I’m so excited to share that I am the co-host on the new TV show, “Going From Broke”. “Going From Broke” takes a hard look at the nation’s student-loan crisis — and gives millennials a chance to dig themselves out of massive debt.
As the co-host, I am the financial expert working with ten millennials to help them get on the path to financial freedom. The show is produced by Ashton Kutcher, Matador Content, and Chicken Soup for the Soul Entertainment. The season premieres on Thursday, October 17 and will stream for free on Crackle TV. Click the video below to watch the trailer.
Student loan debt is something that I have not previously discussed on Money & Mimosas. The reason is because I believe the overall system is amoral, broken and predatory. The first time I realized this was shortly after I moved to the Bay Area. I had launched my bookkeeping business and was juggling several gigs to make ends meet as I built my client base. After a few months, I had finally built up enough cash to have $600 in my savings and pay off my $2,000 credit card balance.
I only had one credit card- it had a $2,000 limit -and I wanted to pay off the balance so I could have it for emergencies. Once I had reached that goal, my next goal was to boost my savings to $2,500. Since my income was inconsistent at best, I reduced my monthly student loan payment on one of my loans to $25/month so that I could focus on my savings. Boosting my savings was my top priority because I knew having access to cash was really important, especially when building a business. And especially when living in an expensive city.
I’ll never forget the day that I called my loan provider to ask them to extend the period I where I could pay $25. They wanted me to boost it to $250/month - which was really a stretch for me at the time. The guy on the other end was incredibly condescending. He called me lazy and I got the impression that he thought I was some stupid girl with a pipe dream.
For the tenth time, I told him that I could not afford the $250/mo payment. I had other bills, other student loans, and needed to focus on my savings.
He got eerily quiet and then in a mobster-like tone said, “Well, I see that you just paid off your credit card. Why don’t you use that to make your payments?”
My credit card interest rate was much higher than my student loans. That did not make financial sense. And my credit card was supposed to be for emergencies. And no, mobster, paying student loan debt does not constitute a life or death emergency.
It was in that moment that I realized something was not right with my student loans. I went back to my accounts and realized that although payments had been made, the principal on my balances kept increasing. I realized that there were random penalties and fees assessed that had not been brought to my attention.
So, I started doing some research and found that I was not alone. People all over the country were sharing stories about Sallie Mae misapplying payments and refusing to negotiate with them during times of economic hardship. Many of these people had no choice, but to stop paying their loans. Which turned into them defaulting and assessing even more penalties and fees on their balances. As it stands today, 40% of student loan borrowers have defaulted on their loans.
Why do we have a system where nearly half of its participants are failing?
The answer is best summed up in the phrase, “Absolute power corrupts, absolutely”.
The federal loan system was created in 1965 with the best of intentions. However, what began as friendly, helpful, and benign has evolved over time into the most ruthless, hyper-inflationary and predatory lending system that the nation has ever seen. [Source: StudentLoanJustice.org]. Due to effective lobbying and compromised interests, Sallie Mae and the overall federal student loan system has been granted unprecedented power. And they have used it to create an system of economic bondage where graduates are tied to their debt for decades.
There are a handful organizations fighting to change the system. One group, StudentLoanJustice.org (SLJ), is a grassroots organization started in 2005 to fight for the rights of citizens with student loan debt. Founded by Alan Coollinge, they have been profiled on 60 Minutes, the New York Times, Fortune magazine, VICE magazine, CNN, Fox News and dozens of other media outlets.
SLJ’s immediate focus is to convince Congress to restore basic consumer protections to student loans. This would allow millions of borrowers to negotiate fair and reasonable settlements of their student loans- just as borrowers do with credit cards, IRS debt, etc. As it stands, student loans are treated much differently than other loan products. In fact, when you visit the Federal Deposit Insurance Corporation (FDIC) website, they single out student loans with a separate hyperlink for more information.
Standard loan protections include bankruptcy, the ability to negotiate the debt, and transparency with the interest rate terms. Due to fierce lobbying, the Sallie Mae has been able to skirt around these protections and has since become Wall Street’s profit-making darling. From 1999 to 2004, Sallie Mae’s then CEO, Albert Lord’s compensation topped $200 million. From 2010 to 2013, when students began to shoulder more and more debt, Sallie Mae’s profits were $3.5 billion. [Source: Reveal News]
The removal of these protections has allowed for a system to go unchecked and spread like a deadly virus killing everything in its path. It kills self-esteem, the will of many young people trying to create a better life for themselves, and their bank accounts. It is also killing our economy. The lack of disposable income due to monthly student loan payments and ruined credit scores due to the inability to pay student loan payments, has led to a decrease in home purchases and other spending that fuels our economy.
This is not a new conversation. The Consumer Financial Protection Bureau has sued Sallie Mae in several states. Presidential candidates, Elizabeth Warren, Bernie Sanders and Marianne Williamson, have acknowledged that the system is out of control. U.S. Representative Ilhan Omar and Bernie Sanders released a student loan debt cancellation bill.
With Money & Mimosas and the press I will be doing for the Going for Broke TV series, my hope is that more of us become informed about a system that has been designed against the people’s right to pursue life, liberty and happiness. The student loan system is economic bondage… a modern-day debtor’s prison designed to keep people from creating a prosperous life where they feel free to pursue their passions and dreams. Something needs to change. And with the right mindset, the will to seek out information and the tenacity to act on it, we can change it. Together.
About Money & Mimosas: Money & Mimosas was started as a passion project by Danetha, a former NFL cheerleader turned entrepreneur and financial journalist. After a brunch conversation with girlfriends, Danetha was inspired to launch a blog to explore her journey of becoming rich, sexy and confident.