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Episode 43: The College Debt Crisis with Phillip Ramsey and Bryan Dewhurst
159 Plays6 years ago
These days, it’s not uncommon for a person to graduate from college with tens of thousands in loans – sometimes reaching debt loads of $100,000 or more. We all know this is insane, but what can we do about it?
In this episode, we do a deep dive into the dark pool of college loan debt. There has got to be a better way. We are disgusted with what’s happening and we’re going to talk about it.
One aspect of our work that we love is speaking to high school students. We speak at local high schools about twice a year. One thing we run into a lot is a total lack of planning when it comes to paying for a 4-year degree. So you want to go to Stanford. Great! After getting accepted (a huge hurdle in itself) how are you going to pay for that premier education provided at a premier price?
That’s what we want to dig into here. Understanding your options about where you might attend school and how you can pay for it without digging a giant hole of debt for the student or the parents.
what you will learn in this episode:- Uncommon solutions to higher education without crushing debt
- How predatory lending targets college students and their parents
- The crucial role mentorship can play in discovering the right path
- The 4-legged chair of college funding
- How to treat applying for scholarships and grants like a job
- Why putting money away is just one of 4 paths to college funding
- How real estate can help fund your child’s education
- Why you shouldn’t sacrifice your financial security for your child’s education
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Transcript
Introduction to Uncommon Living
00:00:02
Speaker
Everyone dreams about living an uncommon life, but how we define that dream is very different for each of us. And for most, it's a lifelong pursuit. Welcome to the Uncommon Life Project podcast. We're going to introduce you to people who are living that life or enjoying the journey to get there. We're going to also give you some tools, tricks, and tips for starting or accelerating your own efforts to live an uncommon life.
00:00:27
Speaker
a life worth celebrating and savoring. Please welcome your hosts, Brian Dewhurst and Philip Ramsey. Hello everybody and welcome to another episode of the Uncommon Life Project where I am your host, Philip Ramsey. And I am Brian Dewhurst. Thank you for tuning in and thank you for rating and subscribing to this podcast. It means a ton to us. We are on our way to 100
00:00:52
Speaker
reviews and we are getting close. So keep going. Thank you for doing that for us.
The College Loan Crisis: A Growing Concern
00:00:59
Speaker
Today we are going to talk about an epidemic of huge proportions. Massive. Who and what are we talking about today? Brian Dewhurst. We're going to dive into the dark pool of college loan debt.
00:01:14
Speaker
college, the lie, the myth of college, the value trap, the debt pool. I don't want to beat it up too much in the intro, but you get the idea that we are disgusted with what's happening in this country and we're going to talk about it. It really is. And we've been doing some, I'd say we go to this high school class once every semester and it is, it is alarming that no one has a plan.
00:01:39
Speaker
And they're just going to go out and have a great four years. But let me just start out with this story. So we're at this college, I'm sorry, we're at this high school class. We're doing kind of a deal and we asked somebody like, okay, let's just talk about your future. Who has a really clear plan of what they want to do? And there was a woman or a girl in the front and she raised her hand. She's like, I want to be a nurse. And do you remember where she wanted to go, Brian? I do, vividly. Where did she want to go?
00:02:07
Speaker
Stanford. Yep. So she wanted to go to California and go to Stanford. And we were going to say, we asked her, well, how are you going to pay for that? That seems like it could be expensive. And she was like, yeah, I'm going to probably save, you know, work over the summer and save. And right away, Brian and I were like, whoa, like, do you know how much that is?
00:02:27
Speaker
I'll just cut to the chase. Long story short, she wanted her dream was be a nurse and live in California. And after we did some math, we realized her student loan debt after she got out of college was going to allow her to have after room and board and her student loans, I think $38 to eat.
00:02:51
Speaker
for the rest of the month because of her student loans were so high. They were higher than her rent out in California. It was like a quarter of a million dollars between tuition, room and board, and then just everything else. And I even think she said she got a scholarship and we were like, just give us the numbers and we'll help you run it. And the point of that was like, we aren't telling you that we want you to live in California, but we want you to live in California and not eat ramen noodles.
00:03:20
Speaker
Right. And give plasma.
