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Mark Cuban’s Horrific Student Loan Debt “Solution”

The stock market’s been horrific. Volatility has been at record levels. Stocks are at 6, 7, and 8-month lows. The losses prompted me to stay glued to CNBC. Every morning this week, I woke one hour earlier and listened — rapt to the dancing futures and opening moments. Then, I’d be off to work, school, etc.

But this article isn’t about stock market woes. Instead, I want to focus on a CNBC guest and favorite, Mark Cuban. Cuban is an entrepreneur and billionaire (about $2.6 billion). He’s an owner of the Dallas Mavericks and serially invests in startups, businesses, and other money-making ventures. This week, he decided to speak out against the rising tide of student loan debt — something we can all agree is crushing our future economic potential.

At first, I welled with excitement and thought, “Finally, someone is going to start critiquing our financial destruction via student loans and provide sensible solutions to the $1.2 trillion debt.” Cuban exclaimed that we couldn’t continue this and that we were hurting the entire economy with this burden. But after complaining about the problem at length, he provided no solutions.

The CNBC anchors recognized this and asked him to elaborate on his answer. And that’s when I nearly soiled my pants. His big fix to this growing problem was to — ugh, it’s hard to write this — cap the federal governments tuition aid to students. More specifically, he proffered that students shouldn’t receive any more than $10,000 each year in aid.

The billionaire entrepreneur, successful businessman, and all-around sports guy said that a cap like this would force schools to reduce tuition and fees. This is when I began screaming at the TV with a rebuttal, desperate to be heard by the conservative messengers on CNBC. That didn’t work, so I took to my keyboard to muddle a rebuttal.

Unfortunately, there’s a growing movement among “experts,” pundits, and pretenders that solving the student loan crisis is as simple as cutting funding opportunities. Cut the funding and institutions will be forced to lower their costs. Economically speaking, they’re partially right. When you reduce the funding opportunities, this manipulates the “free market” for education.

With the “Cuban Plan,” the idealistic message is: cut aid funding and watch the tuition/fees crumble. With a $10,000 cap on tuition, Cuban expects institutions to follow in line. But that’s not what will happen. The reality is that the market for private loans and corporate, profit-hungry, debt-ballooning machines will take its place. Suddenly a controlled market of lenders by the federal government will be swamped and stalked by private lenders — only out to massage another percentage point (or more) out of desperate students who are eager to get educated and attempt to better themselves.

Many will be priced out of an education. The bloated budgets of higher education institutions won’t be able to simply adapt. Universities have been spending astronomical amounts on recreational centers, educational facilities, and residence halls (aka: dorms). While frivolous, the tuition and student fees are established. If they were to be reduced or cut due to federal aid money, schools may default on hefty loans to pay for these extravagances.

Cuban’s idea is a lose-lose. Schools will default, close, and/or fire massive amounts of educators. Students will be stuck with private loans to pay the gap, or be forced to relinquish their dreams of a higher education (and the future earnings potential). The only winner will be Cuban and his cronies — the 1 percent.

See, the rich will benefit because it’ll be another federal program that’s axed. And anything federal, governmental, or communally good is inherently bad among rapacious 1 percenters. Moreover, private funders such as Chase, Wells Fargo, and Bank of America will be able to roll up their sleeves, sell some toxic loans, and collect for decades. Those holding stock in those companies could escalate their wealth — all off the backs of low income and desperate students.

What we need is government reform. What we need is debt forgiveness. What we need is a growing mass of people that believe in future generations and their education. What we need is a long view — not the myopic, shortsighted one that Cuban propagated.

He’s right about one thing: there’s a crisis brewing and we need to change our relationship with student loan debt immediately. Tuition and fees need to be cut. For-profit universities should be unable to receive federal funding whatsoever. Taxation to support higher education of public institutions needs to increase dramatically. Be it from estate taxes or net worth taxes or capital gains taxes, somebody’s got to pay for it. And we can’t keep giving the bill to future generations.

