Welcome to Michelle is Money Hungry, a podcast focused on having real and empathetic conversations about the intersection of money, policy, and politics. In my view, personal finance and money isn’t just about working hard. I’m spending the ENTIRE SUMMER talking about the potential for student loan forgiveness, the cost of education and is this policy an overreach or necessary?
With inflation rising and millions of students about to have their loans come out of being paused due to financial policy enacted during the COVID pandemic, this policy is living rent free in my mind. What will happen if Student Loan Forgiveness actually happens and what will happen if the Administration decides to move away from this policy? My guests and I will talk about everything that gets lost in all the noise of politics, tweets and everything in-between. Is college really a part of the American dream and is the cost of college a problem?
For those of you who don’t know, I used to have a ton of unsecured debt. It took almost 8 years to pay off over $60,000 in every kind of debt that you could imagine. Credit cards, payday loans and other random debt. I don’t even want to get into my student loans. That’s why I’m doing this series.
I hope you enjoy the conversation that I had about student loan forgiveness with the college investor founder Robert Farrington. Listen on!
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CashFreely
As a result of my debt experience, I was really skittish about ever getting another credit card. I hate to admit that when it was finally time to sign up for my first card in years-I chose badly. I hate this new credit card and I wish that I had known about CashFreely when making this decision. What I love about this free tool is the following. It helps credit card users stay organized when using different cash back programs.
You don’t have to worry about leaving cash on the table. CashFreely helps credit card users optimize the different cash back rewards programs that may be a part of current cards you’re using or future cards that you may be considering in the future. And just maybe, that extra cash can be applied as an extra payment on your student loan. Again, this is a free app or you can use the website and I think you should check it out. Click on the link in my show notes
Disclaimer: This show and series is for entertainment purposes only. Do your own research and communicate with your student loan service provider.
Listen to the Show
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Show Notes
Robert Introduces himself and briefly shares the The College Investor origin story
Michelle-“How did you get into creating College Investor? “
Robert-“It was honestly, unintentional, I was side-hustling. But, my friends were like “Hey, that’s great but I have student loans.” I also had over $40k in student loans. What does any good blogger do when you have a bad experience with student loans? You write about it.”
He wrote about it and the article was one of the first of his posts that went viral. That experience really opened his eyes that there was a problem and changed how he approached his content.
Michelle-“Do you ever talk about the choice people are making in terms of going to college and the opportunity of cost and deciding if it makes sense to borrow money and what about the people who don’t finish school?”
Robert “Yes! I want to get my message with folks in high school and it actually hasn’t resonated. But, the real framework I use today is an ROI framework. The number #1 or #2 reasons why students go to college is to earn more money. But, if you spend too much it could be a negative ROI. If you don’t pay anything it could be a much higher positive ROI. The fact is psychology plays a huge role in this decision making and social pressure and community pressure that impacts choice. There are so many other educational options that are a good or better fit than college for these students.”
Michelle-“I used to work with international students for a long time and one of the students that I met was a girl from Switzerland who had begun her nursing training around the age of 14 and part of her education was getting the training in this field. I think about that student often because she was getting that training and already getting paid. I remember deciding where I was going to college and the decision was which school provided the most funding for the cost of school. GenX and older millennials didn’t have access to social media and people being transparent around school cost.”
Robert-“Just like every other money topic we’re influenced by what we see. But, when we were in high school, technology was the way to do it. My high school had eliminated all the trade skills and these were required electives and no one is exposed to anything other than that. I was lucky, my wife’s dad was a lineman making over $200k a year for the electric company. But, if you don’t see that, how would you know? The irony is, last year, the high school I went to began teaching trade skills again.”
Michelle-“Last year we had to get plumbing done and the plumber was working on 4 different projects in my neighborhood at the same time. His wife showed me their home and it was a mansion. They couldn’t keep up with all of the work that they were getting. I’m wondering, what if anything, have you noticed in your community and the community that you serve around the conversation around student loan forgiveness?”
Robert-“It’s such a polarizing and divisive conversation and that’s what I’ve been seeing. But, I also find that there is this huge gap in what it actually means. A lot of people don’t realize what’s already out there even before any changes in the law. People don’t even realize who owns their loans.”
Michelle-“If you were working on this policy what would be the top 3 things that you would do?”
Robert-“Student Loan Forgiveness would be a part of any solutions but I think it needs to be tied in to fixing the root cause of the problem. How can these loans be so toxic that we have to fix them. But, they are not so toxic that we keep lending them. We need to help those that need the assistance. There is this segment that could go up to 18 percent of folks that we definitely need to help. The Fresh Start program is one of my favorite programs. We have to figure out how to be accountable to college costs. Undergraduate student loans on the federal level have caps on them. Every single story you see in the media are typically graduate loans or parent plus loans that don’t have caps. Graduate schools are the profit centers for most schools. We have to cap the lending. We also have to look at the private marketplace as well. Private student loans are a small portion of the loans outstanding. You really have two problems: current costs and people who are currently in the system.”
More Student Loan Forgiveness with The College Investor
Michelle-“I would like to talk a little more about private student loans. What are your thoughts about bankruptcy and the ability to even include these products in bankruptcy settlement.”
Robert-“90% of all undergraduate private student loans require a co-signer because these banks aren’t dumb. The other thing that people aren’t talking about is Student Loan refinancing. Those are private loans. A lot of people didn’t realize that they took on private loans when refinancing their loans. Federal loans are difficult to get discharged in bankruptcy because there are income driven repayment plans. A judge would refer back to Federal law that is supposed to help borrowers. Income driven repayment plans circumvent an additional judgment to give the borrower financial relief.”
Michelle-“What would you advise a high school student re: paying for college right now?”
Robert-“Ideally, you want the student loan slice to be small. Earnings, scholarships and grants, work study, navigating your college choices and federal loans first vs. private loans. There are all of these funding slices and focus on minimizing the cost. It’s all about the ROI. When you and I were in college, Glassdoor didn’t exist. There’s data by major and what you do. For example: engineering degrees are 95% likely to give graduates a positive ROI. If you go into art and music (don’t be mad at me it’s the data) 65% get a negative ROI.”
Michelle-“One of the things that really surprised me before I did this series I discovered that most predatory loans are federal loans paired with for-profit schools. What is your observation around the lending that is related to those schools. What is going over there?”
Robert-“You go back to 1970 95% of all colleges were public or non-profit. Now, 60% of the schools are private for profit schools (by number vs. enrollment). Such as cosmetology/barber schools/etc. These are technically graduate schools that don’t have a cap on lending and the Federal government will give them these loans. The financial aid program puts out a list of the schools with the highest defaults 18 of the top 20 are barber shops or cosmetology and these students typically need certificates in order to work in those spaces. The argument against caps is that it may disenfranchise folks from going to school. And, they’re right. But, there’s the moral hazard issue. The benefit of caps is worth the risk.”
Michelle-“If you were advising an administration on this topic of Student Loan Forgiveness?”
Robert-“They need to educate the American populace a lot more on what is going on right now. Navient and Nelnet are contractors for the Federal government and we need to hold our contractors accountable for their work. I would love to see SLF expanded. You work for 10 years and any balance should be forgiven. We as a country say that we value public service. Part 2, who pays for that forgiveness? The college connected to the loan. Here’s why-the school will be held accountable for those loans. Collegescorecard.org They should pay if they’re overcharging. You’ll probably see 1,000 schools close and that tells you about those schools. “
Connect with Robert
The College Investor Audio Show
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