Exploring America’s Disdain for Student Loan Borrowers

Exploring America’s Disdain for Student Loan Borrowers

by | Apr 16, 2018 | #Millenniallife, Advocacy, Mindset

“Whatever happens around you, don’t take it personally… Nothing other people do is because of you. It is because of themselves.”
― Miguel Ruiz, The Four Agreements: A Practical Guide to Personal Freedom

You’ve probably noticed that if you bring up your student loan debt, people start to get visibly uncomfortable. If you start to get specific about your student loan debt some people will get nasty. Pretty soon you’ll hear things like “I bet you didn’t spend all that money on your education.” “My generation worked to pay for school, today’s kids don’t want to work.”

You know what these thoughts represent? The uncomfortable reality that college is more expensive now than ever.

The American Dream is built on the idea that any individual can have a picturesque life if they are willing to work for it. The American dream is built on meritocracy. My generation is invalidating meritocracy because of one unshakable reality, student loan debt.

The historic school of thought that you can “work to pay for college” doesn’t apply for many. Here’s the data driven statistic that stops that myth dead.

Today a student at a four year public institution has to work 51 hours per week at minimum wage to afford tuition and fees plus room and board. In 1980 a student had to work 22 hours per week at minimum wage to afford the same thing.

Sources 1,2,3

That’s an increase of 29 hours each week!

My assumption is that many of the folks saying their generation “had the work ethic to pay for school” have worked 40 hours a week for the duration of their careers. Yet if previous generations believe today’s students should “work to pay for school” then they’re mandating an additional 11 hours per week above the standard 40 hour work week and expecting students to put in those extra hours on top of a full-time schedule of classes.

Objectively, the student loan burden just doesn’t add up to an issue of work ethic, and that makes people uncomfortable. I mean shit, if America can’t blame the work ethic of a generation for suffocating student loan debt there might be a problem to deal with. If America accepts these statistics, we have to own the fact that we’re bankrupting future generations trying to obtain the American Dream through education.

Rather than face the problem head on, America pulls out more tools in the accusatory arsenal to shift blame.

“Well I’m sure you didn’t use all that money to pay for college.” becomes a handy weapon. Perhaps the spring break a borrower took at the age of 20 explains why they can’t buy a house at 30. If America can shame borrowers enough that will silence the problem.

But alas, the pesky facts won’t be silenced.

“The average annual price tag for tuition and fees plus room and board at a public four year institution is over $17,000 yet students annually borrowed an average of $7,000 to pay for that expense.”

Sources 4,5

That means students are finding ways to come up with over $10,000 a year for higher education. This statistic doesn’t line up with wasted money on spring break and lavish spending as the source of our problem.

So what is it then that gives America such disdain for borrowers? It surely isn’t reality and objective data. If Americans based their comments on data we’d be saying things like “Today’s graduates are expected to pay more for college while making less money.” or “Despite limiting spending to only tuition and books plus room and board, today’s graduates will need to come up with $76,000 to pay for a four year degree at a public university.”

Higher education is one way to secure the American dream. Federal funding, like student loans, makes access to college widespread and less dependent on a family’s earnings. But the cost is upsetting Americans, because student loans have become an unshakable burden for some graduates and are impeding the way to the American dream through education.

There’s something about the promise of a college graduate. All across America twenty-somethings full of hope, ambition, ideas, and skills are heading into the world to change it. It’s inspiring! One of them could change life as we know it! They could cure cancer, they could genetically engineer a bacteria to metabolize plastic and eliminate plastic pollution, graduates’ possibilities are endless and it’s so refreshing.

The promise of America’s future is so reassuring because that means the mistakes of the past don’t have to persist indefinitely. We can right our wrongs.

This is where student loan debt comes in and produces fear. Instead of seeing bright-eyed, ambitious, problem-solving graduates with the world at their fingertips, America sees twenty-somethings unable to afford rent and moving in with their parents. America sees ambition being trampled as borrowers make decisions based on their debt that don’t line up with the traditional American dream. How can the future be better when it’s innovators are preoccupied with basic financial needs?