These are the people that will take care of you when you are aging. These are the people that will discover the cure to cancers. These are the people that will reduce climate change. These are the people that will pioneer ever greater technologies.

It’s time to support them and ourselves.

Defeat Massive Student Loan Debt With Public Service Loan Forgiveness (PSLF)

By Frugaling Leave a Comment

You can’t imagine how terrible student loan debt is until you are faced with the bill — for the next 20 years of your life. This was my predicament 5 years ago, after I graduated from pharmacy school with about $220,000 of student loan debt.

I know what you are thinking, “But Christa, that number is outrageous!” Trust me, I know! About $30,000 of my student loans was from undergrad and the rest from pharmacy school. I would love to tell you that I only took out the minimum amount of loans to get by, ate ramen for every meal, and delivered pizzas 8 days a week, but I didn’t. I lived like most college students do without much of a budget. I wasn’t really thinking about my future self having to pay it all back with interest.

The 18-year-old student loan decisions have serious consequences

There is a lack of education concerning student loan debt among colleges. As a student, you are not usually educated about the repercussions of getting yourself into massive student loan debt. You make shortsighted financial decisions that can adversely affect your life for years and years.

Some of the student loan debt is because you are giving “free money” to a bunch of stupid teenagers (I can say this because I was one!). Some of the debt is also because tuition costs have skyrocketed. For instance, the pharmacy school I attended now costs $33,990 a year. This equals $135,960 in tuition for pharmacy school! That doesn’t even include undergraduate costs or costs of living.

Many post-graduate/professional degrees require this significant student loan burden

Many graduate degrees cost hundreds of thousands of dollars. How can anyone possibly afford this? Many need significant student loans and financial aid. I took student loans out because they were necessary for my dream job as a pharmacist. After pharmacy school, I was told that I’d pay for the next 20 years. My student loans cost more than the mortgage on my house!

I’m not the only person in this situation. Some have gotten into debt from graduate school and others have gotten into major student loan debt from undergrad alone. Fortunately, in 2007, the government started the Public Service Loan Forgiveness (PSLF) program.

The PSLF program is for those working for the government or in the public service sector. If you find a job in one of these areas and make on-time, scheduled monthly payments for 10 years, your remaining loans will be forgiven. But there are some important caveats and rules to look out for.

Confusing, right? Trust me, it does seem complicated when you are first starting out. Some people will start to look into it, get stuck, and forget about it. Lucky for you, I’m here to help!

Fundamentals of the PSLF program

What type of job do I need?

Qualifying employment includes:

Those who work for the government (ex- military, public libraries, police officers)
Those who work for public service non-profit company with a tax exemption code of 501(c)(3)

Tip: You can call human resources or even check your companies website for their tax exemption code.

Which type of student loans qualify?

Federal loans that were received under the Federal Direct Loan Program.

If you have student loans under the Federal Family Education Loan (FFEL) Program, the Federal Perkins Loan (Perkins Loan) Program, you can consolidate them into the Direct Loan program in order for those loans to be eligible.

Note: Private student loans are not eligible.

What repayment programs do I need to be on?

Income Based Repayment (IBR)
Income-Contingent Repayment (ICR)
Pay As You Earn Repayment Plan
10-year repayment plan (this is kind of silly since you would have nothing to forgive after 10 years)

What qualifies as an on-time, scheduled monthly payment?

In order to be on-time, the payment must be made no later than 15 days after the due date.

For the payments to count, scheduled monthly payments should be in active repayment status. You can’t be in a grace period, forbearance, and/or deferment.

Object Wealth Christa — *Christa from Object Wealth*

Where can I find out more?

You can go to the Federal Student Aid website. They have a bunch of information regarding student loans.

You can also come visit me on my site where I talk about all things personal finance, including my step-by-step guide to the Public Service Loan Forgiveness program.

