Congratulations, graduates, you did it. You successfully paid a ton for your degree, likely using borrowed money from the government and elsewhere. You're a reward for this accomplishment, a mountain of debt. We are talking about student loans. This is game plan. Hi. I'm Rebecca Greenfield and I'm Francesco Levie. This week we're talking about student debt, which is not only an issue for new graduates or people going to school or going back to school, but something that can
follow you throughout your entire working life. Yeah. For the past few years, we've been hearing more and more about our country's huge student debtload, which is right now about one point for trillion dollars. The reason we've been hearing about it so much is because it's a real problem. Yeah. So for some more stats, last year, about seven and ten seniors who are graduating had alone and the average
debt was thirty seven thousand, seventy two dollars, which is large. Yeah, that's a lot of money to be hanging over your head, and it's it's it's also a high percentage of people just walking around with all this debt. And I feel like around the time you and I entered college. It was just kind of expected that you would enter into this really intense contract where you we're going to get an education in return for kind of being on the hook for this huge amount of money for all of
your working life. And you know, there was a lot, always a lot of talk when I was applying for colleges about you know, workshops to fund it and how to fill out your FAFTSA and all these things, but there wasn't any talk about what the implications would be for the rest of my working life. Yeah, and having debt changes the way you behave after school. It changes
the type of jobs you take. So law students, for example, they feel like they have to go work at these big firms to pay off their law school tuition if they're lucky and can even get those jobs. Or you might go to a job that you don't really want
because you feel like you have to. There are companies now that are trying to attract workers by saying that they will help them pay off their student debt, which is a new benefit that they're offering because they know it's weighing on the minds of these new grads so much. It's enough of a cloud hanging over workers that they count this student loan benefit as a perk that's like
equal to health benefits. Yeah, because a lot of people were going into jobs and they weren't taking advantage of other benefits like four oh one case, because they felt that they had to put away money. And it is a significant chunk of your paycheck that you need to put away every single month until the end of time. It seems just to pay off your loans. Yeah, and it's not just putting away money for your four O one ca, but people are delaying all kinds of decisions.
We've read about how people with student loans are putting off buying homes, which has a knock on effect on the economy at large. Yeah. I feel like there are all these things that we blame millennials for or say like it's a character trait of this entire generation of people, which a lot of it can be traced back to the fact that a lot of us are graduating with debt. So like, yeah, millennials are lazy and still live with their parents. It's like, oh, well, they can't afford rent
because they're putting hundreds of dollars to debt. Or there are so many articles about like what industries millennials are killing. Millennials are killing everything. They're just industry murderers. And it's like, well, no, they can't. They're going to behave an act differently because their financial situation is different. Are you sure it's not about avocado toast? Yeah, this was a really fun article guy that said millennials, we millennials aren't buying homes because
we're spending too much on avocado toast. Yeah, it's like avocado toast index. It's really affecting the globally. Con I will admit that I make avocado toast a ton on the weekends, and it's a very cheap kfast like it's not expensive to buy. You use like a quarter of an avocado and a piece of bread and an egg could not be cheaper. And you're a you're a basically a success story, so I feel like you're however, you are a poster child for avocado toast and its benefits. Yes, exactly,
but yes, I mean we're joking. But what's going on here is so much new swirling around because millennials. Anything makes for a good headline that basically shows how millennials habits are changing and that then kind of infers from that that there's something inherently about millennials that you know is making them do bad things to the economy. But if you scratch even a little, you can see that
what's behind so many of these things is student debt. Right, And there are a lot of news stories about the hysteria surrounding student debt. Um. You mentioned at one point for a Chilian figure, which sounds huge, and there's even talk of a similar to a housing market bubble um. And so, like, we know we're supposed to be worried about this on a macro level, but I think a lot of people, and a lot of graduates, it can be hard to wrap your head around how much am
