Category Archives: Roxipedia Musings on the biz of Higher Ed

In which I muse on what’s going on in the world of student lending.

Student Loans and Voices in the Wilderness

After thirty years in campus lending I have accidentally become either an authority or a dinosaur on the subject of student loans. I have worked for a univerisity, a student loan billing servicer and collection agencies. My stated goal from day one has been to help students understand what they are taking on with loans. My work with agencies has been to work with their client schools to help them understand how to keep students out of trouble. Believe me, reputable collection agencies only want the people that belong there–not the dummies who forgot to file paperwork on time.

The government is an awful loan manager.  Just ask any poor slob who is trying to get their loan discharged for permanent disability. Applications seem to disappear behind the federal doors and languish for months and months and months with no action.

Why is this student loan thing suddenly a crisis? Number one, big banks and private lenders no longer make loans that are tied to students and the government. They were forcibly kicked out of that pie and the federal government now makes all the major student loans that remain affordable. This does not include private loans a school makes from their own funds which would equal about three cherries out of the entire loan pie.

What are Americans spending and repaying these days?
•693 Billion in Credit Card Debt
•730 Billion in Car loans
•870 Billion in Student Loan Debt
A few more stats:
•40.1 %under 30 owe student loan debt
•25% age 30-39 have owe student loan debt
•Average student’s debt is $23,300
10% of all student loan debt is in default

You can’t get rid of a student loan in bankruptcy in most cases. 62% of all bankruptcies filed are due to medical bills, so why aren’t we howling at insurance companies? Chapter 13 bankruptcies are on the rise as people try to save their homes. 1 of every 250 homes in the USA was lost in 2010 due to foreclosure.

The problem is like a hydra.

Where did this problem come from?  Its a hydra with a bunch of heads.

Head one: The economy. Students graduate and can’t find jobs and when they can they are not the high paying jobs grads could walk into five years ago, putting them into deeper debt faster.

Head two: the cost of education is going up. Yes, school presidents make obscene amounts of money they don’t deserve but the rest of the folks in colleges and universities are not getting rich. The staff are chronically overworked and underpaid across the country. Faculty, not so much, but they are not getting rich either.  The infrastructure of schools is changing, technology is expensive and to remain competitive schools must invest in staying on the forefront to EDUCATE. This means the cost of attendance is going up too. Sadly, education in this country is not free or even low cost. Its a choice we have made as taxpayers and is in the same bucket as medical care. As a nation, we don’t want to provide it to our people so we don’t.

Students use loans for more than education--like paying for a wedding.

Head three: This is the one that infuriates me. The way we hand out money and handle students is completely insane and it does not work. Students fill out the FAFSA and based on arcane formulas they are offered a financial aid package. In many cases the students need every single dime they get, but in even more cases, the students take more money than they need to pay the costs of their semester/year of school.  Personally, I have seen students pay for cars and weddings as just two examples–with student loans. No counseling, just some paperwork.

The sad corollary: Some students at the age of 18, 19, 20 are entering schools they cannot afford to attend because they assume they will get enough money to go there in the form of loans. Nope. They take on a staggering debt load and have to drop out anyway when they cannot pay their school’s costs.  Just because you got admitted does not mean you can go there.

Head four: the big one and its tied to head three. At the age of 18, 19, 20 traditionally, students are entering college. Yes, many are coming back now in their 30s to get new job skills and how they add to the problem remains to be seen.  Here’s the thing, it is verboten for schools to speak to parents regarding a student’s debts without the student’s specific permission. Because of the way the law is written, students who have never balanced a budget, taken out a loan or had to plan for the future in a concrete way are now saddled with figuring all this out, historically with no help. Schools must give the students the money they accept and they cannot always determine where it goes. We hope in most cases they are saving to pay tuition, but the overage is given to students as a “refund”. This is money for books and to meet the costs of living to some extent while they are in school.

At my university the line of students coming in to pick up refunds was out the door and the down the hall–in the days before direct deposits. Refunds from $50 to $5000 depending on the aid they received. Many, many of these students are living in a dream world, “After I graduate I will get a great job, no problem”.  Most of them don’t even know how much they can expect to make a month in their chosen fields. Do you know how much a social worker makes? A teacher? Not everyone is headed into high paying fields and they don’t understand it when their reality checks bounce.

One major answer to this problem, IMHO, is FINANCIAL LITERACY! Every single student who takes out a loan should be required to take a course in FL and to UNDERSTAND that the future is now and these are freaking LOANS. You can put them off but they are piling up. Do you know how many grads don’t even know how many loans they have or who the loan holder is? Its simply amazing when you start dealing with these grads now living in the real world who suddenly have to figure out how to pay for apartments, utilities and transportation to and from jobs–and on top of that student loans. Defaulting on a student loan will completely destroy your credit faster than  anything else. No home buying for you if you have a track record of late pays–and that blot won’t be expunged for seven years until after the default is cured.

