Tag Archives: student debt

College Isn’t All That

Over the last couple of years with the rise of ‘Democratic Socialism’, aka Socialists masquerading as Democrats, the idea of free college has been making a lot of headlines and gaining some traction within certain circles.

Although entirely flawed, the premises for this idea is as follows: There isn’t enough job opportunity without college degrees, which has resulted in unemployed and underemployed Americans, and the only remedy to this is to get more kids into college. Because without a college degree, people become criminals. But we can’t send more kids to college because it’s too expensive. Rather than finding ways to make college tuition itself less expensive, let’s simply pay an exorbitant amount of money to send everyone to college ‘for free’.

So that’s the idea. That horribly flawed chain of thought has led to the popularity of Bernie Sanders. In fact, Bernie said:

Implying that if you don’t go to college, you’ll go to jail, which is the roundabout way of accusing anyone opposed to jacking up taxes to pay for every kid to go to college as a heartless person who wants to see more minorities end up prison. Essentially.

But the fact is that college isn’t all that. There are plenty of ways to become successful without a college degree.

What has me annoyed and disgusted the most with this whole notion of free college for everyone is that it’s based on a series of false notions, it presents a false dichotomy, it attacks symptoms rather than root causes, it’s redundant, and it would in fact have the opposite effect as intended – meaning it would cause tuition to increase thus making college even less affordable, all of which I will explain below and back up with logic.

Camp Kool-Aid

These days most colleges are simply liberal indoctrination camps. I think a huge part of the reason for Democrat’s wanting more of America’s youth to go to college is to drink the liberal kool-aid and eventually join the ranks of the Democratic party. With their anti-free speech safe spaces, pro-Hamas antisemitism rallies, and trying to oust ROTC and Border Patrol kiosks from campuses and job fairs, you can see how today’s American college campus is the perfect breeding grounds for American liberalism.

Many college campuses are now not only anti second amendment, they are also anti first amendment with students and faculty being suspended, expelled, or fired for expressing things considered to be offensive.

False Dichotomy

Forget for a moment the political posturing related to the free college discussion, and lets circle back to what caused it in the first place. If you ask Bernie Sanders, we need to send kids to college because if we don’t they’ll likely end up in prison. That’s the false dichotomy being presented by the liberal left to America’s youth today: Get a college degree or fail at life.

In response to a like remark made by Sanders, television personality Mike Row had some very interesting things to say where he gives myriad ways to become successful without college, include his personal experience.

Neither my mom nor dad have college degrees, but both are very successful. But what about my generation? Some friends my age, who I went to high school with and who don’t have college degrees are also very successful. I know a handful of people who have college degrees and aren’t successful. And there are people like myself (I consider myself successful) who have a degree and don’t use it in the slightest bit. Had I known I could make as much money as I do without a college degree, I would have never gone to college and started out in my career five years earlier. Just don’t tell my mom.

The always-and-only-college mentality has left a huge blind spot in the American workforce. We’re actually experiencing a shortage of much needed occupations such as plumbers, electricians, mechanics, and other blue collar and vocational related trades. Despite the fact that one can make a good living without working at a desk from 9-5, certain occupations have been framed by society as being lowly, which is a shame.

College Isn’t for Everyone

It’s a waste of money to effectively give every student free education because many of those students will end up pissing away the money we spend on sending them to school. Not every person is made for college. This isn’t to say they are stupid, but that college is a very specific model that isn’t compatible with how everyone learns and thrives.

I have a close friend that has been in college for well over eight years without any measurable progress.  A relative of mine has been in college for 11 years without any degrees to show for it. No bachelor’s degree. No associate’s degree. I love both of them, but they are real life Van Wilder’s, and I think it’s safe to say neither of them will get a college degree.

I certainly don’t think it would have been a good idea to subsidize their education with anyone’s tax dollars because it is clearly working out to be a poor investment. My friend and relative are just two people out of nation of millions. Imagine how many other students would find themselves in similar predicaments, and how much tax payer money would be wasted on a large scale if we sent everyone to college.

Musical Chairs

Taking the previous point and expanding on it, aside from the cost factor of sending incompatible students to college, doing so would also make it increasingly difficult for students who legitimately could benefit from college. As it stands, most US colleges are already impacted. Kids with 4.0 GPAs and all the right motivation have a hard enough time as it is getting into the college of their choice, and the class and programs needed to complete their curriculum. And that’s with tuition costs being as astronomical as they are. If we lowered the bar so much that anyone with a pulse could join college on a whim, imagine how much the current problem would be exacerbated.