Who wants to buy a house while struggling to pay off a mortgage worth of student loans?

Who can create a better future while paying for the past?

Enter the American consciousness, gnawing away at historical beliefs that the dream can be attained through education. The headlines tell America that young people are financially worse off than previous generations. But how can that be? The same system that’s crushing today’s borrowers empowered our parents.

So America presumes the problem lies with borrowers today. America presumes the student loan debt problem is brought about by wrongdoing of the generation feeling stuck. America presumes that the lack of ambition is the cause of the student loan debt problem rather than the symptom.

And so the attacks begin, to relentlessly protect America’s worldview and belief that the American dream can truly be obtained by anyone who works for it. If millions of borrowers think they’re going to disrupt the American dream with a whiny ass lack of work ethic, think again.

America will viciously defend the view that our country fosters the success of unlikely heroes rather than breeding underdogs in the first place.

I’m a borrower who took out $118,000 in federal student loans to obtain my Pharm.D. Because of interest, I ended up with $132,000 of student loan debt. I share this story all the time and oh, how I know the comments people make. Despite working two jobs and volunteering, earning competitive scholarships, and working now in service to the health of my fellow Americans, any mention of my debt paints me as an incompetent burden on society. My six-figure debt and I are a barnacle on America’s ship disfiguring the facade and resisting progress.

But here’s the thing. Every borrower I know is so much more than debt. We give our time and money back to our communities, we work in life-saving, innovative, future-building, commerce-generating, problem-solving professions that keep our country thriving. And the majority of us are relentlessly working to solve our own damn student loan debt problem however we can.

So what do I say to a fearful America uncomfortable with our $1.4 trillion in student loan debt?

“You can believe what you want about my generation. You can call us lazy, entitled, slacktivists, whatever derogatory terms you want.

 

But my generation isn’t stopping.

 

We will find a way out of this. We will build our way out, we will upset the order of higher education and replace it with a system that enables achievement of dreams through education.

 

We will do this with your help, but if you fail to help us we will find a way to do it without you.

 

Our generation isn’t the enemy of yours, we refuse to pit ourselves against you. Together we will build the future America and we have boundless potential to build it into a country that powers dreams for us all.”

 

References

1. NCES table 330.10 Tuition and Fees + Room and Board at four year public institutions 1979-1980 & 2015-2016 https://nces.ed.gov/programs/digest/d16/tables/dt16_330.10.asp?current=yes
2. Minimum wage information US Department of Labor https://www.dol.gov/whd/minwage/chart.htm
3. Bureau of Labor Statistics CPI Inflation Calculator https://www.bls.gov/data/inflation_calculator.htm
3. NCES table 330.10 Tuition & Fees + Room and Board at four year public institutions 2012-2013 https://nces.ed.gov/programs/digest/d13/tables/dt13_330.10.asp
4. https://nces.ed.gov/pubs2013/2013165.pdf U.S. Department of Education, National Center for Education Statistics, 2011–12 National Postsecondary Student Aid Study (NPSAS:12).

Will Borrowers PROSPER Under the New Proposal in the House?

Will Borrowers PROSPER Under the New Proposal in the House?

by | Jan 8, 2018 | #Millenniallife, Advocacy, Loan Forgiveness

Today’s post provides insight on a few key pieces of the PROSPER Act introduced in the House in late 2017. Estimated read time ~5 min.

The PROSPER Act, short for Promoting Real Opportunity, Success and Prosperity through Education Reform, was introduced by Rep. Virginia Foxx (R-NC), chairwoman of the House Committee on Education and the Workforce, and Rep. Brett Guthrie (R-KY), chairman of the Higher Education and Workforce Development subcommittee late in 2017.

PROSPER is designed as a reform to the current system of higher education funding. Currently the law of the land is the Higher Education Act which has been in place since 1965. It’s fair to say that the landscape of higher education has changed significantly since then.

The Best of PROSPER:

Meaningful information for borrowers to make financially driven decisions about college.