If we as a nation intend to hand out enough money to buy a Lexus or put a down payment on a house over the course of four years (or more) with no credit check, no job  and just a signature are we not being failures as lenders? We are taxpayers, this is OUR money. Why are we such crappy stewards? Why are we howling like banshees about the poor students repaying their loans when we should have helped them from the day we offered them these funds.

That’s my  big question. Why are we not helping them understand financial responsibility before they get in trouble? Some students cannot afford to attend school the way we have set up the system. Again, it favors the rich with endless resources. There is no shame in attending a community college for the first two years or working through school. A lot of us who desperately wanted our educations did just that. I worked a forty hour week, had three small kids and still went to school. I have no idea how I did it and I couldn’t do it again. But that brings up another question…where are the jobs that our students need to get them through school? What happens after they understand they will have to save and work to avoid sinking before they get a chance to swim?


Roxipedia: Thinking Outside the Box

I love people who think outside the box. In this age of teetering on the federal fiscal brink of disaster on a daily basis, low cost cleverness rocks my higher education world. 

During my tenure at Saint Martin’s University (I admit it was several years ago and much water has run under the bridge since then) we used humor and positivity to relate to students when we wanted their attention. We designed a logo for the office featuring a drawing of a dog and his sidekick dressed up as Wild West do-gooders, Pronto and the Loan Arranger. We used that shtick on post cards to be returned to us by continuing students and in setting up exit and entrance interviews and other communications.

Our school was Benedictine, and we had an abbey with monks as part of our campus. Naturally, our collectors became widely known as the Sisters of No Mercy and students brought them postcards and birthday cards with pictures of nuns which were immediately posted and shared. In my office, we worked really hard at developing relationships with students and helping them avoid the Sisters.

I believe students must have  face time with a real person in order to be comfortable calling for help when they get in trouble or have a problem. Relationships work and its worth the investment to build them even if most of our work is through technological media like the internet.   

Adding to the getting attention mode before the world was totally electronic, our exit packet was themed as a rocket launch, as in launching into the future with all the silly space metaphors as paragraph heads. There is no faster way to lose a student than with incredibly dry factoids, especially miles of them in tiny type.  You want them to read the stuff not just file it and forget it as so often happens.

The Loan Arranger, practically an antique by now. "Drawn" as a bitmap with Paint about 20 years ago. Good grief, where did the time go?

These days, this information is all delivered electronically and the potential for cool interactive features is amazing. You only need a pet programmer. Today’s tip: make friends with the IT guys on your campus, give them cookies, give them treats and be nice to them no matter what.

I realize I worked at a small school so I was able to get a pet programmer who was willing to work with me to implement what I needed.  Look at what others at schools your size are doing, go hunting for what is out there in the market place, and if you can’t afford it how can you model it?  I had a faculty in art school who told me, “Always steal from the best.” I’m not saying plagiarize but I am saying think about adapting what is out there with your own resources, especially if you are a small school with a small budget.

When you want to deliver something to a student think like a student. Yes, we are the grown-ups (in most cases) but we don’t have to repeat the parent-kid scenario that didn’t work for us as a kid or a parent.  You may remember it as the one where kids ignore parents like they are the dumbest, clue free creatures on the planet earth. Just transfer that scenario and if the shoe fits, change your shoes!

This one up/one down scenario can makes finance people seem to be the meanest in the world with our insatiable demands that students pay attention and pay their debts. Heaven knows there is just not enough time to fit the money part into their worlds, unless of course, it is 2:00 a.m. and they are on the internet. How do you combat this perception of unfair demands and maintain some control?

Tip: If you have a project try and get a student club involved, student buy in gives you a peer-to-peer connection, great new energy and a different take on the issues, and extra hands to get the information out there.

 SUNY Genesee Community College did something brilliantly outside the box, in this case sort of outside the litter box. They have a Stall Wall Monthly Newsletter that posts important information like deadlines, tuition costs, payment dates and refund dates inside every bathroom stall on campus. Everybody uses a bathroom so everybody sees it. How clever is this?

If all else fails, feed them. Food still motivates college students. Southern New Hampshire University, Manchester, uses Pizza Nights to get students to sign their eMPNs. Participants were all entered into a drawing for an IPod Touch as further incentive. Food and fun work as well now as they did 50 years ago. Somethings change but not student stomachs.

