How to Handle Risk?How I Handle Risk?Risk is defined as the uncertainty concerning the occurrence of loss. The key word in that sentence is “uncertainty”. There isn’t a person on this planet who can predict the future. And to think that one can is naïve and reckless. If we’ve learned anything from our past, it is that unexpected things happen. Those unexpected things can be both positive and negative. Some of the best things in life can come as unexpected surprises. However, on the flip side, some of the worst things that can happen in life are unexpected as well. As I’m writing this paper, I’m watching the news about the recent bombing at the Boston Marathon. The Boston Marathon occurs on Patriot’s Day in Boston every year. It’s citywide celebration and runners travel from all over the world to run in it. As we all heard of the events on Monday April 13th, there wasn’t anyone that wasn’t in complete shock. It’s unbelievable to think about things like this happening. They make no sense. But as they occur more and more often, it only reinforces the need to protect ourselves against the unexpected.
How do we protect ourselves against that which we cannot predict? That is where insurance comes into the equation. Insurance comes in many different forms and is there to protect us in nearly every aspect of our life. It is defined as the pooling of fortuitous losses by transfer of risks to insurers who agree to indemnify the insured for such losses, to provide other pecuniary benefits on their occurrence, or to render services connected with the risk. Pooling is the heart of insurance. Pooling spreads the losses incurred by few over the entire group so that the average loss is substituted for actual loss. Insurance companies use the law of large numbers to help them more accurately predict future losses. The American people work hard every day to earn a living and raise a family. We work too hard to have unexpected events ruin the life we’ve built. Insurance provides that protection.
We face many personal risks in our lives, but the four major risks are premature death, old age, poor health, and unemployment. I am a young, single man who is in his last year of college and working full time. I do not have any dependents, I rent a house with friends, and my car is paid off. For the most part, I am responsible for only taking care of myself. However, I do have debt that will have to be paid off whether I’m dead or alive. When my life comes to an end, I do not want to leave my friends or family with any financial burden. To protect this from happening, I am enrolled in a group term life insurance policy through my employer, Sprint Nextel. There are different options available but the option I have decided on at this time pays up to $50,000 to my beneficiary. As I am currently knocking out my debt snowball as part of Dave Ramsey’s Total Money Makeover, all of my disposable income is being
In November, Drexel University released Drexel’s first report on how the University of Chicago System is handling its budget shortfall. The study released by Drexel and a review of their data reveals that the University is now spending nearly $19 billion on student debt, while the total number of student loans, combined with annual tuition and fees, have grown from $834 billion in 1989 to $949 billion today.
If you follow this report you will see that the study also shows that students are in for significant stress. Research by Dr. Peter Rauchler has shown that it’s critical that the University can be responsible for the student debt of their future. So, if you have a choice between spending a couple of hundred thousand dollars on student loan debt or getting a four-year degree, then you are going to want to focus on the latter. We know that this means that a lot of people who are struggling to pay their bills, and are taking on life on a higher wage and by no means living in this country, will see a higher interest rate for the remainder of the working year than people who are currently paying those bills.
In all seriousness, this should not be a surprise. Not long ago, we were told that tuition, benefits, and fees made up over half of all student debt in the country. This kind of rhetoric is not true. College is important, but we must be aware that college is not cost effective when we need it most, especially for those whose only focus is on getting good grades. There is no easy approach to reducing student debt costs and it’s essential that there be a comprehensive approach to addressing student debt.
We are all students. We all have the power to bring change to our lives and to bring the changes that we need to our futures. But with the University of Chicago, we are also students, with student debt on a par with any economy. Student debt is a real problem. It’s a problem all of us can take care of. Students will be able to contribute to change without our government spending and making it possible for them to continue to live out their full lives. We are not simply asking the government to spend money to allow for the right life choices. We are demanding to be a part of change. We are demanding change in our social system without taking government’s money.
This piece by Drexel University researchers provides some additional background information about our current student debt situation.
• University of Chicago – Debtors
• Drexels – Debtors in the Debtors’ Loan System
• University of Chicago – Student Debt
• Drexel – Student Debt Rates and Rates
Drexel’s Student Debt
The current Student Debt situation represents a dramatic spike in our student debt because of the University’s efforts to raise tuition and fees. Most of the university’s student debt today is incurred as a result of the University’s push for an $11 tax on student loans. This tax has been steadily rising since the recession in the late 1990s, and that growth started in the early 2000s.
While most people of all levels see student debt as a solution to their financial woes, there are a few people who simply aren’t happy about it and are seeking to make up their own. The student debt that we know and love is much more than we could possibly afford today, and we need to look at other ways to get it off our shoulders.