A couple links on Crowdfunding

mirrorFrom time to time students will ask me for direction about doing personal fundraising or crowdsourcing. Here are a couple of resources if you are curious about the crowdsourcing landscape. As always, feel free to reach out with questions or to talk through what you are thinking.







Two thoughts from Seth Godin on this topic:





Additional Layer of Risk

parents defualt rateI believe one of the most important ideas in understanding debt is what we call “Layers of Risk”. One layer that I have not taken the time to fully consider was brought to my attention in an article today. That layer of risk is student borrowers with children, and specifically single parents:

  • Nearly 50% of undergrad students borrowers defaulted
  • Of those, 70% were single parents
  • 10% of borrowers are single parents, but they represent 40% of all defaults

These stats also include additional factors and layers of risk. For example, as the article points out if you’re a parent of a child under 3, a person of color, or enrolled in a for-profit school your default rates are even higher.

Additionally, many of these defaulted loans are for students that were unable to complete their degree so they are stuck with a non-bankruptable debt and no degree with which to increase their earning potential.

Any system that disproportionately penalizes the most vulnerable needs to be reformed.

Student Loan Reform in Future?

forbesAn article passed along to me this week with a lead that caught my attention:

A growing number of student loan borrowers — nearly one in three — aren’t making headway in paying down their loans five years after leaving school.

A couple of brief observations:

1.) 2/3 Borrowers with more then $50k in debt aren’t paying down their balances. It’s ‘compound interest’ in reverse – if you owe a lot, the minimum payments just barely – or in some cases don’t – cover the accruing interest. I noted this has a striking similarity to Negative Amortization Mortgages that contributed to the financial meltdown a decade ago.

2.) One of my major concerns two years ago was that the government could change it’s rules anytime on loan forgiveness. This article mentions several proposals that are on the table to do just that including eliminating the Public Service Loan Forgiveness plan altogether. It’s one of the main reasons I don’t think using any version of the loan forgiveness plan should ever be your primary payoff strategy.

3.) We’ve noted before about how the government makes over $50 Billion in profit from the student loan program each year. That enormous cash cow for those in power is the primary reason I don’t predict significant student loan reform for the benefit of the borrowers. In fact, this article says the proposed reforms will earn the government an additional $104 Billion over the next ten years. Incredible.

4.) If the government was actually serious about reform for the benefit of the American citizen, there are a number of options. For example they could put a hard cap on total student borrowing at the median household income ($55,775 in 2017), limit borrowing to the cost of tuition, or financially involve the educational institutions.

CEO or Physician?

stethoscopeI’m working on a long article. Here is a short excerpt. What do you think is the best metaphor for a local pastor?

There are a couple of occupational metaphors for someone going into a full time ministry career. The rise of the mega church over the past 25 years has led some to equate the lead parson as the “CEO” of the local house of worship. One potential problem of this metaphor is the primary ‘work’ of a faith leader doesn’t have anything to do with that of a CEO. Eugene Peterson says “The pastors of America have metamorphosed into a company of shopkeepers, and the shops they keep are churches. The vocation of pastor has been replaced by the strategies of religious entrepreneurs with business plans.”   A better metaphor might be faith leader as Physician of the Soul. The origin of that saying goes back hundreds of years, probably predating a famous sermon by George Whitefield in the mid 1700s. The phrase is taken from Jesus famous retort to those questioning the company with which he chose to keep “Healthy people don’t need a doctor – sick people do.”

The primary work of a faith leader is to tend to the spiritual health of those in their care. For that reason I really like the analogy of faith leader as a physician of the soul. My proposal is this: The way the medical profession educates physicians is a good example for how we should be educating occupational ministers.

Debt and risk taking – article reflection

AtlanticDoes debt influence risk taking? In this article on Millennial entrepreneurs, that is one of the propositions:

The answer begins with more debt and less risk-taking. The number of student borrowers rose 89 percent between 2004 and 2014, as Lettieri said in his testimony. During that time, the average debt held by student borrowers grew by 77 percent. Even when student debt is bearable, it can still shape a life, nudging young people toward jobs that guarantee a steady salary. Entrepreneurship, however, is a perilous undertaking that doesn’t offer such stability. There is also some evidence that young people’s appetite for risk-taking has declined at the same time that their student debt has grown. More than 40 percent of 25-to-34-year old Americans said a fear of failure kept them from starting a company in 2014; it 2001, just 24 percent said so.

