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  • Avatar CREGuy 
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    medical school scholarship sponsor

    There is no requirement to buy another house to be eligible for the capital gains exclusion.

     

    You can exclude up to $250k if you’ve lived in the house for 2 of the previous 5 years.  Married couples filing jointly can exclude up to $500k.

    in reply to: Tax Treatment For Sale Of House #233491 Reply
    Avatar CREGuy 
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    Just to further add to the original question, CRE loans are much different than residential loans. The lenders are going to hold them in their portfolio (so there is no standard of conformity like you see on the res side). They can do different amortization schedules, different interest rate options, different maturities, etc. much of the interest rate will also be determined based on the asset itself. You will get a better interest rate, generally speaking, on a 20 year absolute net lease FedEx facility than you will on a 5 tenant office building with local tenants on 5 year modified gross leases. There are a bunch of variables so it’s hard to give any accurate interest rates. If you’re looking for a ballpark I would say somewhere between Prime + 1-2%

    in reply to: Commercial loan rates #232317 Reply
    Avatar CREGuy 
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    Are you using a broker to purchase the property? If you don’t have any banking relationships, and you’re using a broker, they should have plenty of options for you and can provide the best insight based on the circumstances. Banks are far from the only source of funds as well, but what other options are suitable will depend on the particular circumstance. It also sounds like this is a pretty new territory for you so again I would recommend using a broker as there is a lot more due diligence and moving parts (read: potential pitfalls) in these transactions. Very different than buying a house and the people involved in CRE are going to be much more experienced, educated, and savvy (on average) than the residential side. This applies to everyone, the brokers, lenders, attorneys, tenants, landlords etc.

    in reply to: Commercial loan rates #232313 Reply
    Avatar CREGuy 
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    I think the main issue is that franchises are just a model for a business venture, and those business ventures require full time dedication to be successful, just like most other business ventures.  The only difference between starting up a McDonalds and Doctor Smith’s Burgers is that you are paying for an established business model and brand.  The operations of the business are just as intensive, although the startup phase may be less daunting as the process is already established and laid out for you.

    There are a handful of franchises that are designed to allow for absentee or at least semi-absentee owners out of the gate, but for the most part, you’re going to have to be working IN the business for a while until you can get multiple locations opened where the cost of hiring upper level management to oversee your operations becomes cost effective.  If you’re looking at smaller franchise models, it’s possible to get there really quickly (think sandwich shop/hair salon/coffee type of concepts where you could roll out 4-5 locations in 12 months).  Something like McDonalds? Too much capital required for most folks and too heavy on operations to quickly go from zero to five locations quickly.

    So basically, unless you either hit one of the smaller concepts and roll out enough locations to get your economies of scale in place quickly, or unless you find a managing partner who runs the business while you provide the capital (which will reduce your returns), franchises aren’t typically going to be things that fall into the “part-time venture” category for most docs.

    in reply to: What about franchises? #229246 Reply
    Avatar CREGuy 
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    Even if it were all in CDs that expands the balance sheet of banks and increases lending capacity which will lead to more economic expansion. Just because one allocates capital to a passive investment doesn’t mean the money goes into a vacuum and won’t lead to economic growth. It’s interesting how many people believe this misconception.

    Now if Bill Gates and friends go all Scrooge McDuck and build giant vaults full of cash they don’t spend it would be a different story.

    in reply to: Empty Promises or Possible student debt cancellation? #226344 Reply
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    Avatar CREGuy 
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      It’s another thing to have to forgive the debt of someone who HAD to go to their private, out of state, dream school (especially for a degree in something like teaching where there isn’t a discernible difference in quality of the degree and earning power afterwards), didn’t work at all through school, lived in the luxury student apartments, went on spring break every year, and ran up a huge tab.

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    I would really like to see some data on this concept/case study.

    I think the number of students who were truly profligate who are now seeking PSLF would end up being pretty small.

