When "Skin in the Game" is Anything But

One of my favorite topics to engage in with teens and parents alike is the idea of getting through college debt-free. As you can imagine, this can be on the controversial side of the conversational spectrum. However, it’s something I believe in deeply, and I have countless examples of clients, friends, and youth group kids successfully navigating that journey. It’s one of my favorite wins to acknowledge and celebrate.

Whenever these conversations come up with parents, I get all types of responses. Please understand that I respect every parent’s opinion on the topic. They are the parents of their children and they have the right (and obligation) to lead the best they can. I will absolutely support people with whatever decisions they make with their families. In these conversations, there’s one comment I hear more than any other. They explain that their kids will take out student loans because they want their kids to “have skin in the game.” This is spoken through the lens that paying for their children’s college is an entitled approach in which their kids are not motivated to do the right thing, whereas the student acquiring student loan debt helps to align interests.

I’m all for having “skin in the game.” In fact, it’s one of the hallmarks of my coaching when walking families through the college planning process. That said, here’s what I always try to explain to parents about student loans. Having your kids sign up for student loans is the furthest thing from skin in the game as you can get. Why? Because when an 18-year-old is going to college with student loans, all that’s required of them is to sign a few pieces of paper…..then go have fun. There’s no real sacrifice, and worse, no real awareness or accountability along the way.

The student loans actually remove skin from the game. To college students, student loan debt feels like magical money falling from the sky. It enables them to go to college, pay rent, get three square meals per day, and maybe even a little pocket money……..just because. No amount of work or sacrifice goes into this. It’s the easiest form of money they will experience in their entire lives.

It isn’t until later that the reality of this debt starts to set in. By later, I mean AFTER they finish the thing they were supposed to have skin in. I call this, “the moment.” The moment when the degree is in hand, they’ve been settled into their first job for a handful of months, and are in the process of transitioning into a full adult existence…..then the letter arrives in the mail. Many of you know the letter I’m talking about! It’s the letter that comes approximately six months following graduation, communicating the commencement of student loan payments. This letter can be sobering. I owe how much!?!? My monthly payments are what?!?! For how many years?!?! This is the moment where many emotions can come flooding in. Guilt, frustration, defeat, resentment, worry, and anger.

All the while, they thought things were alright. College was being paid for, the money was always available, and they lived a solid college career. Yeah, they knew they would have some student loan debt after they graduated. But this much!?! This is the moment. I’ve walked alongside far too many people who had recently experienced this moment. Almost without fail, I hear the same thing from them. “I wish I would have known this is what it would end up being. If I had, I would have made some different decisions.” Ouch.

Parents, skin in the game is good. No, it’s awesome! Congrats to you for wanting that for your children. My appeal to you is to not use student loan debt as that skin.

* Please pass this along to any parents who need this encouragement today. We can shift the futures of the next generation, one family at a time!

"I Did It!!!"

One of the main topics I teach in our high school money class is how it’s possible for every single person to graduate from college debt-free. Not surprisingly, this is a very controversial idea. Our culture teaches us that we are either a have or a have-not, and our student loan fate rests in which one we are. I think this toxic belief is one of the primary reasons why much of our society is crippled with a ton of student loan debt.

Since I’ve been teaching these ideas for more than 10 years, I’ve accumulated many stories…..both good and bad. Here’s one that’s all too common. Many years ago, a young lady in my class was stunned and excited to hear that she could potentially go to college debt-free. She asked if I would meet with her and her mom to discuss it further. Of course, I’d love to do that! She comes back to class a week later, looking a bit down. When I asked her how she was doing, she replied, “I told my mom about what we talked about last week. She said you are a liar and it’s not possible to go to college without debt.” Needless to say, the family declined my invitation to discuss ideas on how to make it happen. Fast forward a handful of years and this young lady graduated college with $65,000 of student loan debt.

Now, I’ll share a different kind of story. Several years ago, there was a young man who attended the class. He, too, got excited about the idea of not having student loan debt. He really internalized the idea that he could go to college debt-free. He explained to me that his family already told him they wouldn’t be helping him in any way. It was 100% on him to pay for his college and living expenses. Yet, he was intent on graduating college…..and doing it without debt. He chose the same college as the young lady above. I haven’t seen or talked to this young man since he graduated high school. Last week, I received a random text from him that read, “I did it!!!!!” I had no idea what he was talking about, so I asked him to clarify. He went on to explain how he will be graduating college next month…..with zero debt! He was beyond proud of this accomplishment, and even more excited for what his future holds. He did it, indeed!