Assuming that hypothesis is true, what risks are required for those going into Occupation Ministry?

Are church planters inherent risk takers? Does a candidate need a willingness to relocate? Do financial constrains restrict a pastors ability to start with a small congregation? Are church staff less likely to stand up to improprieties in leadership if they are financially stressed?


Here is a long article published last week in the Boston Globe:Capture

LINK: The College Debt Crisis is Even Worse Than You Think.


It raises a lot of tough questions about the role college plays in escaping poverty. It’s a tough subject. I’m speaking tomorrow to 25 students on the risks minority students face when taking out student loan debt. In my talk I highlight ‘Layers of Risk‘, including the graph you see here. When you combine layers of risk, the stakes change. For example in the graph, you’re slightly more financially healthy as a black male then a white female – primarily because of the Gender Pay Gap. But when you add an additional layer of risk – being a black female, the numbers jump. Add additional layers of risk like being born into poverty and the numbers jump further.

Email me with thoughts or questions.

Student Loans in the News

USA TodayAs I was traveling a couple weeks ago, I picked up the March 29th edition of USA TODAY. In the Money section Peter Dunn had written an article specifically addressing adult children still living with their parents. But what really caught my attention was the following paragraphs on student loans:

I’ve come to the conclusion that asking 18-year-olds to commit to tens of thousands of dollars of debt, without a job, income or assets, is among the stupidest thing modern society does. When you have no concept of money, what’s the difference between borrowing $20,000 or $50,000? You certainly know there’s a difference now, but you didn’t when you were 18.

Student loans can convince you that money doesn’t matter. Debts tend to do that. You get the benefit of the purchase without having paid for it. Obviously, this idea isn’t limited to student loans.

His line “You get the benefit of the purchase”  popped into my mind when I read this article today:

Forbes: The Scary Truth About Millennials and Student Loan Debt

The opening line of that article reiterates a similar idea – “out of sight, out of mind”. One of the most important things financial counselors like myself can do is bring people into an awareness of their current situation.

Changing Cultures

American Fish65 years ago, in post World War II America, there were major social and economic power structures that provided an easy path into occupational ministry. The vast majority of citizens attended a faith based service at a church founded by a national denomination. If you felt called into occupational ministry, you could pick one of those national denominations and follow a clearly defined path to ordination. After ordination, you could rely on that denomination calling you into an entry job and a clearly defined occupational path.

This was extraordinarily effectively. It’s hard to over emphasize the influence of “Methodism” to all aspects of American culture. American’s LOVE the concept of applying a ‘method’ to everything from making Ford Model A’s to making the next generation of pastors.

There was an obvious backlash to this version of cultural Christianity. That led to the Jesus Movement of the 70s which directly led into Calvary Chapels and Vineyards. I had a church planter from the 70s tell me that all you had to do was plant a ‘cool’ church and they would fill right up. I believe these churches really connected culturally with the counter culture movement of the late 60’s and 70’s. Instead of a priest or pastor in robes with a pipe organ, you had pastors in jeans and rock and roll worship.

That movement is (or has) waned. We are in the middle of another major religious cultural shift. Into what I don’t know, but you can’t just plant a ‘cool’ church and you haven’t been able to for a decade or two. (For what it’s worth, I think we’re moving back toward a version of “liturgy” and the grounding nature of old church traditions. I think the unmoored feeling of modern culture is driving us back toward practicing faith in a manner our forefathers did. For example, we are seeing a rise in young Episcopal’s and evangelical Catholics.)

The point of this is that there were two major cultural trends that have lost some footing:

  • If you go to college, you’ll have a job for the rest of your life. This idea goes back to the 1950s and factory mentality. A college degree isn’t a guaranteed job. A job isn’t a guaranteed career. And a career isn’t a guaranteed pension in retirement.
  • There will be a clearly defined occupational ministry career path. Either from your denomination, or local congregation, or society.