Predatory Lending and Political Critiques
00:03:22
Speaker
And so we thought maybe different, you know, challenging her a little bit of saying like, Hey, what if you got a, you went to a community college for two years and then you did this and that. And then let's say you lived out in California, but you didn't have any debt. Could you live a lot better? And of course you could. And so that's kind of a quick story of, I just don't think students or parents are talking about this.
00:03:43
Speaker
and not having a game plan. So not only is it a huge problem, and I think it's more like a 2008 mortgage crisis problem, and Brian you can speak into that, but you have to have a solution. And so we're going to try to give a couple, we're going to try to give a couple solutions that we think that are uncommon, and hopefully this will help you get motivated to start talking, getting a plan about student loans.
00:04:06
Speaker
Because it's real and I was been going on for about three minutes and I didn't start our timer. So 25 minutes. Let's go We're going I know I get going and you know, you just lose your focus Sorry, I'm gonna tell you why I'm gonna just frame it why this pisses me off so much Because use the word pissed on the I am I'm like getting I rated this one So I think right now we're approaching one point
00:04:35
Speaker
three to 1.5 trillion in student loan debt. 30%, 30%, mind you, that's like, let's just say it's like just shy of a half a billion dollars. No, that would be half a half a trillion dollars. Sorry, half a trillion dollars. 30% of it is delinquent, meaning beyond 90 days, miss payment. My biggest frustration with this is that, and I,
00:05:02
Speaker
Again, we have some solutions. My biggest frustration is that it is predatory lending and no one is talking about it in that light, in my opinion, very few. And predatory lending is where you're entrapping people into high rate, high interest rate debt or debt, you know, as a means to an end. And these kids,
00:05:29
Speaker
And you know, we've been in high schools, like we're trying to be part of the solution as
Impact of College Debt on Graduates
00:05:33
Speaker
opposed to, you know, my other huge problem with this is the, I'm going to get a little political in the show is Elizabeth Warren, the Democratic presidential nominee, not nominee, but like, you know, whatever candidate she's running. God, I hope she doesn't get the nominee. We'll just pay for this. We'll just, we'll just wipe out the debt like it didn't happen.
00:05:53
Speaker
What are colleges going to charge if you do that? Like won't the cost just go up? Cause then it's just like, I mean, it doesn't solve anything. I mean, it's just totally anti-American. And so this is predatory lending. We are strapping kids with 10, 20, 30. I think the average student loan debt in America right now is like $30,000. No, that's that was in 2014. Yeah, it's gotta be that high. I'm trying to be conservative with my statements.
00:06:23
Speaker
But yeah, like if you take all the student loan debt and divide by the people that have it, like the average is over 30,000 per person. It's crazy. And when you look at economics, you know, I have an economic major degree. Not worth it. Okay, moving on. Look at the data. And it's like, we haven't had real wage growth in over 20 years, like real meaningful wage growth, like we had in the 80s and 90s.
00:06:53
Speaker
And so you've got these kids coming out of school with a huge debt noose around their neck, and they're getting jobs making $25,000 to $45,000. customer service rep living with their parents. And they're back with their old roommates. Wondering why, you know, and I've said it before, I'm gonna say it again, the reason why the economic expansion out of the Great Depression that we had in 2008, 2009, it was a Great Depression and the whole financial system was on brink of, of like,
00:07:25
Speaker
wiped out and reset probably should have been because it's now been worse over the last 10 years but two things one most people have all of their you know liquid assets in a 401k it's their largest asset they can't use to start a business you can't use to transition if you lose your job and then two you have all these kids coming out of college with these student loans and so you have two generations of people that are saddled
00:07:54
Speaker
you know, and basically illiquidity. So it just was a huge mess. And frankly, it still is. And so I just think when you go through it and I went through it, you went through it, you go into that university, they're giving you t-shirts to get credit cards. Or umbrellas and toasters. Umbrellas and toasters and t-shirts to get a credit card and you're away from mom and dad and you sign up for this crap. And it's at 20 plus percent interest. And then you walk into the student loan office
00:08:23
Speaker
Oh, just sign here, here, and here, and then boom, money's in your account.
00:08:27
Speaker
And you have no idea the ramifications of what you just did. You know what? My favorite thing is, is when you go to the counselor and they're like, just take 14 hours, just take 13 hours for your first semester. Just get acclimated into it. I'm right into it. I remember my, my poor sister, she came out. Yeah, I got 13 hours. I was like, Nope, go back, go back. Try it again. Try it again.