Cause and Effect

I don’t think too many ‘Berners’ have really put any thought into why college tuition costs are as high as they are – the root causes. Instead, all their efforts are focused on the ‘evil banks’ that finance student loans, – the symptoms – but for some reason they don’t have the same animosity towards the genuinely evil college system that charges such exorbitant rates in the first place.

After all, if colleges weren’t ripping students off with such high tuition, the student debt problem wouldn’t be so much of an issue. And if colleges are being such douche bags and ripping off students, why are parents so hell bent on sending their kids there? How can a liberal dominated college system be both the cause and solution to all of your financial woes?

Pro-college people argue that you need to go to college to get a good job to make money. And these same people are the ones reeling from hundreds of thousands of dollars of student loan debt accumulated during their stint at liberal colleges. So what is college? Plague or panacea?

Another relative of mine posted the following image on Facebook back in February that shows the tuition change at Yale from 1970 to 2014, against the federal minimum wage of the time. Oddly, the image’s point is to use higher tuition costs as justification for increasing the minimum wage, as opposed to attempting to simply lower tuition costs, which are arbitrarily set.

yale college tuition minium wage
This image is incredibly misleading if for no other reason than Yale is in Connecticut where the state minimum wage in 2014 was actually $8.70 per hour, and it was $8.00 per hour in neighboring New York, Massachusetts, and Rhode Island. Well above the federal minimum wage of $7.25.

I did some homework. Let’s say this image is accurate and that the tuition at Yale went from $2,550 in 1970 to $45,800 in 2014. That is 17.96 times higher, or a 1696% increase.

We’ll yeah Andrew, it’s called inflation! Duh! Just one minute though…

If we take that 1696% and divide it by the time span in years to get an average tuition percentage change per year, we get 1696 / 44 years = a 38.54% annual increase in tuition.

Compare that with the average US inflation rate of 3.22% over the last century, or even the average US inflation rate over that same period of time (1970 through 2014) of 4.08% (sources). Using these historical figures, Yale’s tuition grows nine times faster than inflation.

Basically, if Yale’s tuition moved at the rate of inflation, that $2,550 tuition in 1970 would have been about $14,815 in 2014. So why was it $45,800 instead? Maybe the problem here isn’t the banks financing the tuition. Maybe the problem is the universities who set the tuition. And perhaps supporters of more affordable college need to be scrutinizing the universities they hold in such high esteem.

Gateway to Extortion

The irony of this whole thing is that there is no surer way to increase college tuitions costs than by giving everyone free college. Liberals are determined to get free college for all at any cost, and they might succeed in ways they didn’t hope to.

If colleges around the country know that the US Government is writing blank checks to cover college tuition, what do you think is going to happen to tuition? It’s going to skyrocket. And it doesn’t matter what kind of clever legislation our politicians throw into the mix, the colleges are cleverer, and somehow, someway, they’ll find a way to take advantage of the situation and rip off the taxpayers.

Frugal Alternatives

These days, those of the left persuasion believe that the solution to any problem is to throw more money at it. This has led to the false belief that if you spend a ton of money on college as opposed to less money on technical or vocational school, it will always translate into higher pay. Or that a degree from an expensive, prestigious university will provide for better job opportunities post college.

Both of these myths have been largely debunked, and even in the rare instances where say a degree from Harvard will earn you higher income than a degree from SDSU, the extra income is negligible, and actually comes at a loss when taking into account the net difference between post-graduate pay and overall college expenses. If you spend 2x more on tuition, and make even 5% more per year after college, it would take you 20 years of working to justify (earn back) the higher tuition cost.

Many students want to go to the college of their dreams. And while following your dreams sounds, well, dreamy, when dreams start to conflict with reality there’s a problem. These students insist on attending some far away university, where they’ll get strapped with significantly higher out of state tuition costs, plus the added expense of room and board. All of which they could have avoided by simply going to a local, in state university and living with their parents for at least a portion of their college career.

Ultimately, college is a financial decision. Not an emotional one. So students, and more importantly their parents, need to start looking at college options closer to home where they can take advantage of the lower in state tuition. Take it a step further and consider attending a community college for as many semesters as possible and students can save tens of thousands of dollars per year on their education.

My freshman, sophomore and junior years were spent at Grossmont Community College where my cost per semester was about $600 (with books) as opposed to the $5,000-$7,000 it would have cost me at SDSU. I transferred to SDSU in my senior year where I finished my bachelors degree and graduated in the spring of 2009 alongside all my friends who went there for all five years, but in the processed I managed to save about $30,000.