I supposed to worry about it myself? Um. And to that point, there was a story that our former colleague Natalie kuld Off wrote about how most students don't know
anything about their college lens. Yeah, the story pops up periodically and it sounds kind of shocking, But basically, people don't tend to like they couldn't name the figure of how much student debt they actually have, and they're also fairly unaware of what their options are for repaying it and what programs might be available to them to help them pay it down with, like lower interest rates or
a better program than the one they have now. They kind of signed into this contract early on and then you know, automate their monthly payments hopefully or they don't. They default, but you know, and then they just kind of don't think about it again. And since I'm no expert on student at myself, we are going to talk to the smartest person I know about student debt, my very talented colleague, shah Nast report covers student debt for Bloomberg, and he is going to answer all of our questions
about our student loans. Thanks so much for taking the time, Shane, Hi, thanks for having me on. So can you tell us how we got to where we are today? Why is student debt such a big problem now? The reason why we're here today? Well, actually there's a lot of reasons. One, there are more people who are going to college, right, I think a huge percentage of the workforce now has a college degree. This wasn't the case, you know, ten twenty years ago. So more people going to school, more
debt incurred. States are cutting back on subsidies that they provide to their state schools. So students, you know, for example, like I'm from California. When I was graduating high school, you go to UC Berkeley all in under fifteen k year full cost of attendance. Now it's like in the twenties, So schools are cutting back subsidies to hire ed So colleges are raising tuition. Families can't afford it, they borrow more. Uh, colleges of all stripes have been raising tuition for years
and years relentlessly. Um, that's about it. So if you're someone who just graduated, you're about to enter their workforce, and you know this is a big problem, but you don't really know what you can do about it. Like how can an individual be smart and responsible about their own loans that they've already taken out. So if you've just graduated, you just left school, you've got six months to get your loans in order. You're in a grace period um, which is offered by the government, basically six
months to get all your paperwork in order. First thing you need to do is before even you find a job. In my view, the government offers what are called income driven repayment plans, which is basically a bunch of repayment plans where your payments are pegged to your monthly income.
And if your income zero so you have no job, no source of earnings, your payments or zero, and you stay current on your loans for twelve months, uh, you check back in with the government the next year, make sure you know your income is the same, and you do that for years, your debts forgiven. So that's my advice to recent grads. Check out income driven repayment plans.
If you're not making that much money and you owe a lot, you've got to check these out because it's not worth putting your life on hold to make your student loan payments. Everyone else, honestly, same advice. If you owe a lot of money, you don't make that much, go to the government's website literally student loans dot gov. Look up these income plans. No one in America should
be defaulting on a student loan. In my view, there are too many options available to people where, regardless of the amount of financial distress they're facing, the government does offer these options to you, and people need to take advantage. So an income based repayment plan you pay back based on your income. Clearly say you're a lawyer, you're making a pretty good salary. You're gonna have to pay a lot back. Still, Yeah, but it's better than what what
is the alternative if I don't do that? The alternative is there's the government offers a standard tenure repayment plan where basically they look at how much you borrowed, what's the interest rate. They figure out, okay, so how much at the current interest rate? How much are you gonna know after ten years? So then they basically divide that total sum up by twenty so twelve months, ten years, and that's your payment for the next ten years of
your life. So if you can afford to make that payment, or if you can afford to pay even more, do so. But if you can't, you owe it to yourself to check out these income plans as opposed to just burying your head in the sand and thinking it'll go away, because it's it's not. The government will get paid. That's another thing I've heard that people don't know where their various loans are. Is there a way to figure that out? Yeah,