I don’t think this is a reason to panic. In fact, I’m excited. I think this is a wildly transformational time in our culture and power structures (religious and otherwise). I strongly believe in the value of a solid Theological Education, and I don’t think a changing society or job market undervalue that at all.

But the reason I write this blog is that the changing times require greater FINANCIAL prudence in navigating the path to occupational ministry. You cannot follow the path of our parents and grandparents. I believe it is also very difficult to go into ministry following the cultural norm of the day – accumulating large amounts of student loan debt.

Instead, to Graduate Free we are going to have to take the path less traveled. The path of minimalist living, working our way through school, fundraising, Ministry Residency’s, and being shrewd shoppers.

I am here to walk with you. It is a journey worth making, and you can do it!

The Volatility of Time

changingWhen times are good, be happy;
but when times are bad, consider this:
God has made the one
as well as the other.
Therefore, no one can discover
anything about their future.

Should I pay off my mortgage or invest in the market?

I’ve been asked variations of that question many times over the years. I’ve read many of the experts and thought about how to apply that in practical principle to my own life. The easy answer is: It depends on what the market will do. The difficulty of predicting the future is the uncertainty of it all….

Of course the root of this question applies to all personal debt, especially ‘good debt’ like student loans – both how much is ‘safe’ to take out, and how quickly should it be paid back. The problem with debt is the inflexibility of paying it off. I have a short equation to help us understand this:


We talk at length here about debt, and we’ve discussed risk, but most of us don’t understand how Time adds to our risk. Risk is the great part of personal debt that we don’t understand for two main reasons:

  • Over time (1, 5, 10 years) when we don’t have any major pain from debt, we get comfortable with it so we stop feeling it as risk
  • Our brain is specifically bad at predicting how we are going to feel in the future

To understand risk better, we need to understand the Volatility of Time

There is a time for everything,
and a season for every activity under the heavens

If we were to oversimplify the future, we would say it will contain good times and bad. Some times are even the best and worst at the same time, as Dickens famous novel opened. What we often fail to feel is what the author of Ecclesiastes was articulating – that life and seasons and times are full of good and bad. This is the way it is and will be but the current season won’t last forever.

Without wisdom, we humans are spectacularly bad at understanding the ebbs and flows of the times in our lives. When times are good, we double down on risks. I’ve helped a lot of people buy a house with twice the square footage after landing a higher paying job. Or when the housing market goes up, I’ve helped homeowners sell their recently appreciated house and roll the equity into a down payment for an even larger house. Of course, both of these came with much larger mortgages. It would be easy to put these people on blast if I didn’t do it myself. Working on 100% commission for over a decade, I’ve had my income either double or go in half four times. Wanting to live at peace inside that volatility has offered me a lot of time over the years to think about that means.

In addition to assuming good times will last forever, we often fail to understand the economic cycles that can undermine our ability to pay debt over time. Here are a couple of cyclical things that happen that are completely out of our control:

  • Wholesale industrial change (Newspaper jobs, factory jobs, etc.)
  • Our physical health
  • Regular economic cycles (recessions, booms)
  • Geographical shifts in availability of jobs (moving into cities, west, etc.)
  • Cultural changes (see: declining denominational participation)
  • Political stability (taken for granted in this country for several generations)
  • Supply and demand of labor (a law degree isn’t that valuable if there are more attorneys then jobs)
  • Individual companies closing (causing job loss)

All of these things are cyclical, but it’s highly likely that one of them will cause a change/gap in income in your future. It’s been widely reported that the average person will have seven careers in their working lifetime.

Now listen, you who say, “Today or tomorrow we will go to this or that city, spend a year there, carry on business and make money.” Why, you do not even know what will happen tomorrow. What is your life? You are a mist that appears for a little while and then vanishes.

Living with wisdom requires living in light of both good times and bad. The danger of debt is that it presumes upon the future. Its risk is higher if you carry large amounts of it over longer times.