    I also don’t think hardly anyone is making rational decisions on this. There are probably a few hundred students who have read the fine print and realize they can live it up and have debt forgiven but there certainly aren’t many. These are college kids and grad students, they are going to the football game and maybe studying. They aren’t trying to set up a long con on the federal gov’t.

    Plus where do you draw the line? How many spring break trips does a college student have to take before they cross the bar of moral opprobrium? One? Four?

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    Obviously I have no idea on the numbers.  Certainly those situations exist, but I’m not sure to what extent and I’m not implying that’s the vast majority of those hoping for loan forgiveness.  We also have two issues being conflated in this thread, PSLF and outright loan forgiveness being floated by Democratic Candidates.

    For the record I don’t think that there are many kids going through college at this point that are actively thinking about PSLF as they take out the loans and thinking “I know I’m running up a huge tab, but I don’t care because PSLF will take care of it”.  Especially not anyone who’s in the process of pursuing PSLF, because the program is only about 10 years old and was/is under the radar.  Anyone who is leaving undergrad with six figures of debt is doing what I mentioned in my post.  The only way to get to that number is to have no consideration to the cost of education, do little to nothing to reduce the cost, and subsidize your lifestyle with loans.  I’m not trying to imply those people are doing it because they plan on having it forgiven, I just think they’re just making poor decisions with no consideration to the future obligation, and then when the bill comes crying foul.  Now if they actually did a widespread loan forgiveness with no obligations on the borrowers part?  I definitely think that would create widespread examples of students doing that with full expectation that Uncle Sam was picking up the tab.

    in reply to: Empty Promises or Possible student debt cancellation? #226085 Reply
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    Avatar CREGuy 
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    It is not evident from the people on this forum trying for PSLF because they are financially responsible.  But the docs I know in real life trying for loan forgiveness are doing so because they are financially irresponsible and took out max loans to fund vacations and gap years.  I think we get a skewed picture here.  Most poster here are running the numbers and trying to see if they can take advantage of a current program.  However I submit that this is the minority and most people run up the debt without a thought and maybe even years afterwards before they realize the problem and look for a solution.

     

    So if loan forgiveness comes to pass then yes the financially irresponsible will take this new credit to buy as much as they can.  I do not think it will be enough to offset in taxes though.

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    I think this is definitely the issue most people have with any form of forgiveness or cancellation.  It’s one thing if you’re cancelling the debt of someone who had to pay their own way through college, but made choices to try to at least somewhat minimize the debt by attending a more affordable school, community college, working part time, etc.  It’s another thing to have to forgive the debt of someone who HAD to go to their private, out of state, dream school (especially for a degree in something like teaching where there isn’t a discernible difference in quality of the degree and earning power afterwards), didn’t work at all through school, lived in the luxury student apartments, went on spring break every year, and ran up a huge tab.  There is no reason that anyone should be leaving undergrad with six figure loan debts.  Those people, just like the docs you mentioned aren’t everyone, but they’re a hard group for the people who are ultimately footing the bill on this to overlook.  If we see widespread cancellation with no requirements, that is only going to get more widespread.

    PSLF is in place and available right now.  Whether it should be or not can be debated, but the thing I think is far better about PSLF vs. just cancelling debt, is that there is some “cost” and requirement on those who will benefit from it, and it serves a purpose to try to give society something back in return for the covering the cost of the program.  There is some skin in the game.  If I stand on the corner giving away free T-Shirts, nearly every person walking by will take one.  If I stand on the corner selling T-Shirts for 25 cents a piece, a lot fewer people will take them.  When things are free people attribute no value to them.  Skin in the game is always a good thing.