We all want to have our dream house, our dream car, our dream vacation, our dream wedding, and go to our dream college, but the simple truth is that those things are often times cost prohibitive and well beyond our budget. It’s stupid to spend $50,000 on a BMW when you can only afford a $25,000 car, and it is just as stupid to attend an expensive college when you can get a degree every bit as good for a quarter of the cost. Some community colleges are also beginning to offer bachelor’s degrees of their own, negating the need for costly universities altogether.

Borrow Wisely

Another problem is that many students simply borrow when they don’t have to. Student loans should be used to cover tuition and books, and not much else. However a lot of students will finance everything they purchase while in college, from housing, to food, to luxury items like recreational spending and even overseas vacations.

This is unwise for a number of reasons. The whole point of a student loan is to pay off an expense you otherwise would not have had: college. However whether you attend college or not, everyone has food costs, housing costs, clothing costs. Just because you are in college, doesn’t mean your breakfast while in college is a college expense. It’s a living expense. Everyone has to eat. Students make the mistake of financing things they would have had to pay for even if they hadn’t gone to college. The result is that when they graduate you aren’t simply paying off five years of deferred tuition, they’re paying off five years of deferred life.

Additionally, students should actually start paying off, or saving to pay off, their debt while they are still in college. When you consider that student loans are basically the only loans in which the borrower is not charged interest for up to half a decade, student loans are actually the most relaxed form of lending on the market. You have 0% financing for 60 months! Don’t wait until graduation to start paying off your debt. Start on Day 1 of freshman year.

Reinventing the Wheel

The other hilarious thing about this recent sensation is that programs already exist to get college loans paid off easier, quicker, and so inexpensive that it is essentially debt forgiveness. About ten months ago I posted a blog written by my cousin-in-law Chris Johnson titled “The Truth About Federal Student Loans” in which he describes in amazing detail the government programs that have existed for decades to help alleviate student debt, and how such programs are alive and well today. It’s funny because democrats are crying for something that already exists.

In Conclusion

Liberals want to send more kids to college to be brainwashed into becoming liberals themselves.

There are many pathways to success, many of which do not included college. College is not a requisite for success.

Not every kid would do well in college, therefore giving every student free tuition would be a gross waste of money.

Because schools and courses are already impacted, sending ill-suited kids to college would jeopardize the education of students who actually are suited for college, by making it even harder for them to enroll in the classes needed for their degree and by spreading professors thin.

Yes, college tuition is high, but don’t blame the banks for student debt. Blame the universities for ripping-off the American public. Colleges across the country have routinely increased their tuition at a rate much higher than inflation would account for. Colleges need to be brought to task, not the lending institutions.

High tuition costs are avoidable though. By attending state universities and taking your general education requirements at a community college students can cut the cost of college in half.

Only finance college costs. Do not finance general living expenses. Students and parents should start paying off, or saving to pay off student loans from the very beginning. That debt should not be ignored simply because it is not yet due.

This is the truth behind, and the solution to the United States current student loan crisis. The fact is, college isn’t all that.

The Truth about Federal Student Loans

A million thank-yous to Chris Johnson for contributing this latest post to Canyoubelievethatguy.com. This is our second post from someone other than myself in the past two weeks and I am very excited and appreciative to have an additional author contributing to the site.

 His post touches on something that has been the subject of much debate recently – and that we’ll probably hear a lot about in the coming election cycle – and that is student loans, and whether or not college education and the tuition that comes with it is affordable for the average American. Chris was kind enough to get us past the fog and rhetoric, and give us some real hard facts about the issue.  Thanks Chris! -Andrew H.

Federal Student Loan Repayment Options

I was asked to say a few words on student loans. I want to start by saying that I think it is rather funny to me that after all this time in the student loan industry, the first person to ask me about this, the first person who actually reached out for information is, like me, someone who believes we already have enough tools to build a good life. Like me, he feels the game is already more than fair and that it simply requires effort, hard work and dedication. Of all the rants and complaints about free education, he is the first to ask me about this even though I have posted no less than 40 times, mentioned in conversation no less than 100 times that for most, education is already either free, or very affordable. And he asked me the first time I  mentioned it to him. To me, this says something about the people asking for more from their country vs those who ask more of themselves. Jim Rohn said it best, don’t ask for it to be easier. Ask that you become better.