No one wants to end up with a degree that assassinates their financial future. Completion rate, average debt of borrowers, and the average salary of graduates at 5 and 10 years for every college will give borrowers objective data to compare across different degrees and different universities. Ideally there would be salary information for graduates 1 year after graduation and job placement rates in the chosen field so borrowers could also assess how quickly they would get a job after graduation and if there are enough jobs to go around.

Simplified loan options.

There are six different types of federal loans under the current system. I definitely see the need to simplify them. PROSPER proposes a common sense split of one loan for undergraduates, one for graduate students, and one for parents. They call it ONE Loan although there are in fact three loans.

The Worst of PROSPER:

Elimination of a time-based loan forgiveness option.

Essentially PROSPER would protect borrowers from negative amortization (an increase in the principal balance of a loan caused by making payments that fail to cover the interest due) by limiting borrowers to paying no more than they would have under a 10 year standard repayment plan. The problem? You still have to pay off the entire principal of the loan. So if your education cost more than the income it provided you after college you’re stuck paying that loan pretty much indefinitely.

Why is this so problematic? With other types of debt, such as credit card debt, if you get in over your head that debt can be discharged through Chapter 7 bankruptcy. Student loan debt, not so much. A borrower has to die or become permanently disabled for federal loans to be discharged. So if a borrower gets in over their head with student loans under PROSPER… your debt will follow you around for-ev-er.

Graduate student loan changes.

PROSPER would set a cap on the loan amount available to graduate students without taking into account the cost of attendance. In addition PROSPER eliminates graduate students eligibility to participate in work study. Coupled together, these changes could limit the ability of an individual graduate student to financially support their graduate education.

 

The Things PROSPER Could Do Better:

Offer a time-based forgiveness option.

Even with responsible borrowing there is not enough readily accessible data for a student to accurately decide how much their degree is worth. Want to know the average debt of a graduate in your chosen field of study at your institute? Good luck finding that. Want to know job placement rate? You can probably find that. Want to know the average starting salary of graduates from your particular program? That information isn’t there. Add that to repeated tuition hikes and a system designed to keep students spending and it’s amazing anyone gets out without torching their future finances.

In addition to the majority of responsible borrowers the fact still remains that federal student loans give 18 year old borrowers access to tens of thousands of dollars a year so they can choose a career for the rest of their lives… give me a break! The pre-frontal cortex is the part of the brain responsible for planning and complex decision-making like anticipating long-term consequences. This part of the brain isn’t even fully developed until around age 25. So a borrower at age 18 is supposed to choose something they want to do forever and borrow responsibly. We shouldn’t be holding this decision making over someone’s head for a never-ending period of time.

Loan forgiveness is not a get-out-of-jail free card, it’s the responsible thing to do in a system of higher education that’s becoming increasingly treacherous to navigate.

Offer stronger incentives for colleges to control costs and demonstrate outcomes.

PROSPER could directly tie a college’s access to federal funding based on borrower outcomes. If specific institutions and programs of study fail to demonstrate appropriate debt-to-income ratios, the government could lower funding to those institutions.

Why am I proposing taking money away? Because this prevents predatory programs from racking up debt for borrowers without keeping the promise of higher income through higher education. This steers borrowers away from these types of programs because they won’t be able to access funding. Right now college tuition is on an indefinite upward trend. At some point all degrees will be priced out of affordability. Tying federal funding to something like a debt-income-ratio motivates colleges to lower costs to reduce the debt portion of the ratio. Right now there is no motivation for colleges to lower costs.

A Controversial Stance on Public Service Loan Forgiveness (PSLF):

I’m not opposed to the elimination of PSLF in the long term.

A large percentage of borrowers attracted to this program are not who PSLF was intended for. PSLF has attracted many high income high debt borrowers with the means to repay their loans regardless of a loan forgiveness option. Borrowers like myself, a pharmacist, can save tens of thousands through PSLF but can afford, albeit with modest additional financial pressure, to repay the full balance of our loans without loan forgiveness. Loan forgiveness options encourage existing professional colleges (Pharmacy, Law, Medicine, etc) to continue to increase tuition. The lucrative tuition encourages for-profit institutions to open up which floods the job market with new graduates and drives down wages despite increasing the price tag of education.