it's actually kind of a problem. So the government has this huge database, it's called you know, it doesn't really matter what it's called. But basically they have this database where it's like every person who's ever taken out of student loan or gotten a federal grant from the from the FEDS, it's in this database again, student loans dot Gov. Go to this website and you're you know, you get a credential, so you give yoursel security number and like date of birth. You log in and all your loans
are listed. Private loans they're not there. So if you borrowed from some bank, you gotta go to the bank, But if you borrowed from the FEDS, literally, it's all on this website. And what do you How do you feel about taking out private loans? Um? I think it depends right, So I like, if someone asks me, should they take out private loans, my instinctive answer to them
probably not. But depends on your situation. But if you can meet your obligations by borrowing from the Feds, you're probably better off doing so, because if you borrow from a bank, you fall behind on your loans. You know, after graduation, they're going to come after you and you'll default after like six days, it'll ruin your credit. They won't really offer you that many options, like you're going to have to pay up FEDS. First of all, it
takes nine months to default, that's number one. The second thing is they offer all these income plans so literally, I mean I can't the fact that people default. It really bothers me because literally, if you make no money, your payments are nothing. It's you get a bill it says zero do literally zero dollars. I'm sorry, I don't mean to get emotionally, it just it really bothers me that people default when like because they have no money, because like you don't have to pay anything if you
enroll in these plans. Do you think people are averse to the income payment plans because they think they need to be paying off as much as possible, or they just do not know about it. I mean, I think it's a variety of things, to be honest. I think one some people just they're like afraid of debt, you know, we all. I mean I have friends who refuse to
look at their monthly statements like credit cards. You know, they'll make their mortgage, but credit cards, auto loan, student loans, like they're just scared and they just they it goes in like in a box in their closet and they never open it other people. They get bad advice and information from their loan services. Loan servicers are these companies. They're the ones who send you your monthly bills, they
tell you when you're behind. They're the ones you send your checks to, or you know, do your auto debit from your bank account. These these guys, they don't employ enough people. Imagine calling your local cable company or your cell phone company and wanting help, like you're on hold forever. You get to someone, that person doesn't really understand what you're talking about. You asked to talk to a supervisor, You get transferred around. Next thing you know, forty five
minutes have passed in your issue hasn't been resolved. Same thing with student loans. Government doesn't pay them that much. Companies don't invest, so like they're employing all these people who don't know what's going on, and so you ask them for help. They have no idea. You're probably not aware of the incomplainants, and so you're basically where you started. It's a bureaucratic thicket, and you are a young professional trying to make things work, and you don't have time
for it. Exactly like how much do we get for lunch? Right? For lucky again, our most people eat a through desk. I eat at my desk, so I probably take fifteen minutes for lunch. And during that time, I don't want to call my loan company like figure this stuff out. I want to go on TMZ or I mean actual dot com. That's right, that's right. Um, So you've been talking about when you're taking out loans, like try to
get a federal loan. What are some of the other ways if I'm going back to school or thinking about taking loans for my kids? What are some other ways I can be smart about going into debt. The best thing you can do, and the thing is, like most people don't do this is try to borrow the least amount possible. So like figure out how much you're gonna pay. It's like basic budgeting. What's your rent going to be, what's your tuition going to be? How much you're gonna
pay for books? Like can you buy use books? Can you like make photo copies of like your friends books, and like violate copyright laws, may not get caught, Like do all these little things to like save money. The biggest thing is like don't borrow too much. Their university professors and like experts on student loans and financial aid who are saying, like the biggest issue or one of the biggest issues, that people don't borrow enough, Like too
many people drop out of college due to like financial considerations. Yes, there are people out there who like get hit with unexpected costs and they have to drop out because they can't afford it, And like, I get that, but so many people oh way more than they can afford. Even President Obama said, I want to say in like the summer of twenty twelve, or like he acknowledged that a huge chunk of our student loans that will not be repaid.