00:08:54
Speaker
and get more hours so you can get out in four. Unbelievable. Or they let people change majors. We want to focus on, again, I think the solution is, and you and I agree in this, our solutions are based on what you can do at home, what you can control, what you need to be teaching to your kids. We're trying to eat our own cooking with some of this. Our kids are just getting to that age where they can handle money, and we're starting to talk about these things.
00:09:22
Speaker
But this is a nationwide epidemic. We invested in the documentary, Broke Busted, and discussed it with our friend Adam Carroll who highlighted this.
00:09:34
Speaker
I want to highlight him because I really love his attitude of this. And he went to a more traditional financial planner and at the end of it for his three kids to go to UNI or something, it was going to be, do you remember what that number was? I want to say $750,000 or something. It was ridiculous. And he was like, I'm sorry, I could go and buy a complete like 18plex with that money and cash roll this whole thing. Yeah. Yeah. Crazy.
00:10:03
Speaker
So it just, the whole thing is just infuriating. And, and I think the other side of it is, and then we'll just jump into solutions because we don't need to beat a dead horse. But the other side of it is, is most of these kids, and we've been in these high schools, you know, I feel like we've done a lot. We've invested a documentary to shed light on us. We, we're speaking at high schools, we're creating content around this topic for our clients.
00:10:27
Speaker
Most of these kids, and they are kids, I say that because I think most of them are, they have no idea what they want to do. They have no idea what they're gifted in and they have no idea what that job that would result from that degree would actually be like. And so I think one of the things that you've talked about the most and I think was my probably missing link, if I go back to my college experience, is mentorship.
00:10:55
Speaker
So I want to touch on that at the very end as our solution. Cause I think that is one of the most important things. Yeah. I don't think it gets enough air time, but I want to dive into our solutions and then I want that to be the capstone.
Alternatives to Student Loans
00:11:10
Speaker
Okay. So our, we wrote an article on our website. We're trying to produce a lot more content around this topic. We've alluded to it in other podcasts. Um, we call it the four legged chair of college funding and we stole that.
00:11:25
Speaker
from, it was an older saying, the three legged stool of retirement. So one of the legs was, you had your pension, your employer took care of you, you stayed there for 30 years and you had a pension. And then the government had a pension plan called Social Security and that was just safe and secure and awesome. And then the third leg of the stool was like, oh, you should save a little bit of money too. That was the three legged stool of retirement. And we know that leg, one of those main legs pensions has gotten hacked off
00:11:54
Speaker
And now it's basically you and social security and your 401k. And we're saying for a lot of people, if you look at the numbers, it's not enough. And so we took that analogy and applied it to college and made it four legs and all four legs you can control. And so the first leg of that is scholarships and grants. And Adam Carroll has curriculum on this for his clients or his followers.
00:12:24
Speaker
And, um, you know, I got a couple of scholarships and grants. I think everybody goes through it, but I think the difference is, is treating it like a job. Now I think what Adam is talking to his followers about and what we're saying to our people is that freshman year of high school, have your kids start applying for these scholarships and grants knowing you're not going to get them. No, it's practice. You want to be good at anything. You got to practice it. And if you really get good,
00:12:52
Speaker
at applying for scholarships and grants, and then you do it the next year, and you do it the next year. Well, then that window when everyone does it, you know, between junior year and, you know, before you get there, you know, everybody does it like, ah, I'm going to fill out some scholarships and grants for 30 days, and I'm going to get a ton of money. And you get like one or two, or you screw up your ACT and you don't get as much as you think you should, but most people quit.
00:13:17
Speaker
And so anyways, it's that mindset of like applying for these scholarships and grants until you have that college diploma in your hand.
00:13:25
Speaker
And he does a good job of saying, like, do this instead of a job. Like, treat it like a job. Sit down and just bang out these essays. Keep a record of the places you're sending these, uh, scholarships or grants to, because I would say in every one of those essays, be like, and I'm applying for it next year and I'm applying for it. And eventually if you do that for eight years, you're getting it.
