? The first 32k for my BA and MS definitely was, although I could have done it cheaper. Admittedly, I could have done without the additional 22k from my unfinished doctoral program, but I wouldn't be the person I am today without it, nor would I have met my husband. (Was he worth the extra 22k? So far, yes ).

My parents didn't pay for my education (other than books and some spending money) but I respect that. I already have 529 plans for my kids (and I don't have kids yet) and work in higher education so I'll get a 75% discount on tuition...assuming I don't RE first.
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Re: Is Academia A Loan TRAP?
Old 08-23-2004, 12:07 PM   #15
 
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Re: Is Academia A Loan TRAP?

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they data mined the hell out of a bunch of information in order to make the points necessary to write a controversial book...
Hah! I thought that was obvious when I read that book when it first came out.


I agree that most doctors (especially specialists) end up having a lifestyle that demands their $200K-$400K salaries to sustain. I know a few who could easily retire on 2-4 years of salary. I really don't have much sympathy for the costs of education and insurance. At least the profession pays big bucks when they are finished. Other professions have high education costs without the huge salary.

If your friends want to be hard working and rich then being a specialist doctor is probably the best profession.

The risk is that salaries will fall because the US starts addressing the cost of health insurance and medicine.


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Re: "The Bell Curve"?!?
Old 08-23-2004, 01:23 PM   #16
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Re: "The Bell Curve"?!?

Quote:
SG, I was reading along just fine until you quoted that "reference". *There's a reason those guys never got published in a peer-reviewed forum...

http://www.apa.org/journals/bell.html
Nords,

But the point is that if the data from these guys who are accused by many of being elitists/racists won't even support the idea that "all plumbers have low IQ", then surely we don't have to debate it. Even after the authors have data mined the numbers and tried to put forward their theories, they can't support the point that I originally contested.

I personally don't believe a good case can be made that IQ is an important indicator of anything for the vast majority of people who test near average. I think that there is a strong case that culture bias, class bias and environment still polute IQ scores more than most psychologists will admit. The test can help identify special needs for people on the extremes. And that can be useful. But IQ debates are a rat hole that could eat up a significant amount of bandwidth if we start down that path. While I did feel that the original statement about trade jobs vs high status jobs and intelligence was off target, I was hoping not to get into a debate about what IQ tests really test and what it's significance was.

I guess I failed. ;D
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Re: "The Bell Curve"?!?
Old 08-23-2004, 04:16 PM   #17
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Re: "The Bell Curve"?!?

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"all plumbers have low IQ", then surely we don't have to debate it. ..<snip>*But IQ debates are a rat hole that could eat up a significant amount of bandwidth if we start down that path.
Regarding the first point- since I was the original poster- I hope no one thinks I am stupid enough to posit that "all plumbers have low IQ". This is what is called a strawman. I have noticed from earlier posts that SG is adroit at creating, and slaying those critters.

As to wasting bandwidth, I think that it is obviously very important to save all available bandwidth for dryer sheet work, and I thank SG for taking charge of this wayward and clearly OT discussion, and shutting it down before too much damage could be done.

Mikey
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Re: Is Academia A Loan TRAP?
Old 08-23-2004, 05:16 PM   #18
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Re: Is Academia A Loan TRAP?

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I think it is hard to get a high IQ intellectual type person to embrace a trade. *. .
I guess I misinterpreted the above statement. *But you are very welcome for avoiding the discussion of IQ. *

Oh . . . and one more thing . . . BLOW ME!
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Re: Is Academia A Loan TRAP?
Old 08-23-2004, 10:17 PM   #19
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Re: Is Academia A Loan TRAP?

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I guess I misinterpreted the above statement. *But you are very welcome for avoiding the discussion of IQ. *

Oh . . . and one more thing . . . BLOW ME!
I guess you inhabit the wrong end of the bell curve. Or maybe you have just been away from work too long. Because I can't see how anyone who can tie his own shoes could get from "It's hard to get an intellectual type person to embrace a trade" to "all plumbers have low IQ." Don't forget, the original discussion was about possibly trying to push one's kids toward a trade. I made the possibly wrong jump, considering the density you seem to possess, that the kids of people on this board would be intelligent, and even intellectually inclined.

As to your final riposte, it was funny when the original poster said it. From you, not.

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Re: Is Academia A Loan TRAP?
Old 08-23-2004, 10:34 PM   #20
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Re: Is Academia A Loan TRAP?

I suggest whoever brought the IQ debate into the discussion to drop it. *Not that I don't feel its interesting topic but your chances of discussing it intelligently is next to nil. *It's one of those emotional topics such race, religion, and etc that people can't discuss without getting emotionally involved. *You can make vaild points all day on this day but if your audience isn't prepared to listen to them then arguement will go nowhere.

I once was told some good advice by a college professor about speaking your mind. *He said before I open my mouth in front of anyone always ask if the topic is appropriate and if the audience is receptive. *For example it's no use trying to preach the advantages of the Muslim faith to Southern Baptists.

Another more personal example is the fact that I'm democrat going into military. *I know my audience for the most part isn't receptive to my form of politics so I practice self censorship rather than spark endless arguments all day. *

Let's turn this discussion back to whether people think college loans are too risky!
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