Same class, same college choice, similar backgrounds…..vastly different outcomes. The difference? One believed it could be done and the other didn’t. You could argue he put in the work and she didn’t, but that’s not exactly fair. He did indeed put in the work…..he worked so hard. But she’s the type of person who would have put in the work as well……had she believed the mission was possible.

Our mind is a crazy thing. The stories we tell ourselves have the power to propel…..and the power to sabotage. It’s amazing what can happen when we believe.

We Ruin Them Young

Last night at youth group, we opened registrations for the money class I teach each year. This will be the 9th year hosting the class, and we’ve taken 175 high school students through it over the first eight years. Walking alongside these kids is always one of the highlights of my year. One of my favorite parts about the class is a scholarship program we developed in conjunction with it, where students who go through it have the opportunity to apply for a scholarship when they are seniors. To date, we’ve granted $48,000 in scholarships thanks to a number of generous financial partners who have chosen to bless our youth in this way.

After announcing the class, a few students approached me with questions, comments, and stories. I’ve done this long enough to know these stories will be told, but they never cease to amaze me. One student shared that she, at 17 years old, already has a $350/month car payment. Another student shared about her college plans, which will result in more than $100,000 of student loan debt. That’s her number, not mine. That’s a literal number she, her parents, and the college have discussed and somehow have gotten comfortable with. This is for a bachelor’s degree, mind you. Both of these kids, even before exiting minor status, have already made significant, life-altering financial decisions. Rather, I should say their parents allowed them (at best) or encouraged them (at worst) to make these choices.

These young adults don’t know what they don’t know. They are making decisions today that won’t present their true impact until years down the road. These are the scenarios that may someday result in resentment and anger toward their parents. The parents likely mean well, and the kids trust their parents, but I’ve seen this story play out enough times to know where they’re heading. I regularly meet with clients who have to process these situations from earlier in life and hopefully offer forgiveness to their parents. These deep wounds come up meeting, after meeting, after meeting. Many of these parents don’t even know there is deep-seated anger. After all, they were trying to help their kids and sincerely believed they were serving them well.

As I try to close out today’s post, I’m not sure what the takeaway is. Maybe it’s that we adults and parents just need to do better. Whether we have kids or not, there are young people looking at us. What we do and what we say has the potential to make a profound impact on their life. Let’s use that influence for good.

The New Student Loan (Forgiveness) Crisis

We have a student loan crisis brewing in America. No, not the $1.75 trillion (and growing) of collective student loan debt that’s hindered the future of two generations. That crisis is well-documented, and tragic. The crisis I’m talking about today has more to do with the recent student loan forgiveness program.

Let’s rewind a bit, shall we? In March 2020, as COVID wrecked everything we knew as “normal”, the Federal government enacted a freeze on all student loan payments (and interest accrual). This has since been extended eight times, and payments are scheduled to commence on 9/1/2023 (barring another extension).

In the meantime, the Biden Administration launched a program to forgive $10,000 of outstanding Federal student loan debt (or $20,000 if you had Pell Grants) so long as your income is less than $125,000 (or a combined $250,000 if married). Millions of Americans immediately applied in late 2022 when the online application went live. Then just as fast as it launched, it was paused. Several lawsuits were brought against the Federal government, claiming the government didn’t have the authority to issue widespread forgiveness in the way it was executed. This sudden turn of events emotionally crushed many, causing widespread anger and dissension. But this isn’t the crisis, either.

Unbeknownst to most people, this same student loan forgiveness program applied to people who actually paid off their loans since the freeze began in March 2020. So instead of applying to have their loans forgiven, they were applying to get a refund for the qualified $10,000 or $20,000 sums. It’s difficult to discern how many people qualified for refunds, but statistics show approximately 9 million people paid on their loans since the freeze began. Many of my clients fell into this group, as they took advantage of the freeze to finally free themselves of the burden of their debt by aggressively paying them off. Amazing work!

This is where things get weird. Instead of going through the Federal government and waiting for their approval (which was obviously paused with the lawsuits), their respective loan servicers were the ones processing these requests. Lo and behold, checks started arriving. Hundreds of thousands of Americans (or perhaps millions?) have been receiving refund checks for their student loans. According to the texts, calls, and DMs I’ve been receiving, these checks are still arriving in people’s mailboxes.