00:13:52
Speaker
You're getting it. And I think there's a lot of scholarships and grants that just go on unused because they'd ever get signed in. Like no one even applies for them. Right. And I think there's a guy on, on Shark Tank. I think he got paid like over a million dollars because he applied for so many scholarships and grants. Yeah. I paid over a million dollars to go to college. And then he started a business showing other students how to do that. So there's a ton of resources out there, but it's really the mindset at home as a parent of,
00:14:20
Speaker
freshman year of high school, we're doing this and we're doing it thoroughly and we're keeping records.
00:14:26
Speaker
the second leg of the stool and why we- I wanna go back. Because there's also some places that will help you try to get your student in through the right college. For example, there's some students, or I'm sorry, there's some colleges outside of state that are drastically wanting to get people from outside of their state, so they'll give you in-state tuition. Those are quirky things. There's also some scholarships out there that you can get, or grants that you can get from, let's say, a New York school. If you are from Iowa,
00:14:56
Speaker
because they want to get like students from all 50 states. If you're from Iowa and you love to baton twirl or something, like you can get a full ride scholarship to these places. There's companies out there that actually know the quirks that different colleges want. So there's always that too. So just wanted to walk through that quick. Okay. Sure. And the second leg of the stool is a good old fashioned four letter word that a lot of our kids don't seem to want to use anymore is work. Um,
00:15:22
Speaker
And, but this is why we put them together. Cause I think it's so important, you know, if your kid goes out and works at McDonald's or, you know, wherever most lawns, what is the most they could really earn in a summer? You know, it's probably like, I'm going to be super generous and say it's 5,000, but I would say most American kids aren't making five grand cumulative over a summer. Nope. But if you were to apply for college scholarships and grants all four years of high school and you banked
00:15:52
Speaker
25 to 50 grand. That is worth 10 times a summer, one summer's work. And so the value of applying for these scholarships and grants and treating them like a job or a business.
00:16:08
Speaker
The value is 10x what your student is probably going to get in the marketplace. Here's another thing I think about work. Try to figure out a job that you want out of college. Exactly. I love web design. Okay, then let's try to get you to scrub floors at x web design place in the area.
00:16:30
Speaker
And I want to make sure that that CEO knows that he's scrubbing toilets and scrubbing floors, but ultimately that he wants to come back and work there. Think about that from like a business owner's perspective. How many people would pour into that person even as much of saying like, hey, we'll help you with college because we know that you're going to come back and help us.
00:16:50
Speaker
So just a thought, and I think that also kind of bleeds into mentoring, but maybe there's a way that there can be almost like an internship that you could do around. And if my son or daughter came to me and said, Hey, dad, I'm not exactly sure what I want, but can I just do some internships for four years?
00:17:09
Speaker
and figure it out. I would be absolutely all about it from high school. Does that make sense? I think you probably don't know, there's all the listeners, but there's a school, a high school that's in Iowa, it's called Waukee, and they have a learning center that they did this huge community thing. It's amazing. And they have different pods that you can go into.
00:17:30
Speaker
and kind of do this internship thing that I'm talking about. Like if you wanted to be a veterinarian, they have a pod for that and they go to the local zoo. They have a sports therapy. They have like squat racks and all this stuff that they have a pod for. They have woodmanship. They have investing. That's what Brian and I know of this place. We've helped with that. And then they also have like a media center. But they all have these little pods that you can go in and try to figure out, do I like this?
00:17:56
Speaker
which when I was growing up, I didn't have any of that. It's like, well, go to tassel or, or go, I don't know, serve or, or, or go sack grocery. You know? Yeah. Great. But doesn't teach you. It doesn't help you in the grand scheme of things as much as I think like really pouring into like, what, how did, how am I gifted and how can I help? So that's just kind of a work perspective. Maybe get you a different slant on that. Totally.
00:18:22
Speaker
and i think i think this is why gravitate to is like why is getting a job the default when these kids have the least amount of risk like everything to me is backwards about this you know it's a great point well let's invest in the stock market you could lose everything that you put in
00:18:40
Speaker
and you have time to figure it out and make it back up. But it's like, well, you have 100% knowledge that you're going to need every penny that you have right now because you have no idea what you're doing. Like you should actually be the most conservative when you're young. And if you didn't lose money, you'd have that much more to invest once you do know what you want to do or go to. And so to me, it's the other side of it is like, well, you just need to get a job. And it's like, why don't you start a business when you have nothing to lose?
