Indebting Your Future: Are Student Loans Good?

A student loan is the first pleasurable experience of young people introducing them the perilous idea that debt is good. Debt allows you to buy things. Debt makes it possible to live beyond your means. But debts must be paid back sooner or later. I see students loans more as an investment rather than an expense. If I learn anything from the Finance classes during my MBA, should the future discounted cash inflows be greater than the costs, it is a good investment. With student loans it used to be the case, and that´s why we have seen the rampant growth of all kinds of academic institutions giving away degrees left and right, but the picture is changing. As The Economist reports,

All over the world student indebtedness is causing problems—witness this month’s violent protests in Chile (see article). In Britain, according to a recent parliamentary report, rising university fees mean that student debt is likely to treble to £70 billion by 2015. But, partly because higher education there is so expensive, the scale of the problem is far greater in America. When the next official estimates of outstanding student debt there are published, it is expected to be close to $1 trillion, higher than credit-card borrowing (see article). Credit quality in other classes of consumer debt has been improving; delinquency rates on student loans are rising.

Should delinquency rates continue growing, very soon the financial institutions will (1) pump up the interest rates and (2) severely curb the eligible pool of loan applicants. The history will make a loop, education will become once again the privilege of the few and its prestige will go up. The debate whether education should be for all or just for a smaller fraction of the society has been going on for ever. There are those who believe that for the well-being of the society education should be given to all those who ask for it. The Soviet Union was a good example of this: the country was boasting some 98% literacy rates but it was a challenge to find a good plumber while the economists and teachers abounded. There is a second group who opine that education should be elitist and be granted to people solely on the basis of their merit. This point of view is based on the premise that a good technician is better than a mediocre philosopher and I tend to agree with this approach more. Admitting mediocre students academic institutions impede the learning process for the bright and gifted: it is a vicious circle, and at the end of the process all will emerge with the same piece of paper certifying their academic status.

I started speaking of this to prove a point that once we limit the ability of just anyone to enter higher academic institutions, the student loans will once again play the role they are supposed to: assisting those who will use their diplomas to multiply wealth, and not merely drift through the college years and emerge in the labor market with a skill set fit for a telephone operator.

We can also talk about the role of the business in all this. Spotting talent and helping it develop should be today's companies priority. Clawback clauses or not, but big organizations should help the gifted and deserving to augment their knowledge as they will be entering the labor market in four to five years. When companies talk about CSR, they often talk about hugging the pandas and planting trees. Helping promising youngsters get to where they want to be in terms of their academic and career aspirations is a CSR missions as important: it is doing the right thing and the smart thing at the same time. Very soon they will lead your companies.

So yes, debt is good. You can do more with other people's money. I don't blame those who have indebted themselves to the point of no return; I blame the banks and other financial institutions who made it possible. You cannot reproach people grown up in a society encouraging borrowing, it's part of your culture - what can you do about it? But giving credits and loans left and right for those who know something more about economics and finance than 17-18 year olds is at least irresponsible and morally questionable.

MBA in CSR? Why Not?

I am reposting this great blog post that I came across on the Vault website. Being "the HR guy" felt somewhat similar at my business school. Now doing a CSR consulting project and going through numerous corporate sustainability reports I see how the two are interconnected and what is more important I can clearly see the business case for both. So the business schools will have to adapt their curricula pretty soon (and most have started doing so already) if they still want to be perceived as "trendy" and "sustainable".

CSR is not about charity :)

Does an MBA in CSR Hurt Your Employability?

Posted on Tuesday, March 22, 2011 6:41:44 PM GMT   |  

What are some of the most common reactions I get when I say I'm a MBA in CSR candidate?

1. "Ah, the eco warriors!"

2. "So you study charities?"

3. "There is an MBA in CSR? You must be kidding me."

Okay, there's a fourth one.

4. A long pause and a blank face.

I am an MBA candidate specializing in corporate social responsibility (CSR) in one of U.K.'s top schools with a sustainability or environmental social governance (ESG) component in their curriculum. The program allows a candidate to choose between a general MBA and a specialization in finance, entrepreneurship or CSR.

MBA vs. an MBA in CSR

A few weeks into my second term, a non-CSR academic gave me some interesting advice. He said: Take the general MBA route than a specialized MBA in CSR, while following the same modules I have chosen. His reasoning was that having CSR on my certificate might influence my future career options.

For me, his advice meant one of two things:

• • That he did not think I had the right background to have a decent career in CSR.
• • Or that he thought I would do better in other areas.

Despite how much I enjoy my lectures and research, and my optimism for a career in CSR, his points were a big concern for me. And so, since our conversation, I started paying much closer attention to body language when meeting people in the field.

When I observed smothered cynicism, which was most of the time, I debated their views, hoping to reason the skepticism out. But the reality is that people who believe in CSR or CR are perceived as disconnected from the 'real' world. That they are tree-huggers or socialists, delusional about what makes the world go round.

CSR = Zero Business Skills?

My private equity and venture capital class professor's moniker for me is "the CSR person!"

There is a general perception that anyone concerned with CSR has no numerical skills or business acumen. Not to beat my own drum, but I had the highest score in finance, accounting and marketing in the program! Surely, I cannot go around telling employers that, or is that what it's come down to?

Business schools don’t function in a vacuum and the advice given to me is directly linked to this perception by employers and recruiters. For me, commerce and CSR coexist and my dual education equips me well for contributing much value to companies.

But, how do you communicate that to employers?

Sustainability & Business School Curriculum

There is certainly a growing interest in the field with several business schools integrating sustainability into the curriculum. Perhaps students have as much a role to play in encouraging the same leadership from the corporate world.

Only when employers demand candidates with CSR and ESG background to fill their non-CSR specific jobs like finance and marketing, can we see real change in the perception of studying business and corporate social responsibility.

MBA vs. Masters in CSR

Here's my evaluation of the worth vs. unworthiness of MBA programs: There are masters program that offer full CSR modules, (Masters of Science in CSR, in Sustainability, etc.) and then there are MBA programs with the option to specialize in CSR.

But I think an MBA is more valuable of the core concentration on business skills, which allows candidates to have a long term vision and strategically align product placement and strategic growth with CSR.

Personally, my favorite module last year was operations management, a subject I never knew I would enjoy as much as I did. My earlier perception of the usefulness of this proved completely wrong. After all, LEAN and supply chain management are just a few of the fundamental operations that augment CSR initiatives toward achieving a double bottom line right?

What if Your School Does Not Offer CSR Curriculum?

Of course, there are also many ways to bring up CSR in otherwise hard-nosed subjects like operations management, risk management, etc. For example, while I was taking the operations management class, I happened to be in a discussion with three other members who were also interested in CSR. Our common interest led us to form a group to study microfinance.

For that to fit our operations management project requirements, we studied the use of technologies to reduce cost of operations in MFIs. Problem solved!

--By Catherine C. Chong