    in reply to: Empty Promises or Possible student debt cancellation? #226075 Reply
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    Avatar CREGuy 
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    There needs to be some acknowledgement of the true cost of forgiving some of these loans.  Again the doc (or other high income earner who qualifies) will be making full payments on the loan for at least some portion of the 10 years, in a worst case scenario it’s about as MPMD described, say 3 years.  For most it’s much longer than that.  If in the end the government receives even $150k of a $200k balance, the cost to provide PSLF to that party is $50k, plus the interest cost of the $50k (although one could argue that since our government runs in the red year in year out that should be excluded).  To forgive the same $200k for a liberal arts major who does IBR and pays basically nothing for 10 years and wipe the slate clean, the cost is basically the full $200k plus interest.  In reality, the high earners pursuing this “cost” taxpayers far less than the others.  That shouldn’t be disregarded in the discussion either.  Now not every non-doc has $200k in debt, but the point is that there are different costs for different participants in the PSLF program, and the higher the income, the more it’s offset.

     

    If we want to take that one step further, if we’re looking at this as an “investment” in future tax revenue, the high income earners will provide far greater “returns” in the form of future tax revenues.

    As for the “stimulation” of the economy, I think the effect is minimal.  The majority of people who are “struggling” with student loan debt are on IBR and their monthly payments aren’t much anyways.  Their stress over student loans is simply coming from the fact that the debt is hanging over their head.  Servicing it isn’t a huge problem.  Their monthly payment is what will be freed up for stimulation.  If someone has $100k in SL debt and is doing IBR with a $100/month payment, forgiving or cancelling their debt will just free up $100/month, not $100k.  Now forgiving the debt may create additional borrowing capacity, but certainly not to the same extent.

     

     

    in reply to: Empty Promises or Possible student debt cancellation? #226071 Reply
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    Avatar CREGuy 
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    Most peoples ceiling is way higher than they think and if you think about your ceiling, chances are you will never get there. It’s inherently pointless

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    I think you’re missing the context of the discussion.

    Avatar CREGuy 
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    Meh I’m not sure being an amazing artist is as skilled based as being an nba player. I think that is more about creativity and unique outlooks. I feel like if we compared an elite artist vs a high level hobbyist the skill might not be as different as comparing an NBA player vs a typical college player. It’s not as simple as skill vs talent. Iguess you could call that vision or unique outlook a talent?

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    There are a lot of variables and we’re talking about a pretty wide category here (arts in general) but I would consider the vision/creativity that artists have a natural talent or ability.  I’m sure one can improve their creativity, but one’s imagination/creativity tends to be pretty natural no?  What about the dexterity required to play guitar like John Mayer (and the creativity to compose the music)?  I know my fat slow fingers would never be able to play the piano like Lang Lang.  My wife, despite her desires, will never be able to sing like Whitney Houston, even if we invented a time machine and put her in world class vocal training from the time she could talk.  Like I’ve been saying these areas are a COMBINATION of skill and talent.  You can develop the skill which will get you proficient, but if we’re talking about trying to make these things a profession, it’s going to take both, and it’s the natural born talent/ability that are going to determine your ceiling.

    Avatar CREGuy 
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    I guess this needs a little peeling back. Job, location, compensation. Forgot that some small things like career development, location, and industry conditions need be predicted perfectly and that “greatness” requires change. What is the reasoning? Great job, great location, great compensation the conclusion is “you’re not that great”?

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    This was in response to a post that implied that if you’re keeping “score” of success through earnings and opportunities, then where you went to school matters.  My point is that if 5+ years into your career you’re still relying on where you got your education rather than the merits of your performance in the real world, then you aren’t accomplishing much.  It certainly doesn’t hurt to have attended a prestigious college, but once you’re done with school and you’re in the real world it’s about performance and results.  As I said, the name at the top of the diploma may get you in a better door at the beginning but once you walk through that door it’s all about the name in the middle of the diploma.

     

     

    Avatar CREGuy 
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    I won’t even go broach the topic of talent vs. work, but suffice it to say you’re wrong.

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    This is silly.  You assert I’m wrong, but offer nothing more.  Art, athletics, music, etc. are areas that require both talent and skill if you wish to make them a profession.  While skills can be taught and developed, talent can not.  We are either born with the ability to sing, jump high, run fast, draw/paint well, etc.  And anyone can get better at any of those things through practice and work, but without being born with the talent, you’re not going to do it for a living, no matter how much effort, passion, work, and desire you put into it, and certainly no matter how much money you spend on your education pursuing it.