00:19:09
Speaker
If you have scholarships and grants that we're providing for your education. Or even mowing lawns. I know my cousins. They are dominating mowing lawns. It's fascinating to me. Here's the slippery slope though. I just want to be very clear with this. If you start a business when you're young and you get a taste of success,
00:19:30
Speaker
I'm telling you college is going to be a rough road because like you're like, why would I leave this and hone my craft into something better or then stop everything and go to college? Like there is something there that you just have to walk through. It might make sense not to go to college then, you know, or, or think about it a little bit different. I don't know. It's just a thought. Let's finish these up. So the third one is just investing in savings, like traditional, like there's five 29s, there's UGMA accounts, you know,
00:19:59
Speaker
you're trading stocks with your kid, it's just putting money away. Whether it's your son or daughter or whether it's you as the parent or grandparent, it's all collectively this third leg. You're putting money away for college and you've got a couple of decades for it to grow and compound, traditional kind of thought process, right? You're putting money away, banking some cash. Yep. I would say the only thing I would say about this is don't sacrifice your future for your kids.
00:20:28
Speaker
We used to get a lot, like, hey, I don't have a 401k, but I want to start a 529. I've got a better idea. How about you guys? And this was kind of back to Adam Carroll's thing. He was like, yeah, I could invest $750,000 if that's the number. I'm not sure it is, but I couldn't invest that for my kids and they could go to college. And at the end of the day, they could have a degree and a diploma, or I could go buy that 18plex cash for the whole thing and at the end, the rainbows still have that.
00:20:53
Speaker
Anyway, keep going. So that's investment savings. Just don't sacrifice your future for your kids.
Entrepreneurial Approaches to College Costs
00:20:59
Speaker
Um, and, and maybe that there's a little sacrifice. I get that, but don't completely sever your left arm for that. And then the last one, the fourth legged stool, the one that we kind of get excited about. Uh, we say real estate. Go ahead, Brian. Yeah. So I mean, we've helped a lot of families do this and it's been slick and I, you know, it's worked out, I think in every,
00:21:22
Speaker
example that we have. I don't want a project that's never going to not have problems, but basically your son or daughter goes to school and you buy a house in that campus area and they get their buddies or their friends or their teammates to come live at that house. And obviously there's rent involved in the four years of college and you as the landlord would then collect that rent. And so
00:21:49
Speaker
You know, you get a four bedroom house or three bedroom house, whatever it is. You're paying obviously for one bedroom, but the other two or three bedrooms are, you know, your child's friends and your rent. And so it basically helps you set up a business there. It helps teach your kids about ownership, about marketing the property, getting their friends in, how to take care of it, you know, responsibility, making sure their buddies are paying rent, keeping the place nice and
00:22:18
Speaker
because it's a business that's producing cashflow, well, now every time you go visit your son or daughter, it's cool and check in on your property, that could be a potential business deduction. Yeah, depending on how you structure that, totally it could be a business deduction. And so all these things that are expenses and that you're going to do now become assets. And it teaches just so many different principles beyond just getting the rent.
00:22:47
Speaker
But, you know, especially if you have children, you know, we have one family that has four boys, all four boys are going to go to the same college. Well, they're going to own that house for over a decade. Um, you know, and now being around their friends and stuff is just like, Oh yeah, that's, that's their house. And I want to live there. You know, it's just like, it's just built in to the framework, you know? And, um, that's just a lot of money that was going to go out of their economic engine for decades.
00:23:15
Speaker
with four boys paying rent to somebody else, well, now all that money plus their friend's money is coming back to them with just a simple investment in a property. And so that's been kind of like our uncommon approach to college process and funding that, but those, you should be doing all four of those, right? Like you want your kids to have a good work ethic and experience things. You want to get other people's money in the form of scholarships and grants, and you know, you want to save and invest
00:23:43
Speaker
and teach your children those principles
The Importance of Mentorship
00:23:45
Speaker
as well. So it's all of it, not just one of them. You absolutely do. And at the end of the day, these students that are getting out with student loans are in bed with the government. They're not like Brian and I's student loans where it's 2% and it's like a privately held bank that you have it. This is with the government. They can garnish wages. The IRS.