With that said, I’ll jump right into it. The Federal Government has, already available several programs that allow federal student loans to become affordable. In most cases one can eliminate interest all together. I have been in finance for almost 13 years now. For the first 11 or 12 I was a Mortgage Banker. But for the last two, I have been a Compliance Officer for federal student loan programs. There are at least 7 programs available and they all serve a specific purpose depending on the borrower and where they are in life. But there are three programs that stand out. Three that literally offer anyone the ability to absolutely make their federal student loan debt affordable. The US Department of Education’s IBR (Income Based Repayment) option. Before I jump into the details,  I think it might be best to first touch on how student loans work, why they are so incredibly difficult to pay off and ultimately why they are such a problem in the US.

When you get a federal student loan, you are not taking out a mortgage. You are not qualifying for a car loan. You are taking out a heavy debt with a high interest rate you likely cannot refinance and one that will charge you interest daily. On top of that, it will compound daily. If you understand finance then you probably know at this point, most people are paying a negative amortization loan. This means that they are making payments on their loans and are not even covering the interest on a monthly basis. They are paying towards their loan(s) and the balance is actually going up.

What’s being done about this, nothing. Why? Because service providers of federal student loans have lobbyist in Washington that are second to none. The laws are not written to protect borrowers. They are written to make money. Same thing happened with mortgages and the US threw a fit. Regulation was again placed on the industry and and the entire industry was turned upside down.

 In the US, federal student loan debt exceeds car loans and credit card debt combined.

Who was to blame, the banks, the consumer? Personally I say both and I think the circumstances of each deal would have to be considered. But what scares me is that this industry is doing the very same thing and no one is even talking about it. No one seems to think its a big deal even knowing that in the US, federal student loan debt exceeds car loans and credit card debt combined. To make matters worse, a majority of this debt belongs to our young, our future. They are entering into the professional world behind the line. I will conclude this paragraph with probably the scariest and in many cases least known fact about federal student loan debt. You absolutely cannot get rid of them ever. With exception to these federal forgiveness programs and people that are 100% and permanently disabled (after the loans were acquired), these loans do not ever go away. In fact, they are on a short list of debts the government can actually garnish from disability and social security income. And make no mistake, they will. So if they are willing to take social security income from people living off of $800 to $1,500 per month, what do you think they would do to people in the work force?

So now we know federal student loans are very difficult to pay off. We know why student loans of $40,000 take 80 years to pay off while Americans in New York and Los Angeles pay off $600,000 to $800,000 mortgages in 15 and 30 years. And yes, we now know why a specific group of individuals are upset that college is too expensive. Well now we can jump back to the IBR programs offered by the US DOE. The William D. Ford Act was passed and authorizes the government to forgive federal debt. The IBR comes with it a very specific yet very short list of guidelines. Prove your income, tell them how many people you live with and they will determine what your payment should be. Do not worry about the interest. Do not worry about paying off the loan or loans.

First, they will consolidate your loans. Then, they will set you up with a term, 120 months (10 years), or up to 300 months (25 years) and or anywhere in between depending on the income and family size. They will take between 5% and 10% of your gross annual income as payment or less, again depending on family size. They evaluate this income annually. Every 12 months you must turn in one of three forms of POI (proof of income). Pay check stubs, tax returns from the previous year or bank statements in some cases. In some cases you may even be able to use tax returns from the year before last. If you are married and use returns (1040’s) they will base the payment off the borrowers AGI (Adjusted Gross Income). If you use pay stubs there is a chance you can separate the income, meaning the calculation for the borrowers payment will be based off one persons income rather than the combined income. If you already file separate returns, this too will allow the calculation to be based off one persons income. Even when separating the income, you may still use the full family size for the calculation. I understand this can become complicated and in many cases, people do screw this up. Service Providers like Naviant (previously Sallie Mae), Great Lakes and Nelnet should offer this service (and can), and for free. They don’t unless you are aware of them and ask. And if you ask me, trusting them to do it for you is like asking the prosecuting attorney to handle your defense while trying to prosecute you. Remember, they are paid off the interest.

There are also services available to assist in the evaluation and enrollment as well as management of these programs. If you seek this assistance out, under no circumstances, I repeat under NO circumstances should the consumer pay for these services until the entire process is completed. Not for any kind of application fee, not for any kind of processing fee. NOTHING, not a single dime until you are in and enrolled correctly. Even if they ask you to pay into some type escrow account, your talking to the wrong people. To add to this, these services are not a part of the program, and like the service providers borrows are already paying they do not work for, or are not a part of the federal government.