This is a guest post from Christa, the founder of ObjectWealth.com, a blog on personal finance and her journey to go from massive debt to building financial independence. She is also a hospital pharmacist and loves watching Game of Thrones (even though it gives her nightmares).

How To Fundraise $25000 In 12 Months

By Frugaling 4 Comments

In search of hope amidst great pain

To save money on housing and food, I decided to become a resident assistant as an undergraduate student. That decision put me on a collision course with residents dealing with serious mental health concerns. The transition to college was always different — some people eased right into it and others struggled.

I loved my residents, and thought we had an incredible academic year. It was April when everything changed. A resident died by suicide. As one of the first responders to the scene, the visuals caused an aching, grinding weight over my chest. Over the course of the next six months, two more people in my life would die by suicide.

It shattered me. There were many days in which getting up was a trial. I’d leave classes early to go into a bathroom and cry. I remember feeling lonely and isolated in my pain. It took that heartache and tragedy to find hope for something better.

Always Remember Fundraise Plan — Part of my proposal to administrators.

Finding, honing an inspiration

I was desperate for action. Then, a flash of energy hit me in one sleepless night nearly a year after the first suicide. I wanted to start a scholarship to fund undergraduate students who wanted to pursue suicide prevention and/or work with those suffering from severe mental health concerns.

Over the course of the next month, I created a proposal for the university and told them how I would fund an endowment (a self-supporting — through interest — scholarship). I explained that I had been talking to friends and family. Altogether, we could scrounge up about $2,000 to start.

They told me I could try, but I’d need to fundraise $25,000 within 5 years.

I said, “Deal.”

Make the first donation

When I started the scholarship I had about $500 in my bank account. I had few assets. Still, I sold everything I could and donated a couple hundred dollars to start the scholarship. It was less than 1% of what I’d need to raise, and it hurt to give that much (especially since I’d need to take out student loans soon after that). No financial advisor would say it was wise.

I had to give everything I could. My head and heart were sucked into this powerful idea — hope through tragedy. I don’t regret giving as much as I did then or over the years. It fueled my passion to seek donors and encourage others to join me.

Realize your connection to community

With almost every cause, there’s a community of support behind it. I realized I wasn’t alone in my distress and desire to make an impact. In fact, the community around my alma mater was incredibly supportive. They were eager to make a difference, as well. They had been affected by this issue.

I heard stories about lost loved ones — brothers, sisters, fathers, mothers, children. It hurt to hear the stories, but I only grew more connected to those around me. Eventually, students at a local high school started fundraising for the scholarship. It brings tears to just think about how meaningful that felt. A cynical part of me died when others began to donate. I didn’t know if anyone would support the cause.

Inspire yourself and others

Suicide Prevention Fundraiser — Group of supporters spent a day in the plaza providing information about the scholarship and suicide prevention.

The $2,000 wasn’t enough, and I felt a pressure to make this happen. I told everyone about the scholarship. Donations began to trickle into the scholarship account.

I shared on Facebook and Twitter — all over social media. Each time led to others sharing. The positive feedback was unmatched in my life. It felt amazing to be channeling such a dark period in my life.

Others were inspiring, pushing me to continue. Likewise, I seemed to inspire others. This shared, symbiotic relationship appeared to benefit everyone. My energy, which had long been depressed and negative, shifted.

That first summer, a massive, $5,000 donation was made. The idea of a scholarship to prevent suicide and provide awareness to this issue struck a chord with many who were affected in the community.

Throw away modesty, seek media attention

This is the trickiest part for some people. Seeking attention is something that society generally says is inappropriate. Unfortunately, far too many people think media will just come to you when they’re ready. I threw that lesson away as fast as I could.

Seek out media outlets! Talk to local papers, zines, and websites about your story and propose times for interviews. This has a tremendous snowball effect to getting donations and finding supporters. Media can be your best friend. You never know, you might just get the biggest paper in your state covering the scholarship and linking to it.

Endowed status!