It's just not going to And the reason is, like people aren't getting go jobs they can afford their loan payments, Like they're not really thinking about this stuff. Best that you can do, figure out how much you're gonna need and do not borrow more than that. And when you say don't borrow more than you can afford, part of that calculation is probably like what your degree is actually going to net you in the end, exactly how good
of a job you can get. This is kind of a controversial idea, but should people be thinking more pragmatically about what they study in college in order to get a return on that investment. I absolutely think we do. Right now, go to the Census spirit you never met websites, so you can go to the Census Bureau. You know, they have all these stats on like American households, like how many how much beef we eat? All this stuff. One thing they have is like earnings, and they have
earnings by like education received. Literally one in four bachelor's degree holders in America make this no more money than the typical high school grad. So for a quarter of bachelor degree holders going to college, like, if you're talking about financial return, probably wasn't worth it because think about they had to take time off work to go to school, they had to pay for that school, and maybe they took out debt and they come out and their earnings
are no more than the typical high school grad. Like, people need to be thinking about this stuff. But also, I mean, like schools know that grad degrees are a huge money maker for them, so they jack up the tuition and students can borrow up to the full cost of attendance from the FEDS, which the schools themselves set there is an incentive for the schools to charge as much as possible, and like there's this thing in higher
ed where people associate higher price with better qualities. So like school, oh must be great, must be buried in the school. And so you have like people who are graduating with masters and social work noble profession. Like my wife is a public defender. She works with social workers and utmost respect for them. They're go going to these programs where they're paying like fifty plus a year, they're coming out making like thirty forty. The schools charge it,
the Feds will fund it. The borrowers on the hook. Like I get the desire and want to do good, but at some point, like people have to think, like this amount of paying for this degree, is it really going to pay off? I think a lot of people are worried about what might change for the better or the worst under the new administration. Can you tell us
about how things are going now? The fact of the matter is, like the Trump administration, they are they are making it harder for student debtors to repay their loans, like that is a fact. They are increasing collection charges, they are decreasing the amount of the requirements they're putting on loan companies. The Obama administration towards the end, they wanted to make it easier for borrowers to pay back their debt. They wanted to increase the level of customer
service offered by these loan companies. Trump administrations saying no, we don't care about that. So and then on top of that, they're like moving to eliminate certain like there's an income based plan right now, or excuse me, there's a payment plan called public service loan forgiveness where if you come out of school with student loan debt, you work for any nonprofit or any government agency nonprofit five and one C three right, typical nonprofit. You make your
payments for ten years. Anything of your debt remaining after that is forgiven tax free, like you're done. Trump administration wants to get rid of it. Trump administration also has said previously that they want to largely like move a lot of the federal student loan program into the private sector.
Right now, federal loans third entitlement. If you've got a pulse, you can get a student loan if you go to a bank, like they're going to frisk you pretty good before they lend you that money, and if you're higher risk, they're going to charge you more. So it's going to be more pensive. So that degree you want, it's going to be more expensive. That's what the Trump administration wants. Now. You know, they have this philosophy where less government involvement,
let the private sector to its thing. It'll probably be better for the economy and for society, like on the whole, like after a certain amount of time. But right now, if you can't really put food on the table, you're struggling to do so, you can't really afford to pay rent. You want to better your life, You want to get a degree, get a better job, get a real career. Trump administration, at least in the short term for you, over the next couple of years, they are legitimately making
it harder for you. I want to focus on that public service uh loan forgiveness program because I think a lot of people might hear that and get really scared if they entered a life a career of public service UM or you know, I have already taken out loans with that in mind, that they're not going to get that forgiveness if this policy changes. So if of student loans right now. Don't worry about polk service loan forgiveness,
like it's in your loan contract. You are if you're eligible for it, you can take advantage the Trump administration's proposal. First of all, has Congress has to pass, It has to go through a house, has to go to the Senate. So that's like for starters number one, number two. Even if they were to move forward and Trump's plans were to be enacted, it can't be retroactively applied. So the way it would work is it would eliminate this option
for future borrowers and future loans. So like let's say you're a college student now, you've got a year left, the loans you've taken out to date would be eligible maybe like next year when they pass it. Your loan two years from now may not be eligible, but stuff previously will be. If you're in it now, if you're dead or now thinking about it, like you're safe. Do not worry. This is for future students and future loans that would not be eligible. Another thing I wanted to
ask that might be different about the current administration. You've written a lot about this in the past, but an industry that the Obama administration was trying to crack down a lot, especially towards the end, was for profit colleges. And when we talk about return on investment, those are some of the worst actors in that way, Right, You really get very little often for what you what you spend on a for profit college. Um, So what is
