Episode 00 Who is the FIT Institute and What do We Do

Today we welcome our first guest to the podcast, Betharoni Bird, a 2012 college graduate now working in the culinary arts. Learn how Beth paid her way through college with only modest debt that she repaid within two years of graduating. Learn how your local college may be much less expensive than that dream private culinary arts training school. Hear how (i) you may need to structure your curriculum while in college because your professors may not know what you need to know, and (ii) you may need years of additional training once you have completed your undergraduate degree if you want to pursue a management or professional level of work in the culinary arts field. It’s hard work and it’s not for the faint of heart, but if you have stamina, an enthusiasm for food preparation and willingness to work hard, you will find there are many well-paying jobs in the field of the culinary arts.

Minute 00-[1:00] All of these acronyms are used to describe Income-Based Repayment programs for federal student loans. And the one thing they all have in common is that they stretch out loan repayments for decades. Minute 2-3: I am a lawyer, but I am not providing legal advice here just general information about student loans. This podcast isn't and won't be affiliated with any lenders. Minute 3-4: This first Season is devoted to providing information to people who are contemplating taking out student loans. I think people are incredibly nonchalant about what it means to be burdened by a significant amount of debt. The acronyms and names for repayment programs and plans have created confusion and led people to believe that a great deal of their debt will be forgiven by one mechanism or another. Minute 4-5: Millions of people are burdened by student loan debt that they are finding difficult if not impossible to repay According to a https://www.wsj.com/articles/student-debt-payback-far-worse-than-believed-1484777880 (January 2017 Wall Street Journal article), as many as half of all borrowers of federal student loans have not made a payment in seven years. Perhaps you are thinking this is because they are the beneficiaries of the loan payment programs having all those interesting initials. Minute 5: At least half of all people owing student loans aren’t repaying the loans. Minute [5:30]-[6:30]: As is discussed in my forthcoming book, Shun Student Loans, there are only 4 ways of getting rid of loans: (i) paying them in accordance with their terms, which typically means paying them back over 10 years; have a portion of the loan forgiven by complying with complex and ever-changing loan forgiveness rules and regulations: having a portion of the loans forgiving after paying a fixed percentage of one's income for 20-25 years; and bankruptcy. Minute [6:30]-9: To begin, don't be misled by all the acronyms, PAYE, REPAYE, IBR, IDR, they all serve to hide some degree of bad news, perhaps the most egregious, hidden bad news is that you have absolutely no way of knowing that any or all of these programs will be available to you for handling your debt. The government giveth and the government taketh away. You have zero guarantees that any or all of these programs will be available to you to deal with your debt. Zero. You might, but the situation is that you'll definitely owe the money and some repayment plan might or might not be available to provide you a modest assistance (or none whatsoever) to deal with your debt. Minute 9-12: Your federal student loan servicer needs to cooperate with you in order for you to enroll. It is in their interest to not cooperate with you, but to cause you to miss payments and to go into default. This creates a huge income opportunity for them as they can add fixed fees and an increased interest rate. How much could these fees be? As noted in the case Bible v. United Student Aid Fund, Inc., 799 F.3d 633, 321 Ed.Law Rep. 712 (7th Cir. 2015) (further discussed in the https://harvardlawreview.org/2016/06/bible-v-united-student-aid-funds-inc/ (Harvard Law Review)), one lender charged a defaulting borrower more than $4500 in fees prior to allowing the borrower to enroll in an IBR when the borrower's original loan was only $18,000 (sic; in the episode, I say the original loan amount was only $15,000, but it was actually $18,000. Still, she was charged more than $4,500 in fees prior to being enrolled in an IBR. Loan servicers are not your friends. Minute 12-17 High Risks Loans: (i) The programs may go away. You have no guarantee that the program will be available to you. The programs are only available for federal, direct student loans. (ii) You won’t be in control of whether you qualify for any of the programs. The loan servicer is in control. (iii) You cannot appreciate what it means to owe debt for 20-30 years. (iv) Finally, if a debt that is