     

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    For music and many many other things, talent is vastly over rated. A mediocre “talent” with a 3sd work ethic and drive will be better than a 3sd talent and minimal drive. That people believe its true is a big roadblock to success. Almost everyone can become pretty good with a small amount of real focused work, pareto principle stuff. You probably wont be world class, but you can be way better than average and pretty damn good with minimal effort. This has just become more obvious, look at those family paint night things or stuff on youtube, its easy to become pretty good. Many of these things are skills and like medicine if its volume that makes the difference what is really small differences in talent get lost in short order due to volume as skill is built.

     

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    This seems like an irrelevant point to make.  Natural born talent and abilities are going to determine your ceiling in the arts and athletics.  You can make up for some shortcomings on the talent side through work and determination, and the natural born talent is no guarantee of anything can certainly be squandered if you don’t do anything with it.  That doesn’t change the point that I was making that you need a certain level of natural born talent/ability in these areas if you’re going to do them as a profession.  It’s one thing to get really good (compared to Joe Average) at painting a picture, playing a guitar, playing golf or basketball.  It’s a whole different level to be able to get someone to pay you for your picture, pay to come listen to you play the guitar, or pay to watch you play golf or basketball.

    Avatar CREGuy 
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    I won’t even go broach the topic of talent vs. work, but suffice it to say you’re wrong.

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    This is silly.  You assert I’m wrong, but offer nothing more.  Art, athletics, music, etc. are areas that require both talent and skill if you wish to make them a profession.  While skills can be taught and developed, talent can not.  We are either born with the ability to sing, jump high, run fast, draw/paint well, etc.  And anyone can get better at any of those things through practice and work, but without being born with the talent, you’re not going to do it for a living, no matter how much effort, passion, work, and desire you put into it, and certainly no matter how much money you spend on your education pursuing it.

    Nobody deserves anything just because they really want it or simply because they tried their best and put in the effort.  That’s not to say that something isn’t worth pursuing, but society does not have any obligation to support you financially in your pursuit.  You sing the sad tale of an artist chasing their dreams and having to work jobs they don’t like instead of their passion.  My point is that many people work jobs that they don’t like so that they can make ends meet and put food on the table.  Why should we treat artists any different than the garbage man who would prefer to be a woodworker or a fishing guide?  We all make choices and trade offs in life.  You seem to be making the assumption that high income earners are all doing what they love and being paid for it while artists are stuck in a life of poverty because their passion simply doesn’t pay well.  I think you would find that the majority of people aren’t doing something they love, but they do it because doing what they love would leave them in a life of poverty.

     

    Avatar CREGuy 
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    We’ve had this conversation so many times before so I’m going to say it. If anyone deserves loan forgiveness it is PRECISELY the student with the degree in Creative Writing. Why would someone who comes out earning 6 figures, who actually has the income to pay off their debt, deserve loan forgiveness more than the person who can’t? That makes absolutely no sense. You say, they shouldn’t have gotten “a useless” degree in the first place.

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    I agree with many aspects of your post. I agree that not everyone can or should do STEM degrees and jobs. However, I personally don’t like the word “deserve.”  If folks want to get a liberal arts degree and do art stuff, that’s totally fine by me. But it’s a bit ridiculous to go into six figure debt then moan and groan about it. Parents and educators should put more emphasis on the realistic results of these degrees, and I applaud you for shooting your students straight.

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    Your words are “it’s a bit ridiculous to go into six figure debt then moan and groan about it.” How many threads do we read a day about someone pursuing PSLF? Signing with a hospital with nonprofit status so they can have their loans forgiven? Why is someone with 5x as much earning potential than an artist working in their field more deserving of loan forgiveness? It makes no sense that on this forum it’s perfectly natural that a high earner, such as a physician, should pursue it but anyone else doing meaningful work who didn’t happen to choose a high earning field is now “moaning and groaning.”