00:24:05
Speaker
Yeah. So it's just something that I think that needs to be talked more. Brian, you do as well. Um, and we're kind of starting to come up on the throws out with our kids starting to get older. Um, kids are expensive, but man, if we can invest in them and start giving them a different path, I think that's another thing. Just, and we'll tie this all in because we literally have a minute left, um, is just mentorship. You know, like help your kids thrive.
00:24:31
Speaker
And even if like my daughter, I'll just tell her she thinks she is going to love babysitting. My wife and I are hopeful that that'll be good. But even that, like how can she get, even start a business that maybe when somebody needs to have a babysitter,
00:24:50
Speaker
they call maybe my daughter's business. And my daughter is now in the job of vetting these babysitters and making sure that these people have babysitters. Because something that I think is wrong is when my wife and I need a babysitter, we cannot find them. We call 25 people
00:25:06
Speaker
No one's ready to babysit. So if there was like a business I'm helping my daughter try to figure out this Babysitting business and obviously there's some pitfalls there so but I'm really trying to think of how can I empower my daughter to start something that she can create that she gets excited about and then maybe plug her in with some one or two people that'll help them that way and even I we've talked about church a lot and we're godly men and
00:25:34
Speaker
But there's a girl that she's younger, she's out of college, she has a job, but she has dedicated herself into kind of going up with our kids or girls in church. And so every year they get older and they go to a different grade, she will kind of continue to go and teach them. And I just think that's a brilliant model because she's investing in these girls.
00:26:00
Speaker
And so, how can I get more of those kind of people in my kids' life? And in Brian I's life, how can we get more mentors to help us through this? Because at the end of the day, we're all faking it till we make it, in some senses. And that's why I think it's really important to help our students get a mentor that they look up to, that they know at the end of the day, I love that job.
00:26:24
Speaker
What I kind of went through and I think Brian did is too like we don't really know what we wanted to do exactly. Brian knew more than I did. I should say this. I had no idea what I wanted to do and I was kind of going through kind of different classes trying to figure out what I liked because of the professor. And a lot of times that's not the people that you really want.
00:26:41
Speaker
shape your life with because they're not really doing it. The people that are running or teaching business never run a business or never even owned a business. So sometimes I get frustrated about that. But if I had a mentor to help me and invest in me and try to help me like, hey, go to this class because I think it's going to be important. Go to this class because I think it's going to be important. Yeah, I know that professor's tough, but like get through it, get through it. And they invest in you in four years. Well, at the end of the rainbow, you're going to go back to that person and say, hey, I did everything that you told me to do.
00:27:11
Speaker
Where should I go look for a job? And if they don't say I have a perfect job for you because I've been watching you for the last four years They would probably say hey I got a couple friends that would love to meet you and they'll they'll also feel invested and Responsible for your future and your success. I think we need more of that in this day and age. So that's kind of my Sorry, I appreciate it. I appreciate and that was the one thing I didn't do in
00:27:38
Speaker
you know, I did want to be in this business out of college and knew that. And I just didn't have that mentorship, that intentionality of, you know, asking and being guided through and, um, you know, have that person to go to saying, Hey, I really want to stay at this company and be an advisor. Does that look like, you know, um, and so I've always appreciated that expertise and mindset that you bring to the table. And I just, it's free, you know, it's free to go.
00:28:08
Speaker
pick people's brain and you got to be intentional about it and respect their time and expertise and all those things. But it is... People love to help. People love to help. When I think how many times have we gone and spoken to high schools and the kid's like, Oh, I want to be a financial advisor. And not one of them has reached out to us. I mean, not one, you know, it's like we even tell them, you can call us. We'll, we'll meet with you. You can come over, you know, and not one of them does. And so it's there. So anyways,
00:28:36
Speaker
Well, hey, you've been listening to Uncommon Life Project. I am your host, Philip Ramsey. And I am Brian Dewhurst. Thank you for listening. Until next time, have a great day. Bye. Bye. That's all for this episode of the Uncommon Life Project, brought to you by Uncommon Wealth Partners. Be sure to visit uncommonwealth.com to learn more about our services. Don't miss an episode as we introduce you to inspiring people who are actively pursuing an uncommon life.