the what is the Department of Education under Trump? What is their point of view on for profit colleges and that sort of Obama era crackdown? Well, so far they are defending some of the Obama era crackdowns in court, so industry. So there's this new rule it's known as gainful employment. Basically, it says the government will stop giving UH students loans to attend certain career programs if previous grads from those programs don't make enough to afford their
student loan payments. So it's like, after a few years, if a particular career program like welding at you know, such and such college, if their students aren't making that much relative to them out they borrowed, the government will say no. Moss. So industry obviously is sued to overturn this in court because government's funds nine out of ten new loans and it's a huge cash cow and no one wants to be left out. Trump administration thus far
as defended this thing in court. So if you're thinking about it from like a taxpayer protection perspective, like that's probably a good thing. On the other side, the Trump administration's Education Department is talked with former for profit lobbyists and executives, and these are the folks who very strongly believe, like, look, we need to provide people with choices, and the more choice we have, the better the market will work. Will
have informed consumers, they will be decided. Let them decide whether there are certain schools worthy of their time and investment. Don't have the government in the business of limiting options. That's like their sincere, you know, worldview. I've leave them that that's what they that that's what they truly believe, and like their policy kind of flows from that. So knowing that, you've got to think, like long term, Trump administration is going to make it easier for for profit
colleges because they want people to have choice. Betsy Devas has no problem with like for profit K through twelve schools, so why would she have a problem with for profit colleges and universities. You gotta think that they're going to make it easier for for profits. The issue is like, do we want to society where people have unlimited choice and where that choice could lead to a their own financial ruin and be squandered taxpayer dollars which are kind
of a scarce resource these days. If you think about like the options we have in terms of we got a fun sol security, we got a fund Medicare, we got from the military, we have all these other programs, Like do we want to let taxpayer dollars go to waste in terms of like people getting degrees that are useless and worthless and owing a bunch of debt to the treasury that will never get collected. Or do we want a society where people have unlimited choice if they
waste money the taxpayers and get repaid. Oh well, at least people have the choice, like which one do you value more? That's the way I kind of think about these issues. Well, this was really interesting and fun. Thank you so much for coming on and talking to us. Thanks for having me on. I think Shaheen knows too much. His outlook is pretty negative on the state of student loans, and the cost of college and live future debt burden
and what it's going to do to our nation. Um. And I think maybe you might think, like, oh, should I go to school even at all? Or take out loans or you know, do I have to be the most conservative ever? And I don't think we'll ever be able to afford to send my kids to college. Yeah, And I don't think that that is is the message.
It's more like Shaheen said that he doesn't understand why anybody defaults on his loans, and that's because he is so knowledgeable that for him, there are all these resources and things, and I think a lot of people just don't know as much as he does. The fact is, it's not really in anybody's interest right now to make those options really easy and fair and available to people.
So to me, if you're not a reporter who covers this and is really steeped in it, it's really easy to understand how you might not know what your repayment options are, or you might be so overwhelmed by the sheer number that you just declined to deal with it at all and you kind of tune it out and hope it goes away, and of course it won't go away. We'll only get worse. Yeah, So to help with that, we asked Shan for some easy resources that people can
seek out right. So, if you have student debt and you are unsure what to do about it, your first stop should be Student Loans dot gov. She he mentioned it a couple of times, but they have some really useful things on there. One of them is a one of them as a student loan repayment calculator that can tell you approximately how long it will take you to pay off your loans based on your debt, your your
interest rate. And you can also on that website apply for income based repayment programs if you need a little more help than that. If your needs are more complex and you just don't know what to do about your student loans, there is Student Loan Borrower Assistance dot org and they have a whole trove of resources to help
people handle their debt. If you're in the position where you haven't taken out any debt yet and you're still deciding on a college, you should make sure to go to this other government website called College Scorecard dot e D dot gov, and that has resources for every single college in the US telling you basically how much you can expect to make after you graduate. Yeah, super useful and hopefully student debt is a little less terrifying. And now it's time for half big takes, half fake takes.
You can call into our hotline and leave your own half big take at two on two six month seven zero one six six. This week's guest half big take comes from Shaheen Alright, Shahan, what is your workplace? Great? So we at Bloomberg LP, you get free coffee at work. I don't understand why I see so many people on the elevators from the ground floor to our main office on the sixth floor carrying cups of coffee that they bought from an outside place when we have so many
coffee choices in the office. We have like a white moose chocolate coffee today the other day. We I mean, that sounds kind of gross, but there's like hazel nut, there's like sustainably grown coffee, there's ice coffee, there's decaf coffee. There's like so many coffee choices and it's all free,
and it's all unlimited. I don't understand why people walk into the office holding like what are clearly four or five dollar cups of coffee, which, like I get if it's a once week treat, like you're feeling special that day you want to like have an enjoyable morning. Makes sense every day that's you're looking at Bucks a week, Like what is that hundred bucks a month, hundred a year? We get it for free? Like what are you doing?