After about 12 months — the fastest a scholarship has ever been fully endowed in the college — over $25,000 was raised. Whatever you’re looking to fundraise for, know that you can. Follow your passion, link others, connect with a community, give until it hurts, and seek some old fashioned media attention. You can do this.

If you would like to donate to the Always Remember Never Surrender suicide prevention scholarship I founded, head on over to: https://advancing.colostate.edu/arns

Personal Finance Gurus Fail With First Generation Savers

By Frugaling 3 Comments

The struggles of a first generation college student

Join me on a small aside — I promise it relates. An organization called the College Board is responsible for creating the Scholastic Reasoning Test (SAT). This exam is one of two major college entrance tests (the other is the ACT). Score high enough on the SAT, and you could attend almost any university. Likewise, entrance scores can often influence the level of aid given to entering freshmen students.

One variable can influence your SAT score, admission chances, aid opportunities, and much more; it’s called, first generation status. These college students are the first person in direct, immediate family to pursue a secondary education. Essentially, parents of first generation college students must not have attended college themselves. Born and raised in a family without ties to college can directly affect your success in higher levels of academia.

In nearly every category, with decades of data, they’ve found clear differences between first generation and non-first generation college students. College Board researchers have found that first generation college student are less likely to take preparatory courses for the standardized exam, take fewer advanced placement courses (AP) prior to college, and are less likely to take accelerated math courses. These are just a few of the hurdles for these disadvantaged students.

Family role models for academic success can be scarce. Study habits may not have been learned. Monetary support may be nonexistent. First generation students may struggle to connect with peers on campus. All of these factors raise the risk for dissatisfaction in school, higher dropout rates, and mental health concerns. Frankly, it pays to have family ties to education.

Similar status as a first generation saver

Maybe you’re wondering, “What does all this college student talk have to do with personal finance and money, Sam?”

I’m glad you asked.

Similar to college, first generation savers face serious tests — analogous problems exist. Lessons are passed down from generation to generation. Inheritances can be shared and kept within families. Strong principles and techniques for smartly minimizing individual tax responsibilities are taught. (Heck, how do you think Romney only paid about 14.1%?). First generation savers frequently have friends in comparable financial predicaments.

Starting, customizing, and following a monthly budget are learned. It helps if your parents teach you. Additionally, when you can see how they save and manage their money in action, a good cycle can be learned. The first generation saver doesn’t have the opportunity to learn from parents. As the first savers in a family, they’re bucking a pattern of money mismanagement — the waters can be murky, challenging, and lonely.

Jim Cramer Tulane University Photo — *Photo: Jim Cramer at Tulane University (Credit: Tulane Public Relations)*

Is willpower the key ingredient to saving?

Personal finance gurus stress individual power, will, and grit. They propagate unscientific expertise that suggests they have the tools to balance your budget, reduce debt, create emergency funds, and retire with a sizable nest egg. For the most part, their help and advice can really help. Unfortunately, their one-size-fits-all advice isn’t often tailored for first generation savers.

Willpower-based economic education is far too common. It’s the ill-conceived bumper sticker of American personal finance policy: one must have the will and energy to save — that’s all it takes. Otherwise, you’re a lazy failure because you cannot commit to these steps.

I’m afraid that does an injustice to more multicultural groups who don’t necessarily have the same role models and social support for financial success. Frankly, most personal finance advice is distilled and created for a certain population; one that has the means to believe in free will and individual power.

We need more diversity among financial gurus — socioeconomic statuses, races, genders, persons with disabilities, and more. Voices need to come to the table and share their individual experiences. While some advice and feedback may not fit, there’s hope in knowing that more people are out there sharing openly and acknowledging the team effort that’s necessary to come back from tens of thousands in debt.

Defeat Massive Student Loan Debt With Public Service Loan Forgiveness (PSLF)

The 18-year-old student loan decisions have serious consequences

Many post-graduate/professional degrees require this significant student loan burden