The two most common financial questions students have are “How much will my income be once I graduate?” AND “What will the payments be on my student loans?“.
We’ve looked at different income questions before (here, here, here, here), and we’ve looked at some of the payment questions (like is Public Service Loan Forgiveness (PSLF) a good option?), but as a regular reminder you can go to this link and run your future payments for yourself:
Shortly after the 2002 elections, I remember being optimistic that we might see some real change on several conservative key issues. Republicans had just won several swing seats and took a majority in the Senate. They already owned a majority in the House and had a very conservative George W. Bush in the presidency for the next 6 years.
Near the end of 2007 I distinctly remember President Obama’s acceptance speech in Grant Park where he famously proclaimed his administration’s CHANGE with the affirmation “Yes we can”. It was a great speech. Democrats controlled the House and Senate for the next four years.
I remember telling my wife on that night 8 years ago that there were a lot people putting their hope in this man to make their lives better. It’s a hope that no human being can fulfill.
At the risk of sounding like a self-help guru, “If it’s to be it’s up to me.”
The night of November 8th there will be a lot of disappointed people and worse there will be a lot of happy people that think they accomplished something.
I’m reading “Getting Things Done” and came across this about making a change and getting something accomplished:
…anything personal or professional, big or little, of urgent or minor importance, that you think ought to be different than it currently is and that you have any level of internal commitment to changing.
There it is. The key to my success and happiness and meeting my goals (financial and otherwise) is summoning the burst of energy needed to make a decision about what needs to change (getting sick and tired) and making an Internal Commitment to Changing (mad as hell and not going to take it anymore).
It sure isn’t in this election.
Articles like this make me angry when they use a college education as the “carrot on a stick” that makes student loans a good thing:
“Student loan debt is also an investment in your future. Simply put, you will be more employable and earn more with a college degree.”
I believe this is a straw man. The argument for or against a college degree is irrelevant to the structural problems that student debt brings. I believe that student loan debt is a social problem, a social justice problem even, because it is most egregiously harmful to very specific segments of our society.
- 1 out of 3 student loan borrowers don’t graduate. This immediate invalidates the ‘college is worth the debt’ argument. If as many as a third of borrowers aren’t graduating, they are stuck with debt they can’t get out of and no increased earning potential. There is myriad of reasons they might not be graduating, including being poorly trained for college, health, financial, family instability, substance abuse (yo Madison!), and more. More on that here.
- If I default, the government will withhold low-income benefits. Because the government is the debt collector, if I default on my student loan debt the government will withhold my tax returns (including Earned Income Tax Credit and Social Security benefits). These social safety nets aren’t a big deal if I’m wealthy, but it’s devastating if I’m poor. Between the socio-economic classes (rich and poor), who is more likely to default?
- The highly indebted are borrowing even more. We’ve discussed before that there is a bifurcation of healthy borrowers and unhealthy borrowers. The healthy borrowers borrowing is remaining level, but the unhealthy borrowers are borrowing even more than before. Some estimates put these borrowers at around 17% of all borrowers. In my experience, this sounds about right. We know that if you are female, of color, or an older student you are significantly more likely to be a highly indebted borrower.
- Borrowing to make an “Investment” is extremely dangerous. Quoting a 15% financial rate of return is just lying if it doesn’t take into account borrowers who don’t graduate and the higher interest rates and fees on defaulted student loans. If you can’t bankrupt out of a ‘bad investment’, it can cause decades of pain for defaulted borrowers. High returns don’t mitigate risk. This is why the lottery is a bad investment. A potential 15% ROI doesn’t offset the inherent risks of student loan borrowing.
So to summarize, “it’s okay to have student loan debt!” as long as you’re intelligent (with an aptitude for intellectual studies, healthy family structures, and safety nets that allow you to graduate), are not poor, and are not a woman or minority.
There are a variety of potential improvements that could be made on the legislative level (realistic hard cap on borrowing, lower interest rates, larger Pell grants, allowing bankruptcy), but these are out of our ability to change right now.
Instead, let’s focus on personal behaviors I can change RIGHT NOW to reduce my risk of being a statistic. These include borrowing as little as possible, fully understanding my current situation and risks, and building healthy personal financial habits.
Dave Ramsey is fond of saying “If you want to be rich, do what rich people do. If you want to be broke, do what broke people do.”
I was reminded of this on a couple different occasions recently. One friend posted a dumb picture on Facebook and another ordered a “Dewars on the rocks”.
Thomas Stanley in his incredible book “Stop Acting Rich” tried to differentiate between the “Glittering Rich” and the actual wealthy – the “Millionaire Next Door” type. Contrary to popular belief, the vast majority of wealthy people don’t drink expensive liquor or own extravagant things. Perhaps the fastest way out of debt is to stop buying stuff we don’t need.
If you want to “Fake it until you make it” with money, you can start right now by living frugally.
Daniel Pink pointed to this research paper which suggests:
Those paying for college with loans perform significantly worse than students receiving other forms of aid.
Why is this? It may be because of increased financial pressures, or stress about the future, perhaps debt is a trailing indicator of some other instability, or it may be caused by many factors.