 My favorite clever trick for getting another type of students, those with past due balances, to respond is from a school in the Pacific Northwest. They bought brightly colored envelopes and stamped them with the return address of the school, just the street address and not the name of the dreaded Collections Office. They stamped “You’ve Won!” on the outside of the envelope and inside is a notice on more colored paper that says, “You’ve won a trip to collections if you don’t contact us regarding your past due balance.” It goes on to list the fact that they are there to help and some of the options available. Talk about hitting a mule over the head to get its attention, half the battle is getting their attention and the other half is getting them to respond. This worked really well because of the shock value but it takes a brave and fearless finance office to put this tool to work.

These are a few of the things I have discovered, what you have done or discovered outside the box on your campus? 

Why we need Fiscal Literacy Counseling
Swiped from the website Overheard Everywhere

Really skinny college girl: I paid my rent and then I spent the rest of my refund, $700, on this new Louis Vuitton (squeals and hugs the purse). But now I have 30 bucks to last a whole month. Looks like I’ll be dating for dinner or eating crackers.
College student girl friend: You spent twice as much on your bag as you did your rent! At least you paid your rent on time! Don’t worry, you’ll find dates. That purse is totally worth it!
Really skinny college girl: I know, right, I should just live in my purse. I think that is why married women get fat: they can finally afford to eat. You know my ass is getting fat when I get married.

overheard at IHOP
Dallas, Texas

Bankruptcy: Rabbit Wonders Who Fell Down the Rabbit Hole?

Who is Filing Bankruptcy?

I love this chart. It’s from 2008, but it really does give a nice window into who exactly is filing bankruptcy? In my world of student lending that’s a hot topic because in most cases you can’t get rid of a student loan by filing bankruptcy.

That may be slowly changing with the state of the economy and the plethora of predatory lenders who have saddled heedless borrowers with huge debt. That’s not to say the borrowers didn’t have their eyes wide open when they jumped into that swimming pool of molasses and then couldn’t get out.

I just read an essay called “The Frivolity of Evil” in a book called “Our Culture and What’s Left of It”, by Theodore Dalrymple. Dalrymple takes a dark view of society and he’s a little on the crispy side in his observations, but I took away an important point. A lot of humans make choices, really stupid choices when they know the outcome will be bad. They do it In The Moment. It’s easy to think about NOW and let the future sort itself out.

That pivotal place is where a lot of factors intersect.  Dalrymple interviewed a lot of women in terribly abusive relationships who had multiple children and  multiple partners. In every case the women knew the man was a very bad choice as a father and partner and still chose them for immediate gratification, hoping blindly things would work out.

In this instance, the subjects were all low income and coming through his clinic in England for treatment, but if we take that same thought and apply it to people who know on some level the loan they are taking is a bad choice, it makes sense. Personally, I have talked to  many students over the years who are desperate to finish their educations at any cost. They are just sure that diploma is the magic bullet that will make their dreams come true. Sadly, I don’t think that is the case in many instances and definitely not in this economy.

In my days at a university, I knew a 400 pound woman who got a teacher’s degree to teach first grade when she couldn’t climb a set of stairs to get to her classes. Of course she couldn’t get a job teaching rambunctious kids, yet the school eagerly took her promise to pay and didn’t counsel her on her prospects as a teacher.  The dilemma:  It was politically incorrect to mention her weight but it was  morally indefensible to leave her in debt to the tune of $30,000.00 she could never pay.

Things like this happen all the time. We live in an ivory tower in academia, we are proud that we  welcome students, change lives and make dreams come true. Still, I don’t think we do a good job of explaining to our students that reality has some nasty bitey teeth that never let go of your leg if you don’t get a job and worse, default on your loans. 

 Personally, I think schools are culpable in students’ failures if we don’t accept responsibilty for teaching them fiscal sense and counsel them on the reality of the jobs they want in the workplace that exists today. Like anything else, some students will show up on the door step knowing already what money is and does, and others will be lost and clueless, ready for that dip in molasses and a swim in the sea of bankruptcy.

I think thousands of us in the campus based lending and collections areas of schools know exactly what has to happen, but getting anyone to listen is a whole other fish fry. I’m seeing more and more about financial literacy these days and I’m really glad after being one of the voices yowling in the wilderness for years.

How does it happen? Who is successful? I intend to find out…

The Law vs. Bristlecone Pines:In a Slow Contest

Bristlecone Pine, oldest living thing in the world

For those not in the know, Bristlecone pines are the oldest living things on earth. They can be as much as 5000 years old. They grow in isolated groves at and just below the timber line in a few areas on the planet. 

They grow in inhospitable conditions  including cold temperatures, dry soils, high winds, and short growing seasons. The wood is very dense and resinous, not prone to invasion by insects, fungi or other  pests. As the tree ages,  often only a narrow strip of living tissue may connect  roots to a handful of live branches.