If you can manage this yourself, you should. If on the other hand you are the type of person who has a hard time with this sort of thing, or if you are not good at staying on top of things like this, I’d recommend the assistance. To receive the forgiveness or complete the program, the evaluation, like I said earlier must be completed annually, every 12 months until the term is up. Only then, when the term is up can you provide proof that the program has been completed. As a rule of thumb, I ask people this, do you do your own taxes? Or do you hire someone to do them for you? Use that same thought here. Another example I use for clients, if you get a speeding ticket, you would not hire an attorney to fight it. It simply wouldn’t be worth it. If on the other hand you hit and killed someone with your car (on accident of course) you would probably hire one. Well if you owe $5, $10 or maybe $15,k, that’s like a speeding ticket. $20, $50 or $100,k plus… Obviously I work for one of these companies. I assure you, they are quite compliant, it’s my job to make sure they are. If it is done correctly, if you are enrolled, maintain enrollment annually and keep up on the payment the government will forgive the remaining amount owed at the end of the term. You can still go into deferment or forbearance but you will not receive credit during this time towards the forgiveness. If you have an unstable income, or if you are not in a career type work environment, you may see income go up one year and down the next. No problem. The term will adjust accordingly. The best way to look at it, the higher the income, the higher the payment but the lower the term. The lower the income, the lower the payment but higher the term up to 25 years unless, you qualify for PSLF or PAYE.

PSLF is another program that falls under the IBR option. If you work in public service or non profit, the term is automatically 120 months or 10 years. This includes but is certainly not limited to: Police Officers, Teachers, Church employees, Soldiers and Nurses. Anyone paid by the state, the government or even local government like city and county employees. You pay an affordable payment, many times a payment of zero for 10 years and then your debt is forgiven. And this is not some kind of hand out, it is not a compromise. It’s simply an alternative to a standard amortization. Instead of paying off your loans, with a payment based on balance and interest, you make a payment based off income and family size and for a specific amount of time. The Government feels that they will get enough from you from the term set. They are willing to take whatever this amount comes to at the end of the agreed term. The difference here, with PSLF is that as long as you are employed by public service or non profit, you will be finished after 10 years regardless of how much you’ve paid towards your debt. Even if you’ve paid zero dollars. Another program, Pay As You Earn (PAYE) is similar, only the term is 240 month or 20 years. The PAYE program also starts at a lower percentage, meaning they only take up to 5% of the borrowers gross annual income. This program is for any employment type but the loans must have been acquired after late (end of November) 2007.

So in the end, anyone qualifies as long as the loan(s) are federal. There are private student loans as well and if you do not know what kind you have, you can ask your service provider. If you are familiar with FASFA or the DOE, you likely have federal student loans, not private. Or, if you want, my information is below. I’d be happy to assist anyone or refer them to an Account Manager that can. If you owe federal student loan debt, this is the best and most efficient way to repay them, period. The only exception, specific circumstances and loans. Parent Plus Loans are limited to one program and in some cases, the benefit is not all that great. Still worth looking into though. If you have consolidated and then defaulted, could be tough to get approved. Again, it cannot hurt to find out.

I will leave you with an example. A man lives with his wife, two children and his wife’s mother. So the family size is 5. His income is roughly $32,000 per year and is steady. I might add that with a family size of five, he could make upwards of another $5 to $7,k per year and his payment would be the same as it is now, $0 (zero dollars per month). He pays $0 per month, has been in the program 3 years and has thus far has paid absolutely nothing on his student loans. Based on his percentage increase in income every year, he will pay $0 for another 4 years. That is seven years with no payment. If he is lucky, and his income increases to what he expects, on his 8th year in the program he will qualify for a $10 per month payment. In the 10th year, his final year because he is a teacher, he will pay $40 per month. That means that he will pay $720 over a ten year period of time and on a $45,000 federal student loan. He entrusted us to manage this for him and the payment to us is $39.42 per month. Add that up over 10 years,  you get $4,730.40. So all together, he will pay $5,450.40 and he will not even have to think about interest. Not to mention, once he enrolled, his DTI (Debt to Income) ratio came down TO ZERO. His credit scores improved and his monthly affordability came up.

Compare this to what he was doing… $45,000 at 6.8%. He had just left deferment and had agreed to pay $450 per month. It would have taken him 12 years and 3 months to pay off and he would have paid $21,047.83 in interest alone. So he was on track to pay $66,047.83. Now, he will pay $5,450.40 and in less time. Show me a country that offers that, with the same amount of opportunity, same market and the same amount of citizens. Personally, I call that free education.

Chris Johnson, VP, Compliance for Student Advocates,  September 2, 2015

Chris’s Information is included below:

Cell: 562-231-4120.
Office: 714-473-1800.
Email: cjohnson@r3group.org