Because time is a variable, you can greatly reduce the risk debt brings into your life a couple different ways:

  1. Exit Strategies

Good investors figure out how many ways they can ‘get out of a deal’. If you buy a building and the market changes you can rent it, renovate it into a different use, sell it for a loss (but get out of the deal), find different investors, hold it until the market changes again, or even give it back to the lender and declare bankruptcy. The more exit strategies you have UPFRONT, the more you can mitigate the risk. Many of these strategies involve getting out NOW, should the times change in a way where you don’t want to/can’t hold the debt for long periods of time.

This is one of the scary parts of student loan debt. Because you can’t declare bankruptcy and there isn’t a sale-able asset securing the debt, your ability to get out now is severely limited.

  1. Aggressive repayment

When you pay off a debt quickly, you acknowledge time in the equation. It’s why wealthy people say the number one key to building wealth is getting and staying out of debt. Without debt, your ability to navigate a future bad time is greatly improved.

Larry Burkett told a story years ago in one of his books (that I can’t find, but am remembering from memory) of a small business owner that used a line of credit at his local bank to help smooth out cash flow. He owed around $100k on the line of credit, but didn’t consider it much of a risk because he also had around $100k in cash at the bank. This arraignment worked quite well for some period of time. Unfortunately bad times hit during the savings and loan crisis of the late 80’s and his bank was shuttered. If I’m remembering the story correctly, as the books of the bank were settled his note was called due immediately by the auditors. Unfortunately, his $100k in cash was tied up in the assets of the bank and wouldn’t be available to him for months (if not years) until all the bank’s assets (his debt) were liquidated to pay the bank’s liabilities (his deposit). Even though he didn’t lose any money (FSLIC insured his deposit), what he thought was liquid (his cash deposit) became illiquid, and what he thought he could pay over time (his debt) became due immediately. Time caused a financial emergency.

I experienced a much smaller version of this same thing when my employer when out of business about 10 years ago. Our daughter had just been born but the medical expenses of her birth were not paid by my company/insurance because the assets of the business were frozen until all its accounts could be settled. My wife and I ended up paying about $4,500 to prevent the hospital from sending the accounts to collections. A year or two later, that money was released from the company and by God’s grace we were refunded all the money we had paid.

Time presents risks that are very difficult to prepare for. The point of calling it an ‘emergency fund’ is that we don’t know what the emergency will be, but we are prepared because we know there will be one over time.

Take a lesson from the ants
Learn from their ways and become wise!
Though they have no prince
or governor or ruler to make them work,
they labor hard all summer,
gathering food for the winter.

The lesson of this proverb – the seasons WILL change. Make a plan and execute it while you have the opportunity. When times are good, reduce your risks. When times are bad remember that no season lasts forever.

Does the amount of debt I’m considering only work out if everything goes well? How aggressive should I be in paying off debt once I graduate? Make a financial plan that accounts for all seasons, both good times and bad.

How am I reducing my financial risks over the next 1 year, 5 years, 10 years?

Student Loans: Warnings from the Mortgage Crash

crash_wsj“Default rates identify only a fraction of delinquent borrowers — those who have actually defaulted on their debt. They overlook the much larger shares of borrowers who are neither repaying their loans nor in default….that includes borrowers who are delinquent or whose loans are in deferment or forbearance or in repayment plans in which the balance is growing rather than shrinking.”  (SOURCE)

I began working in the home mortgage business in 2002 and I stayed in that line of work originating new loans right through the economic meltdown of 2008 – a meltdown caused in no small part (primarily even?) by bad home mortgages that defaulted.

I originated “A” mortgages – none of the bad credit or high interest rate loans that dominated the defaults. But prior to 2008, more and more marginal loans were being squeezed into the category of “A” loans. Those loans could then be packaged and sold on Wall Street as “A” paper – even though those of us originating on the street knew better.

Some of the key terms of these ‘marginal’ loans that I originated look stunningly like what I’m seeing in student loans right now. We originated loans that had key characteristics that made them different from traditional 30 year fixed rate mortgage loans:

  • Negative Amortization Loans
  • Interest Only
  • Adjustable Rate Loans (ARMs)
  • Zero Down Payment Loans

I’m seeing eerily similar terms duplicated in student loans right now.