I'm so not surprised that that is your point of view, having just spent a while talking to you about loans and money. You Yes, very practical, Shaheen. Has anyone ever called you thrifty? I'm a I'm a I do the treat coffee. I also am of the same, like I'm not spending money on free things. Both both of you are pretty are pretty responsible, and we're careful with our money.
I I don't want to be the person who defends this practice, the practice of buying outside coffee, because I always end up in the position of like advocating for spending too much money on these things. But um so I would say, hypothetically, we're one to spend money on coffee when perfectly good, free coffe is available to them. They are not paying for the coffee itself, they're paying for the experience they're paying to sip their coffee on the subway or in their car on the way to work.
And I don't know. I'm not going to defend it. You're right, everyone should coffee is bad, but yeah, some our coffee is bad. But yeah, I get if it's like if the coffee is really bad and you can't if it's undrinkable. I get that, but ours is not ours is not ours? Is fine, But I mean I also like some coffee expert, like, you know, maybe someone who drinks something fancy will like turn their nose at Ours.
It's good for me, I don't mind. And then again, I also eat fast food when my wife isn't paying attention. So there's also that we all have our guilty pleasures. Francesca, what is your not vully formed idea this week? Uh, there's a really unexamined danger to check in your email first thing in the morning. Everybody's like, oh, work life balance isn't an awful We have our phones on our bedside tables, and we just first thing in the morning, we stare at this blue screen. Blah blah blah. I'm
not I'm not talking about that. When you open up your phone first thing, and you start scrolling through emails. This is what happens to me. You read the email, it's now no longer marked as unread, you have some kind of reaction to it, but you're like too tired yet to actually respond or take any action on it, and then you completely forget you got the email until like three days later, and it kind of comes back to you in like a vague memory, like a dream.
So you're basically it's basically like waking up and deleting all your emails. That's what you're doing. So don't do it. Wait until you've had some coffee and you're sitting at a desk and you're in work mode before you start checking your emails. Yeah, this happens to me all the time. I just realized. So I'm not saying you should like stop doing this for work life balancers and whatever. Do your email first thing, and just do I still do this.
I mean, as rational as Rasionally I want to change, but I just, yeah, I'm noticing this is a problem, and I'm recognizing the problem, and I'm telling you that I need help doing something about it. But you're not in my house for saying the more so there's nothing you can really do. But fair ways shaming you, Becca? What is your half? Big take? My take is so underdone.
I don't know where I fall good on it, but going out on Friday nights prior con lay out the case for both, I think I might be seasonal, like in the winter dark so tired. I think it's kind of nice to have a night in or maybe a cozy dinner. And I know people who fall on that end of the spectrum. Friday night, No go out, You're too tired anyway, and then you'll just be tired the rest of the weekend. Then again, Friday night you all
you want is like a drink after work? Now are you considering it a choice between Friday and Saturday night? Like you you go out one or the other? Or is it like sometimes Friday plus Saturday or only Saturday? Because for me, like I just never go out. I have I'm I'm done ever having fun ever again, I can feel like that when you go out on Friday day night and you party too hard and you're too
frankly hungover and tired to do anything Saturday night. You've kind of lost that night and then it feels like the weekends over sooner. But then sometimes if you just go home on a Friday and veg out and don't do anything because you're too tired and unmotivated, then you wake up on Saturday and you're like, ah, I already missed fifty percent of the weekend nights. Yeah, so I don't know whoa take? So unbaked? You know what? Call into our hotline people two on two, six one seven,
help us. Do you like going out on Friday nights? What's the take? Help us help our take? And this has been half big takes, half baked takes. Thank you for listening to another episode of Game Plan. You can find me on Twitter at RZ Greenfield and I'm at Francesca today. You can tweet us your half bag takes or any other thoughts you have about the show. And you can also subscribe to our new letter at bloomberg
dot com slash Newsletters. If you like this show, head on over to Apple Podcasts or wherever you listen and rate and review and subscribe, and tell your friends to rate and review and subscribe. We love hearing from you. This show was produced by Liz Smith and Magnus Hendrickson head a podcast is Alec McCabe and we'll see you next week. Bye bye.