They grow slo-o-o-o-o-wly but they hang on, sort of like the law in America. I have worked in higher education, in the campus based lending sector for over 30 years at this point, and I have an ongoing fascination with American federal law. Sometimes its hard to believe its still alive when you see some of the deadwood we are dragging around that poses as the law of the land. Like the bristlecone, at times it feels like there are a few branches connected to the roots and the rest is dead as a doornail and as dense as bristlecone wood.

The law attracts its own version of insects, fungi and potential pests: members of Congress, attorneys and sycophants with a vested interest mostly in the contents of their own vests, and nothing is as inhospitable and bleak as a law library if you ask me. Congress has the high winds (windbags) and short growing season (Congressional sessions) covered.  All the detractor factors do some damage in the end, but I’d like to think they do just as much that is good either accidentally or on purpose. Think of them as the good insects, like lady bugs.

Looked under "attorney" for clip art, got "formal suit", how truly perfect is this?

I’ve been researching bankruptcy law and student loans yet again, because since George’s bankruptcy overhausl in 2005, things are on the boil. Okay, a slow motion molasses boil, but still, change is in the wind. After BAPCA, the Bankruptcy Abuse Prevention and Consumer Protection Act, the pendulum started a slow swing away from creditor protection and back to consumers. This was helped along by the collapse of the economic house of cards Americans were living in. People stood up in the rubble of lost jobs and foreclosed homes and took a good look around at how we got here.

Enough folks poked needles into their Senators and Representatives to get at least two bills written to protect student loan borrowers from predatory lenders in bankruptcy. Neither of those made it out of committee because the goverment has had bigger fish to barbecue, but I sense a shift in how bankruptcies are treated as far as student loans go. I fully expect something to get enough steam and trajectory to make it into law within the next two years, or more…remember the bristlecone.

I see two culprits, and since I don’t work for anyone but me these days, I can say what I want (the emperor has no clothes!).

Culprit the first: the Current Bankruptcy Law. Yes, its fine and dandy to say no student loan can be discharged in bankruptcy, but that doesn’t look at the human faces stuck with that debt, and sometimes collection fees make a 20K debt add up to 70K, remember those predatory lenders? Where’s the fresh start in that?  I am of the opinion that we should put some kind of cap on student loan debt. I am hoping our bristlecone pine Congress can figure out how to craft a law that actually helps borrowers get a fresh start when they have earned it.

Here’s my take on the how to: IF someone can prove they have made a good faith effort to pay their loans, stayed in touch with their lender/school and followed through to the very best of their ability, there should be a cap on non-dischargeability. We know a lot of loans pop good at seven years out of school, so the cap needs to be at least ten years out of school WITH the aforementioned demonstrated efforts.

 If you still can’t pay your loans and you have to file bankruptcy, let the loans go. Fine, never let Joe Schmoe return to school and get any kind of loan, that stops that abuse right there, but if Joe has $200,000 in medical bills he can’t pay why would we stick him with an aged out bloated student loan that has tripled in size?

Confusion on Campus

Culprit Number Two: The School Who Failed to Explain to the Student What Borrowing Money Really Means. We are hearing a new buzzword in this industry: Financial Literacy. Its about damned time. Financial Literacy means the school takes responsibility for educating their students in the realities of money. It teaches them about the consequences of overborrowing, and it puts the brakes on the amount of money they can borrow, gearing it to what they can realistically expect to repay.

 Liberal arts schools pride themselves on educating the entire student, preparing him/her to take a place in society as a participating member. If they haven’t bothered to give the student a good fiscal education, are they really educating the entire student? Schools are delighted to sign students up and be paid for the process, but if we are focused on the traditional 18 year-old especially, shouldn’t we be helping them understand what it costs to live in this country, how to budget funds, save and make a good future for themselves when they step out with that diploma and look for a job in a crappy economy?

For the first time in history, student loan debt has outpaced consumer debt. More students owe more money than all the credit card and consumer debt added togetherin the country as of June 2010. At this writing one in twelve people from the age of 18 to 24 is in debt hardship, in 1989, only 12% of people that age were in such dire straits.

On campuses across the country Perkins Loan and Student Accounts Offices have historically been whistling in the dark trying to get anyone to pay attention and lend a hand because this is one of those its takes a village things. Finally, the village is paying attention, can I get an amen?

I’m really looking forward to seeing what happens next in the snail race in Congress to change the bankruptcy law. And I’m watching  financial literacy campaigns and strategies pop out every where on campuses, I’m looking forward to tracking the best of them. I’d really like to stop seeing schools as part of that rarified forest that lets old dead trees hang on with ancient roots and only a few living branches for 5000 years….