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    I actually agree with you regarding PSLF for physicians. I don’t personally think physicians were the intended target when PSLF was made, but forgiveness (from doing 10 years at a non-profit) is different than an outright cancellation (as proposed by politicians). Forgiveness and cancellation are two separate things that have the same result: no more student loan debt.  However, I don’t blame physicians or other high earners for taking advantage of these legal forgiveness programs.

     

    Edit: thanks for your edit/comment @mapplebum. I didn’t misread your tone at all. I hope mine didn’t come across as harsh, either. It seems we agree on some aspects of this.

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    Exactly.  PSLF involves working 10 years at a non-profit or government position in order to qualify.  The purpose is to try to provide an incentive for people to pursue positions they may not ordinarily pursue which in hopefully provides some service back to society who is ultimately forgiving their debt.  Obviously this isn’t always the case, as with Physicians who are working in qualified institutions, but still earning market wages.  I already touched on that several times though in that minority of cases, those physicians are in fact going to pay back their principal balance and then some and the amount forgiven really amounts to a forgiveness of a large chuck of their interest.  The government will be made whole on those loans, they just won’t make money.  That’s much different than loaning someone $200k and forgiving it after receiving less than 10% of the original principal.  And all of that is before you consider what those two individuals will contribute in income taxes over their lives.

    The fact that PSLF exists makes me feel even less sympathy for guys like the one in the previously linked article.  We have a program in place right now that would allow forhis loan forgiveness, just go pursue a job with a company or organization that qualifies for PSLF.  It’s not like it would be nearly impossible to find something that would pay something in the same range of the $45k he’s making now.  Instead of doing that though he’s just bellyaching about the burden of his debt, and wants it forgiven.

    Avatar CREGuy 
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    I’ve been an adjunct since I was 26. The courses I teach are small, lots of 1:1, so even though I’m not an advisor and certainly don’t get paid for it, students often spend more time with me than their FT professors. Let’s put this into perspective. These kids are 16-18 when they’re applying / deciding where to go to college. I’ve mentioned before that this last year I taught at a no-name college I’m sure you’ve never heard of that charges over $50k / year. Twice this year a student admitted they were borrowing in one semester more than I did in 4 years. Both had majors with extremely low earning potential. I told them both to move home and attend the community college until they could get into an affordable state school. Neither did, but I’m certain I’m the only reason they came up with a plan. One decided to do elementary education with the intent of teaching in a Title 1 school. I convinced the other student to pursue Computer Science so that when he’s in LA trying to make a name for himself in Film he’ll be able to support himself. Just in the meantime ;). The alarming part of all of this is that these students were encouraged to go to the expensive school by their parents and teachers. No one mentioned the reality of such a debt load. Instead they were told they would receive a better education (which in their mind correlates with better job prospects). Once they arrive their actual advisors WOULD NEVER tell them to switch majors or take another job in order to minimize debt. I don’t blame these kids. They are trusting the advice of the people closest to them.

    We’ve had this conversation so many times before so I’m going to say it. If anyone deserves loan forgiveness it is PRECISELY the student with the degree in Creative Writing. Why would someone who comes out earning 6 figures, who actually has the income to pay off their debt, deserve loan forgiveness more than the person who can’t? That makes absolutely no sense. You say, they shouldn’t have gotten “a useless” degree in the first place. Well, the world will be a very boring place when people only go to school for degrees in STEM. It’s sickening how my artist friends are in poverty. They’re winning awards, teaching your children, and making this country a more beautiful and thoughtful place. Yet they’re drowning in debt. As an educator, what I see in my students are bright minds going into degrees that excite and challenge them. A 17 year old doesn’t realize how little utility such interesting topics have. They attend the more expensive school under the misguided belief that it will help them in the future. Sometimes they don’t attend the more expensive school, but taking on debt comes down to receiving an education or not. Then I look at my friends — who know they will never be able to pay off their debt — they are working their asses off. They take pictures and play harp at your wedding, work crap welding jobs with their MFA, and then wake up Monday morning to teach entitled kids how to finger paint and play “The Happy Farmer.” Guess what, none of that is their real work. Your spin coach teaches that class to pay the bills and then rushes off to rehearsal so she can give free dance performances in the community. Your massage therapist also teaches dance, has a side business in real estate, and runs Fringe Festival but doesn’t get paid for it.