We don’t need to know the ‘why’ to understand that if we’re headed toward large volumes of debt we need to pump the breaks and really calculate if it is worth it. As educational institutions, we need to dig deeper to provide alternatives to debt.
There is an old joke that the best two days of boat ownership are the day you buy it and the day you sell it. I spent this last weekend playing 54 holes of golf and hanging with some cool dudes. This picture is me drilling an 8 iron over water to make a key par.
We were blessed that a family member of one of the players has a large vacation home in the mountains and they let us use it for the weekend. As I was sitting in the hot tub that night, I reflected on this thought: Though I’m not a millionaire, for this weekend I was experiencing all the enjoyment of this huge mountain chalet.
For some reason, I am hardwired to think I need to own something to enjoy it. Maybe this is a result of thousands of advertisements or perhaps it’s just my nature to want to control. I do think there is a strong movement toward Lyft, VRBO, community gardens, bike sharing, and more peer-to-peer.
We have a guest bedroom in our house, so for the past few months we’ve had a young person living with us. It hasn’t been a burden, it’s actually made life better. I wonder if this is what the early church believers were hoping for when they “shared all things in common”.
Paul told Timothy to teach the wealthy (most of us) to “be willing to share”. What things can we share with each other? What do you need that perhaps you could get by with just borrowing? If we reorient our thinking around this, I think it would tremendously reduce our overall debt levels.
If it isn’t on your radar, and you are a current student, Denver Seminary has put together a fantastic resources page. Here is some more info and the link:
Student Life Resources Webpage: www.dsresources.squarespace.com
This web platform allows Student Life to present our buffet of assistive and developmental resources and services (it is different from the Seminary’s main website). Please use the hyperlink above to navigate to this site, and let me encourage you to bookmark or anchor it in your “favorites” menu so you can access it with one-click. This site is a significant resource in and of itself, and we are excited that you can now begin using it as you provide students with helpful and timely information.
I taught a small group this morning on “The Long Defeat”. It’s a quote from Tolkien that I came across this week via Wesley’s wonderful essay (which links this from Alan Jacobs) and I think pairs perfectly with this beautiful poem and reflection by Richard Rohr.
One connection I’ll make here: If I’m results driven, bitterness will eventually become the defining characteristic of my life. Instead, I submit the outcome (including the possibility of defeat in my life, my relationships, my projects, my country, all my needs and hopes and dreams) to God and I learn to ‘practice’ living.
This is true of budgeting and raising children. It’s true for world number one Jason Day: “I got addicted to the process of getting better.” It’s equally true for every non-famous person that does their taxes, serves a client, prepares a meal, teaches a child math, or pays off a debt.
I have been teaching my son to golf over the past few years. Unfortunately he inherited his dad’s aversion to authority so taking direction hasn’t always gone well. Despite the people that want to help him get better, he pushes back. As we have noted, change is hard.
One reason he pushes back: It doesn’t feel right.
The vast majority of golf teachers in the world will tell you that you need to hold the club in your fingers (not palms) with the “V” of your index finger and thumb pointing at your right shoulder. Often Zeke’s grip will get too “weak”, with the “V” pointing at his chin or left shoulder instead of right shoulder. This is a critical fundamental to hitting the shots he wants to hit, so I’ll reposition his hands on the club and say “Try it this way”.
But he hates it. He says it doesn’t feel comfortable. He won’t be able to hit the ball the way he’s practiced. After I’ve placed his hands on the club the correct way he even re-grips it back to the old way right before he swings.
Of course he’s right. It doesn’t feel natural. It doesn’t feel comfortable. He legitimately doesn’t like it.
But a good golf teaching professional will tell you “what you feel isn’t real”. If you will stick with the change and hit a couple hundred golf balls, the new grip will become your “normal” grip and anything else will start to feel weird. It will become your new normal fundamental.
I don’t need to make the applications to life for you, but I just want to encourage you. If you’re struggling with an area of change – especially around your personal finances – stick with it. It won’t feel comfortable. That’s ok. Trust the process. Hit a couple hundred balls and you’ll look back and not recognize that old crappy golfer.
“Will” has been homeless since he was 12 years old. In the last couple of years he’s made tremendous progress including doing really well at his job. Contrary to what you might assume, housing is usually one of the last pieces of integrating into what you might consider ‘normal’ life. For example, Will got an apartment earlier this year but has continued to sleep outside – Urban Camping – because he feels claustrophobic in the apartment and it’s such a departure and separation from his community and life as he has known it for so long.
That story was told to me last week while visiting Open Door Ministries where I serve on the board. For someone that’s integrated into mainstream society, this story seems impossible to believe. But as I thought about it, I realized how hard I really struggle to make personal change. I’m the same as Will. The reality is, the areas of my life that I’m working on are just less visible and more socially acceptable.
Despite practicing financially healthy habits for years, doing a monthly budget remains one of the biggest challenges for Noelle and me. We have tried any number of different methods, but the busyness of life and lack of urgency causes us to miss self-imposed disciplines that would lead to a healthier life.
Regardless if it’s doing a monthly budget or sleeping under a bridge, change is hard. It takes a tremendous effort to break life-long habits. Let’s do it anyway.