The Black Plague 2.0 (Student Loans)

Could I get any more cliche than being a millennial, blogging about my crippling student loans ? Well buckle up anyways baby because I’ve got something to say. I’ve been a financial planner since I was 20 years old, but the seminal moment that will forever stick with me about student loans happened 6 months after I graduated college when I was 22. I share this story often because I fell prey to a common loan payment mistake even though I do this for a living.


nobody has a clue how any of this stuff works— and the loan companies are, as my Australian friends would say, ‘happier than a piggy in shit’ to keep it that way.

I graduated from undergrad in May 2013, which means I was entering the blissful 6 month grace period before I had to start paying on the debt that had been looming over Future Chris’s* head since 2009. The final price tag? $77,000—which sounds like peanuts if you compare it to what Aunt Becky paid. “Whatever”, I thought, I had been preparing for this moment since freshman year and I had a decent income source lined up to pay for them. The real kicker came in November when I went to set up my payment plan…. My new balance had gone up to $82,300 in just 6 months. “Are you fucking kidding me??”

blinking.gif

How did this happen? How could I be so dumb to not pay down the interest the last 6 months when I had the means to do so? One would think that out of the 44 million student loan borrowers the financial planners with student loans would have it figured out. But that’s the thing most people aren’t talking about—nobody has a clue how any of this stuff works— and the loan companies are, as my Australian friends would say, “happier than a piggy in shit" to keep it that way.


First of all, have you ever tried navigating one of these federal loan websites? The front page always features someone brimming with excitement and with no obvious signs of crippling anxiety, so we can already rule them out as a student loan borrower. Let’s say you actually want to sign in and check your balance or upcoming payments, here is the normal step by step process:

  1. Username doesn’t auto-fill because why not. Get it wrong 4 times and risk being locked out

  2. Click forgot username. Enter SSN, DOB and zip code

  3. “Information doesn’t match our records” Awesome.

  4. Call customer service and recover username

  5. Enter 4 digit pin— like I have any idea what that is

  6. Enter password that must be exactly 8 digits and it can’t match a previous password you’ve used for anything in your entire life

  7. Start drinking


Start gaining control of your situation by diagnosing the severity and facing it head on

Now, lets say you don’t give up with the login process like I had done countless times and are now free to navigate Pan’s Labyrinth. There are a few simple functions we all want to see: how much do I owe, when do I owe it, and when will I be done paying.

So, why are none of these front and center as soon as you log in? Because these companies want you to feel less informed and less empowered. That is financial services 101— the more friction they make for the consumer the longer they will stick around due to inertia. Change is difficult, and the harder they make leaving their service seem the longer you will stay because it isn’t urgent. It’s the same reason I’m still paying $20/month to Planet Fitness, who makes you mail a handwritten letter to cancel your membership.

Nelnet brought this website designer out of retirement to revamp their homepage

Nelnet brought this website designer out of retirement to revamp their homepage

Something that has been encouraging as of late however, is the increase of financial technology (fintech) companies being created to disrupt this industry and make the experience easier for the borrower. Earnest, a loan refinancing fintech company had such a refreshing take on this that I decided to refinance my loans with them in October 2018. Everything was great, they dropped my interest rate from 6.55% to 5.1% and I accomplished everything on their iOS app in minutes. I was so happy with my experience that I even referred 6 clients to refinance with Earnest. Then, as things seemed too good to be true the app and website turned into total garbage overnight.

This is the original Earnest layout and design that I experienced during my first month of using it

This is a screenshot from my phone on 3/7/19. It’s looked like this for over 4 months now

So, what happened to Earnest? They sold to Navient for $155M and the founder subsequently removed all the mirrors in his home so he doesn’t have to look at a fucking sellout every day. If you’re not familiar with Navient, they’re currently being sued by the Consumer Financial Protection Bureau for how they "systematically and illegally [failed] borrowers at every stage of repayment". Cool, thanks for playing.


How you can fight back

The most important thing to understand when facing this challenge is that you’re not alone in feeling deceived or powerless. Even financial professionals have trouble navigating their own loans. Remember how I left college and my debt grew by $5k in 6 months? Well I’m currently past 5 years of repayment and after roughly $30,000 of payments, my balance is finally below the initial $77,000 I left with. I want to throw my laptop across the room as I type that. But, what good does it do to not share my mistakes with others? Otherwise I’m perpetuating the notion our parents taught us that its taboo or rude to discuss money. Well mom and dad, it’s also rude that I’m right back where I started in 2013 when I could’ve used that $30,000 to go to Fyre Festival instead.

Me in an alternate universe chilling with my other debt free homies

Me in an alternate universe chilling with my other debt free homies

If you’re a student loan borrower and/or concerned citizen

  1. Start gaining control of your situation by diagnosing the severity and facing it head on. Download recent statements from all loan companies and lay out how much you owe, what interest you’re paying, and when it will be paid off based on your payment amount. There are a ton of free calculators that exist to help you with this.

  2. Figure out if you qualify for any type of forgiveness. The most value I’ve provided clients has come when I uncovered an obscure loan forgiveness program they didn’t know existed.

    1. Here is a comprehensive list of federal forgiveness programs

    2. Here is a state by state list of other forgiveness programs

  3. If you don’t qualify for forgiveness, your most likely next step is to refinance. A good rule of thumb: If you’re paying more than 5.8% interest then you can reduce your rate** by refinancing with your current lender or private lender like Earnest.

  4. Speak to a qualified financial professional who can help you find the best path or at least validate you’re doing everything right. What makes someone qualified?

    1. They display some proof of professional aptitude, like the CFP Designation

    2. They charge you per hour or a flat fee for the consultation

    3. They don’t try to sell you something after


If you’re a financial advisor

  1. Stop glossing over this stuff because you don’t get paid directly for it. By ignoring somebody’s main source of anxiety you’re sending a message that they look more like an account number to you instead of a human being

  2. Start paying for loan analytics like Payitoff. You’ll differentiate yourself and open doors for clients you didn’t realize were there. We recently saved a client $70k over 8 years by simply adjusting which income based repayment method they were using.

OBLIGATORY EDIT: I had no expectation that this would reach more than 12 people. So I’d be remiss if I didn’t add that if this is something that strikes home with you, I want to hear your story. Drop me a line at chris@iconocapital.com or find me on Twitter (@haighfinancial). Above all else, maybe I can help you figure out a good path forward.

*Future Chris is the person that I often refer to who is stuck with dealing with my terrible decision making during present day. Get bent future Chris!

** Assuming your credit score is over 700