I do think PSLF is the right choice for a specific subset of borrowers whose public sector work has mediocre pay yet requires extensive education. To meet the needs of those individuals while preventing wasteful spending, PSLF needs stricter criteria so it can be applied only to borrowers who could not afford to work in the public sector without PSLF.  Without limiting criteria I’m in favor of it’s elimination for the creation of a forgiveness program that reaches borrowers in true financial need.

I do think existing borrowers should be grandfathered in if they have made a reasonable number of qualifying payments on their loans. If we fail to grandfather those borrowers in they will get slapped with additional interest that has been accruing on their income-driven repayment plan because they made a decision based on the promise of loan forgiveness that wasn’t kept.

What else is in PROSPER?

There are a lot of updates in PROSPER that weren’t the focus of this post. If you want to learn more about what’s in PROSPER check out this post on US News and the PROSPER Act summary put together by the House.

What do you think?

I would love to hear your thoughts on this topic share them in the comments below or on the Repayable Facebook Page.

Student Loans and Star Wars: The Empire of Debt vs the Borrower Alliance

Student Loans and Star Wars: The Empire of Debt vs the Borrower Alliance

by | Dec 11, 2017 | #Millenniallife, Advocacy

Star Wars Episode VIII is set to drop this week and I’m a little bit into it. This week’s post is going to paint student loan debt as the Galactic Empire and borrowers as the Rebel Alliance. Cheers to blowing up the Death Star as many times as it takes!

The Original Star Wars Trilogy…

is about the struggle for freedom against the oppressive Galactic Empire. The Rebel Alliance is a group of rag tag freedom fighters from across the galaxy with one thing in common, a desire to be rid of the Empire.

 

Student Loan Debt is the Galactic Empire

Both student loans and the Empire produce a sense of fear that crushes hope as it spreads. The impact of student loan debt only continues to grow as borrowers are forced to borrow more and more money to pay for the rising costs of college as they strive to meet the demand for an educated work force. Like the galaxy felt with the spread of the Empire so borrowers feel with the rising costs of college, it’s not your first choice but how else can one survive?

 

Borrowers Will Pick a Side

Under the weight of their debt borrowers will make one of two choices. They will succumb to the crushing pressure of the Empire and tolerate their mistreatment without hope, or they will form an alliance to defeat the evil Empire.

 

You Are the Rebel Alliance

Many of you reading this have chosen the rebellion. Like the members of the Rebel Alliance, borrowers come from all walks of life (although I think we’re all human) and share a common goal, freedom. In order to be successful, borrowers will need to adopt the characteristics of a rebellion. You will need to be relentless, innovative, and determined. And like any rebellion, borrowers need a plan of attack.

 

Steal the Plans to the Death Star

Repayable is like the stolen plans for the Death Star, without the risk of being chased down by Darth Vader or having your home planet blown up by Grand Moff Tarkin. In the book you’ll find exactly the strategy you need to blow up your own student loan death star and deal a major blow to the Empire. The blog and YouTube channel provide the up-to-date intel you need to continue the relentless attack on your loans.

 

Your Current Mission

The most recent intel gathered by the Alliance leads to your next mission. A plan exists in the Congress of the Republic (actual Congress) to eliminate the student loan interest tax deduction. The plan has made it through the Senate. It’s up to our Borrower Alliance to fight against the Empire and tell our representatives how to vote for our needs. Thankfully this doesn’t require x-wings, only a couple of emails and phone calls.

Do take action to eliminate this threat to yourself and other rebels. Many Bothans died to bring us this information. JK, it’s publicly available. Call your representatives anyway.

You can find your state representative here and find a link to an example script here (just update the highlighted text to tell your own story).