Washington Mutual was the biggest supplier of these and anyone could broker loans to them. If you’re not familiar, a Negative Amortization Loan has a minimum payment that is LESS than the interest that is accumulating – meaning that each month the balance of the loan actually goes UP. This ‘snowball’ effect causes you to pay interest on interest causing the balance to rise even faster. It wasn’t a surprise to those of us in the industry when in September of 2008 WaMu was one of the first large banks to be placed into receivership by the FDIC and ultimately their assets were sold to Chase Bank.

A student loan can be set up this way today. If you set up Income Based Repayment (based on a percentage of your income – NOT based on the interest accumulating or the balance of what you actually owe) with a payment LESS than the interest accruing each month the extra interest is rolled into the balance of your loan and the principle of your loan goes UP.


These loans provide an extremely low payment – just enough to cover the interest on the loan. You can still do a Home Equity Line of Credit (HELOC) on your home with a minimum payment – an “Interest Only Payment” – that just covers the interest.

In student loans, I see a version of this with forbearance and deferment. It is a financial ‘kicking the can down the road’ that doesn’t require the balance to be repaid. For a variety of reasons, you can stop payment on your student loans for a period of time without them becoming delinquent. In some instances, the interest doesn’t stop, it is just rolled into the principle of the loan.


Prior to 2008, we had a portfolio of home loan options that offered very loan rates that could adjust in the future. Some of those loans were quite good – the mechanics of the loan caused the interest rates to drop and stay low for years. But an adjustable rate loan is in its nature a loan that passes the risk of future higher rates from the bank to the borrower.

The government has structured student loans in a way that also passes this risk on to the borrower – albeit in a different way. Unlike a home mortgage in the example above, the interest rate on a student loan is fixed for the life of the loan. But the government can change the rate each year – and most students borrow one year at a time through school.

The government is essentially borrowing money through 10 year Treasury Bills at around 2.16% today and lending back to us between 4.29% and 6.84% (WITH additional fees from 1%-4.2%). If the cost to borrow goes up next year, they will pass that risk on to the borrower with higher interest rates. If the cost to borrow goes down, they can lower the current interest rate and still have all the profit from the previously originated loans locked up.

Needless to say, the math on a Trillion Dollars lent at those margins is staggering – Student Loans are EXTREMELY profitable to the government. My back of the napkin math estimates that student loans profit (not revenue, profit) of $51 Billion in 2013 is more than 35 states collected in GROSS federal tax revenue. The entire Federal Department of Education only has a budget of $67 Billion.

Sadly, this amounts to a massive tax on the poor, lower middle class, and those bad at math.


We originated a lot of 80/20 loans – home purchases that were funded with one mortgage covering 80% of the purchase price, and a second mortgage covering the remaining 20% so the home owner could buy the home without any down payment at all. One of the biggest buyers of these loans was Bear Stearns, and we were even able to do these loans through them on 2nd homes and investment properties. Needless to say when property values dropped, someone owning an investment property in which they didn’t have any of their own actual cash into was quickly moving toward default and foreclosure. Bear Stearns was profitable with $18 Billion in cash reserves on the very day it went bankrupt. Stop for a moment and just think about that.

Current student loan policy allows students to take out 100% of the cost of their education and borrow well above the actual costs for living expenses. This “Buy now, pay later” takes away any financial pain from higher education. Some amount of pain might be a good idea. It may cause the borrower to pause and realize: “This is a big deal. It’s expensive. It’s important. I don’t want to waste this opportunity.”


Layered together, these risks are very difficult to calculate. We are terrible at understanding layers of risk.

The quote I began this article with was taken from this article. It makes the point that Default Rate isn’t a complete picture of student’s ability to repay because of deferment, forbearance, and super low income based repayment options. And it offers this stunning statistic:

At 475 colleges, more than 40 percent of borrowers had not paid a single dollar toward their principal as of three years into repayment, according to a Chronicle analysis. …. At 171 of the 475 colleges, more than half of borrowers were not repaying their loans.

As someone who worked and lived through the pain of a massive reorganization of the entire mortgage industry because of poor lending guidelines, this all sounds very familiar.