Episode 05 Why Your Student Loan Probably Won’t Be Forgiven Minute [1:30] We need to talk about Public Service Loan Forgiveness (PSLF) because so many people go into debt believing they will not have to repay their debt in full. This is not correct. Creditors expect to be repaid. Minute [2:30]:  There are some loans that will be forgiven in part if certain conditions are met, e.g. teachers teaching in certain designated schools can have up to $5000 of direct loans forgiven if they have made five years of payments, in full and on time. Minute 4:30-8:  Let’s talk about Richard Fossey’s 2017 book, https://www.amazon.com/Student-Loan-Catastrophe-Postcards-Rubble/dp/1548591718 (The Student Loan Catastrophe Postcards from the Rubble), where he discusses at length the problems with PSLF programs, including subsidizing people getting degrees in fields that are overcrowded. Why should Americans subsidize people getting an education in an overcrowded field? Of course, people who have a degree in an area that requires professional licensing cannot practice their profession without the license. In 2016, more people failed the California bar than passed it, i.e. the majority of people in law school thinking they could avail themselves of a PSLF program could not pass the bar. Therefore, they could never meet the conditions required to get their loan forgiven. Minute [8:15]: Why don’t PSLF programs benefit people pursuing only an undergraduate degree? Not all loans qualify to be forgiven (if the loan has the word Direct in its name, it likely qualifies for PSLF, but private loans do not qualify and Parent PLUS loans don’t qualify; there are many more non-qualifying loans than there are qualifying loans); You work in the proper type of profession; and Pay your loan in accordance with an approved Income-Based Repayment Plan (ICBR)  for a ten year period to the proper loan servicer, then and only then may your remaining loan balance be forgiven. Notice the use of the word “may.”  This does not say that if you do everything right, your loan “shall be forgiven.” If you do everything “right” today, you cannot know if your loan will be forgiven. It might be and it might not be. You have to use an ICBR or your loan will be paid in full at the end of ten years and there will be nothing left to forgive; however, since you are not paying your loan in full, the amount of interest on the unpaid balance will be much, much greater than if you were making timely, in full payments, i.e. if your loan isn’t forgiven after 10 years, it will be a much larger amount than if you were paying it in accordance with the loan terms. Bonus Content: I think it is likely that they PSLF program will be modified/ended sooner rather than later. Public service was so broadly defined in the enabling legislation that it encompasses 25% of the American workforce and often the highest paid professions. It makes no sense as public policy. If you are thinking you will use this program to pay for your college education and you have not yet enrolled, I think this is a particularly poor life plan. Follow Richard Fossey at his blog http://www.condemnedtodebt.org/ (Condemned to Debt). If you want another viewpoint on student loans, check out this video https://www.youtube.com/watch?v=yd6cqJqygt0 (Student Loan Debt Slavery with Stefan Molyneaux). Stefan is not particularly sympathetic to people to take on all this unpayable debt, but he does recognize the magnitude of the problem.      

Episode o4 That Putrifying Pestilence Known as The Parent PLUS Loan Minute 1:  It all begins with the FAFSA.  You will be expected to take out a Parent PLUS loan even if you get a zero EFC letter. Minute [2:30] A Parent PLUS Loan is a loan to your student that you are obligated to repay. If you don’t, your income tax refund can be garnished and your Social Security can be seized. Minute 4-7: If you need a Parent PLUS Loan, you likely can’t afford to repay a Parent PLUS loan. Parent PLUS Loans are expensive. They are not like direct subsidized loans, where the interest is covered by the American taxpayer during the time they are in college. The Parent PLUS Loan is much more expensive. It has a 4.25% origination fee. Interest for 2018 is set at 7%. Minute [6:20]:  Average student takes 6 years to graduate; therefore, if your student takes the average amount of time to graduate and you take out $5000 per year, you will owe $30,000 at the end of their six years in college. Minute [7:00]: The student may be given a check for excess loan proceeds. If the student doesn’t need the money for tuition that semester, they may blow the money on a beach vacation or shopping and you won’t even know! Minute 8: Loan payments are due immediately, not upon graduation. If you can’t start making payments immediately, you can’t afford this loan. It’s true you can get a deferment on payments (not interest), but if the loan is not paid on time, your wages can be garnished, your income tax refund can be seized, and all except $750 of your Social Security can be seized.  Minute [10:30]-[13:30]:  What is the interest on $30,000? Roughly $12,000 plus $1,300 of origination fees. That is a monthly payment of $358.00. You need to ask yourself if you can start paying this money back today. If the answer is no, then the answer is clear, you cannot afford these loans. When you see the loan amount you are expected to take out in your student’s freshman year, you need to multiply that amount by six. The average number of years a student now takes to graduate. Bonus Content: Unsure of how to calculate how much your loan will cost you. Check out the calculators at https://studentloanhero.com/calculators/ (Student Loan Hero). Email us with questions if you are unsure as to which calculator to use to figure out your loan cost. Still don’t believe you have educational options? Check out our forthcoming book, Shun Student Loans and Derek Magill’s new book https://derekmagill.com/2018/05/20/putting-the-finishing-touches-on-create-your-career/ (Create Your Career).    