The Social Reason I Decided Not to Use Loan Forgiveness

The Social Reason I Decided Not to Use Loan Forgiveness

by | Nov 20, 2017 | #Millenniallife, Advocacy, Loan Forgiveness

Student loan forgiveness is one hotly debated topic. The fact that we have student loan debt at all is probably the only topic debated more.

Today’s post is going to share my personal experience and why I didn’t choose Public Service Loan Forgiveness (PSLF) despite the fact I have eligible employment and it would have saved me tens of thousands of dollars.

This isn’t to say that you have to share my mindset or that you should feel guilty about making the financial choice that’s best for you. This post is here to share a perspective you might not hear from anyone else through my own experience. It’s not about getting you to make a certain choice. It’s about helping you see there are countless alternatives to the standard school of thought so you can give yourself permission to pursue the one that fits your financial needs and moral compass.

 

$128,000 in Federal Loans at 6.8% Interest

I graduated in 2013 with my Pharm.D and went straight to residency. I made the decision to make income based monthly payments of around $360 per month because there was no way at $47,000/year I could afford the 10 year payments of almost $1,500 per month. After finishing residency and despite paying $6,000 toward my student loans my amount went up to $132,000 because I couldn’t keep up with interest.

 

It was Time to Go For It

After becoming a salaried pharmacist I had a choice to make. Continue in my income-based repayment plan and wait nine more years for Public Service Loan forgiveness or take matters into my own hands, control my destiny, and decimate my debt aggressively.

Here are the financial deets.

You can do the math, it’s going to cost me $60,000 more if I pay my loans off myself in 10 years instead of waiting for forgiveness. So why the hell would I make this choice?

 

I Believe PSLF Isn’t Meant for Me

Here’s the thing, whether I pay $1,100 a month (my income-based payment) or $1,500 a month I can still live the life I want to. I’m incredibly fortunate and have a job that fairly compensates me and sets me up for financial success despite my six figure debt.

There are a lot of people who aren’t so fortunate. Think about a social worker who has $57,500 of student loans for their masters degree so they can help the most vulnerable patients in the hospital obtain affordable access to medical equipment, home care, etc. This social worker makes $50,000 annually. They will pay about $79,200 in a standard 10 year repayment plan and around $48,000 under PSLF that’s a $31,000 savings.

Because the social worker makes less than I do as a pharmacist, a larger percentage of their monthly income goes to necessary living expenses. Their forgiven dollar amount is less than mine would be and the savings can ease the real impact student loan debt has on their every day life. More good is done in their life by spending less money.

 

If I Take PSLF, if Comes at a Cost to Someone Else

The fact of the matter is, when PSLF was designed they had lower debt, lower income borrowers in mind. Unfortunately they attracted a lot of high-debt high-income borrowers like myself and many other pharmacists, physicians, and high income folks working at non-profit institutions. That means there’s not enough funding to go around.

 

I Care About My Fellow Borrowers, Not Tax Payers

We all pay our fair share of taxes here in the middle class, and if my tax money can be used for something I believe in I don’t mind paying taxes. That’s why I chose not to utilize PSLF because I didn’t need it, I could afford to pay my loans with marginal financial sacrifice. I want this money to be there for people who need it. If I use it, it won’t be.

 

What About You?

What do you think about the idea of “saving” loan forgiveness for someone who needs it? What do you think about the idea of borrowers who can afford to pay their loans under standard repayment taking advantage of the savings offered via PSLF? Let me know in the comments below or on the Repayable Facebook Page.

How You Can Make a Difference For Student Loan Borrowers

How You Can Make a Difference For Student Loan Borrowers

by | Oct 23, 2017 | Advocacy

The 115th Congress is wrapping up their crowded agenda for 2017. With over 2,000 legislative search results for “education” the topic is hot and members of congress aren’t experts on every piece. That presents borrowers with both opportunity and urgency to help their legislators understand the needs of borrowers. To make your future better, borrowers like you need to become effective advocates- and you need to start today. Here’s what you need to know to become the advocate you and the rest of us borrowers need. (more…)