All You Can Do is Face It And Fight It
Last week American Student Assistance released an 8-minute movie horror movie called THE RED. It’s about debt, and after the film ends, there’s a call to action to face your own debt (“you can’t outrun it, all you can do is face it and fight it”). I spoke with ASA managing director Sue Burton about her organization and what they’re doing to help people confront their student loans.
LS: Tell me about your organization, Sue Burton.
SB: American Student Assistance has been around for 57 years helping borrowers navigate repaying loans. SALT is our program to help students get ahead of their loans. We’ve found the best way to help students manage their loans is to help them when they’re make borrowing decisions, to get them informed and engaged for when they ultimately leave school.
LS: Your movie gave me a knot in my stomach.
SB: The goal is to drive awareness of the power of solutions. So much is written about the problem of student loan debt—but we want students to feel empowered to take action, to look at solutions, to get themselves informed about their options. You can ask people if they have student loans and they’ll say, oh yeah, but you ask much, they have no idea.
Students are disengaged from the details of their loans and how to manage those loans—they’re paralyzed.
LS: What would you say to someone who wasn’t that worried about their debt. Or maybe wasn’t paying back their debt. Maybe because they were banking on eventual loan forgiveness.
SB: We do encounter quite a bit of what I’d call magical thinking. Students hear rumors of forgiveness, or maybe heard that you worked in a certain job, your loans would be forgiven. And that can be true, for some federal loans.
But students have so little engagement with their loans, we have to unpack what type they have, the nature of the loans they have. A mortgage is one borrowing decision—but student loans are usually 4 to 6 different borrowing decisions, and they can all have different terms. People confuse public and private loans. They think private loans and public loans are created equal and they’re not. So the first step is know what you’ve got.
The terrible tragedy of student loans is that they’ll follow you around; denial and avoidance is really not an option. That’s the message we’re trying to portray in this movie THE RED. Just avoiding them will get you in the end.
LS: Are you just focused on current students and new graduates?
SB: Our organization helps people of all ages. Our programs are for everyone. The shape of traditional student has really changed—even many of our active college students are now are in 40s or 50s. We help a lot of people into their 60s and 70s—some have ignored their loans and are now finding that their social security is being garnished, which is really difficult. We help borrowers in any stage of repayment, but we’re trying to reach students.
LS: After they have loans, or before?
SB: Both. We have partnerships with 150 colleges and we work with students to help people borrow less—how can you borrow the least amount possible?—and to borrow smart—to know the difference between a federal loan with a fixed interest rate and a private loan. So those are our goals: borrow less, borrow smart, and ultimately repay well
LS: Can you talk me through what happens when I call you up?
SB: The first thing is diagnosis, understanding the magnitude of your current debt situation. We have a loan management tool on the website to figure out what you owe. Then we help you to understand the particulars of your situation. If you have federal loans there may be a way to renegotiate, and we can do that—most of the people that we can help immediately qualify for income based repayment for those federal loans. We can’t renegotiate private loans, but we can give specific language and coach you on how to do it yourself. For instance, some banks are open to a student loan short sale, and while we can’t do that for you, we can give you them some things to say to the bank.
We also try to get you thinking that no loan is an island. We want you to think about your cash flow. I hate the word budget, it’s like a root canal.
LS: It IS a terrible word.
SB: And for a lot of students, their income is really sporadic, even after graduation. A budget presumes you are getting a steady paycheck, and that’s unrealistic for many people. So we have a cash flow tool that takes into account money in and money out even if it’s irregular.
LS: I’m wondering if you’ve found it hard reaching students and young adults because it’s just not that cool to worry about this stuff. My own debt spiraled because in a way, I thought, I’m too young and free to worry about this.
SB: Money is never really the end in itself, it’s the means to an end. We really try to structure our content in a way that is engaging and compelling. My eyes glaze over when I read Suze Orman. We’re more interested in making content that is cool and shareable, content that will help you save money, that you’ll want to share with your friends-like Groupon when it first launched, oh cool, now I can spend less, and I’m going to tell my friends.
I just think the majority of financial content presumes a rational practicality that I don’t think everyone can possess.
LS: Did you have student loans?
SB: I did have student loans. They were a quaint amount by today’s standard, and it was 80% of my starting salary out of school. I had three jobs, and that’s how I ultimately came to pay them off. And true confession, I used to market private student loans. We weren’t trying to take advantage of anyone. We were trying to keep people from putting $500 in textbooks on their high-interest credit cards, or using their home as collateral for a loan. Still, sometimes I joke that this job is my redemption tour.