Hello and welcome to Episode 03: You Need a Plan and a Budget Not a Loan and a Credit Card. Many people begin college because they don't know what to do instead of beginning college. That's OK if you have the money in the world and money is a matter of indifference. Remember https://www.youtube.com/watch?v=8utmmWoBSBY (this video) about how wise it is to incur $100,000 of debt before making any money. Minute 3-[5:30]: The question is will your learning in college enhance your career opportunities? Maybe and maybe not. The less you know about the particular requirements of a job, the less likely is that your college major will enhance your ability to perform well on the job. A general degree in business will not prepare you for any business. If you think you want to be a business major, your best option may be to work in a sales job. Sales are essential to every business operation. Minute [6:50]-[8:00]: Many employers, such as Chick-fil-A, Amazon, Starbucks and many, many others contribute to their employee's educational expenses. If going to college would cause you or your family to incur any debt, likely your best option is to take some time between high school and college and work, develop a budget and save money. Minute [8:30]—9: Some people's parents aren't helping. Dave Ramsey's 70% of Americans are living paycheck to paycheck. The majority of Americans would have to sell something to be able to pay a $500 unanticipated expense. This has contributed to the “normalization of debt.” Likely your family is in the majority. Minute [10:30]: You will be expected to repay your student loans. You likely will not have the benefit of loan forgiveness programs. Minute [11:40]: In my book, Shun Student Loans, Get the Education You Need for the Fabulous Life You Want. I have a whole chapter devoted to helping you figure out how to productively spend your time if you don't enroll in college directly out of high school. There are structured exercises and recommendations for free and low-cost online programs that will help you create a structure for yourself. Minute [13:30]: Don't get a credit card. It's much more likely to do you harm than it is to do you good. Minute 15: Those choosing not to go to college will have a greater need to develop a structure for their own life. Bonus content referred to in Episode 03:  If you are unsure of how to go about creating a plan for yourself prior to entering college, I recommend you check out the program at https://selfauthoring.com/ (Self Authoring), a structured online writing program desired to help you envision the life you want for yourself. You should plan to work on it over a period of days or weeks. If that seems too daunting, you might want to begin with a daily writing exercise, that I talk about in my book, Shun Student Loans. Finish these sentences every day for two months. “Yesterday, I….” “Today, I am anxious/worried about….” “Today, I am grateful for….” Start small and short. Plan to write three things under each of the three headings. After a month or so of doing this each day, you may find that you're ready to expand your writing. Perhaps now you want to write about the future. “Tomorrow I will…” or “I am looking forward to…” After a couple of months of doing this exercise, go back and read what you have written. Do you see any themes? Do you still worry about the same things? Have you noticed how many people and things in your life you have to be grateful for? Do you see some areas of your life where you can improve yourself? The point of the exercise is to get you started reflecting on your own life so that you can begin the process of creating the life you want for yourself. Doing this exercise, while you are working an earning money, will help you discern whether a college degree is the right thing for you. Finally, know that you are not alone in facing the challenge of creating a life for yourself and creating your own structure. Pick up...

Min [1:15]             Students and their families are too nonchalant about taking on educational debt Min [2:50]              What happens after you complete the Federal Application for Student Aid, FAFSA? Distinguish between loans and grants because colleges do not necessarily do so Min [3:50]              Colleges often offset grant funds against scholarships you raise, i.e. your scholarship funds may not be as valuable as you think Min 5-7                Colleges may act as a cash extraction machine. College financial aid officers represent the interests of the college, not your interest as a student. Min [7:30]             Private colleges are almost always more expensive than public universities. Many colleges “front-load” the financial aid package. Min 9                   Why you should consider community college and work for your first two years Min [10:30]           Why you should never use college funds for remedial education. Min 12                 Are you college ready? It's more than academic work. Send questions or comments to us for future episodes and sign up for us on Stitcher and iTunes. New episodes are released Mondays and Thursdays.

Show Notes Summary Min 1                   The application is free, but that doesn't mean the student aid is free Min [1:15]             This podcast offers information about student loans and doesn't constitute legal advice Min 2                   Colleges use the FAFSA to calculate each family's expected contribution (the “EFC”) Min 3                   Each family should assess its own personal financial situation to see if it can afford the EFC Min 4                   Family's unable/unwilling to save in advance of college are unlikely to be able to repay any loans advanced to them. Min 6-8                What you should consider if you have both low-interest credit card debt and savings and how you should treat retirement funds. Min 7-8                How much of your savings will the colleges expect as the EFC? Remember that any expected contribution is an annual contribution, not a one-time contribution Min 9-10             Colleges will seek to capture any savings of child to offset financial aid package Min 11                 Parent PLUS Loans are expensive loans that may prove to be unaffordable for many families. Min [12:45]           Your most important first step in college application/financing process is your family assessing for itself what it can afford to contribute towards each student's college education.

00-Min 1             Financial Institute Training: Understanding the impact of student loan debt on the debtor Min 1                   Rose McConnell is an attorney. Developed interest in debt following 2008 financial crash. Min 2                   Interest rates at historic lows. Takeaway: they will go higher! Min [2:43]              Creditors expect to be repaid and educational debt won't just be forgiven Min [3:30]              Student Loan Debt has doubled between 2010 and 2016 Min 4                   First season is focused on the upfront costs of student loan debt and the risk of those loans as further discussed in Ms. McConnell's book, Shun Student Loans, which is available on Amazon Min 5                   New episodes will be released weekly on Mondays and Thursdays. Sign up on Itunes or Stitcher and submit questions and comments on the Contact page of fit.institute. We want to address your questions and concerns