    I know doctors think they work harder than everyone else, and sometimes they do. But many of these people, with an incredible debt load, have dedicated their entire lives to their craft. Dance, music, writing, art all have something in common. In order to succeed, which usually means making a poverty wage, you have to start young and dedicate every day of your life to it. You decided in college to go to medical school, and that’s noble. But their work is noble too. And they’ve done it a heck of a lot longer than you. I don’t mind my tax dollars going to loan forgiveness, even your’s. I just hope it’s in conjunction with lower / free cost of tuition in the future.

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    I agree with parts of your post.  Some of this has to do with the overall lack of understanding of personal finance issues in general.  Why would a parent push their kid to spend six figures on an education with salary prospects that are a fraction of that?  We have many people who say “follow your passions”, so kids end up studying literature, philosophy or sports administration because they find those things interesting.  The problem is that they’re running up a tab and not looking towards the future to think about how they’re going to pay the bill.  They’ve booked a room at the Mandarin, are ordering room service, getting massages, and generally really “enjoying” their stay.  Then check out time comes and they realize they’re going to be paying that hotel bill for a long time.

     

    On the second part of your post, I really disagree.  The argument about it being a boring world always makes me laugh.  Do you think simply because a person decides to go to college and major in a STEM class it somehow makes them a robotic drone who’s only interests revolve around STEM subjects?  Certainly none of those people ever play in a band, do civic theater, dance, or write.  It’s a pretty ridiculous statement and assumption to make.  Kim Jeong certainly is a very boring guy because he spent more than a decade of his life becoming a physician (for an apt example for this forum).  Furthermore, I think when it comes to many of the arts and some of the degrees that are labeled “useless” the issue really becomes a question of “why are these even things that are being offered at a traditional university?”  Most of the arts are natural gifts and not all that different than athletics.  Sure you can hone your craft and get better at it, just like you can become a better basketball player by practicing, but at the end of the day, if I can’t sing or play the guitar well, it doesn’t matter how much training I have or whether I go get a formal education based around Music, I’m not going to be Michael Buble or Stevie Ray Vaughan.  I find many subjects offered at colleges very interesting.  I think there is a lot of history that is fascinating to study, but I’m not sure I’m going to get much more out of a $100k college education focused on history that I will from reading the many books and information online that’s readily available for next to nothing.

    As for the “struggling artists”, at some point one has to decide if something is a viable career or simply a passionate hobby.  I love golf, and I would love to be a professional golfer.  If I had tried to pursue a professional golf career, and struggled to make ends meet while pursuing my dream, would you feel sorry for me?  At some point I would have to decide if this is really a viable option for me, or if I needed to realize that despite the work and effort put into my pursuit, I simply wasn’t good enough and I need to come to terms that I need to find an alternative viable occupation to make money and enjoy playing golf in my spare time.  I don’t think there is anything wrong with pursuing a career in the arts, and I think if it’s something you’re passionate about then go for it.  But at some point one must accept that the market is telling you that this isn’t a viable option as a career, and you need to move on.  We can’t all be professional golfers and we can’t all be artists, actors, musicians, sculptors, etc.  Just like in everything else in life, some people will succeed in those endeavors and some won’t.  That’s fine, but I don’t really see how paying six figures for a college education in those areas is going to give you a better shot of succeeding if that’s the path you go down.

     

    in reply to: Empty Promises or Possible student debt cancellation? #225444 Reply
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