Here’s the crisis. Many of these people have excitedly received these checks, then quickly spent them. After all, $10,000-$20,000 is a LOT of money. But here’s the new reality: if the lawsuit succeeds and the loan forgiveness program dies, these checks will turn into new debt. I’ve had multiple clients reach out and tell me when they log into their student loan account, they now have an outstanding balance that mirrors the checks they received. And just like that, after all that work, discipline, and sacrifice, many borrowers find themselves unknowingly back in debt.

If this is you, or perhaps someone you know, here’s what I recommend:

• Don’t spend it. This isn’t your money (yet).

• Don’t send it back. If the forgiveness goes through, you’ll be glad you already have this money. There’s no telling how hard it will be to get your money down the road if you have to re-apply for it.

• Put it somewhere safe….and leave it there. A savings account or high-yield savings account should do the trick. Just set it aside, and leave it alone.

Once all this mess gets sorted out in the courts, you’ll hopefully have a clear road map on how to handle your situation…..one way or another. But please don’t sabotage your financial life in the meantime. You worked so hard to get here. Don’t let this blessing turn into a curse.

"I Lost My Job....Now What?"

Amidst all the Coronavirus memes, toilet paper rantings, and day-in-day-out inconveniences of the self-quarantine, there are a lot of people struggling financially. Millions upon millions of Americans are losing their jobs. Regardless of what you think about the seriousness of COVID-19, the media’s portrayal of it, or our government’ handling of it, the reality is people are hurting. Some medically, some financially, and some both.

A few weeks ago, as we were just starting to experience the front end of this thing, I wrote a piece called “Prepare, Hope.” In it, I laid out five things all of us need to do in order to navigate these rough waters, financially speaking. In case you don’t want to read it, here’s the cliff notes version: leave your investments alone, make sure you have a healthy emergency fund, don’t make any major financial decisions, make sure everyone in your household is covered by health insurance, and don’t stop your generosity.

Those five pieces of advice are just as relevant today as they were a few weeks ago when I first wrote about them. However, some of you are losing incomes and/or losing jobs. If that’s you, the five pieces of advice above simply aren’t good enough. You need more! So if you’re asking “I lost my job….now what?”, here are some practical next steps to give yourself an opportunity to bridge the gap between this negative situation and your brighter tomorrow:

Get rid of the guilt

Losing a job can be utterly demoralizing. It makes us feel like a failure and strips us of a piece of our identity. We walk around through life feeling like we’re making the right decisions and have some sense of security, until it’s all stripped from us. Please don’t beat yourself up over this, unless you successfully predicted a guy in China would eat a bat that would cause a global pandemic, essentially destroying the travel, tourism, entertainment, and food/beverage industries overnight, all the while reducing demand for most products and services to zero while the world self-quarantines. If you saw all that coming, then yes you should be beating yourself up. If you didn’t, then you’re human just like the rest of us. As I often say, we can only control what we can control. Unfortunately, we can’t control the gut-wrenching decisions our employers have to make. Hear me out: this isn’t your fault! I know people who were absolutely crushing it in their careers two weeks ago…..and now don’t have a job. If you feel guilt, or regret, or blame for your Coronavirus-induced job loss, please work through it and get to a place where you acknowledge there’s nothing you could have done differently.

File for Unemployment

“Unemployment” feels like a four-letter word to a lot of people. It feels like a hand-out. It feels like cheating. Please hear me: it’s not! This is what the program was designed for. This is why employers pay a tax specifically for this. It’s meant to protect people who lose their job. Don’t think of it as a hand-out, but rather a hand-up. We need to humble ourselves to do what’s best for our family, and for most of us that means immediately filing for unemployment as soon as we lose our job. A lot of people are asking the question “do I even qualify for unemployment?” Here’s my advice: just apply! So many people are sharing false information, half-baked knowledge, and bad assumptions. The best way to know if you qualify for unemployment is to apply for unemployment. Each industry and each job has its own unique set of circumstances. Also consider there is new legislation being discussed and negotiated all the time. Just apply! The worst they can do is tell you “no.” If you lose your income, immediately file for unemployment and figure out what benefits you are eligible to receive.

Contact your landlord or lender

If you’ve lost a meaningful amount of income as a result of this pandemic, reach out to your landlord (if you rent) or your lender (if you own) and ask for relief. Most lenders are showing a lot of grace and mercy to their borrowers. They don’t want to kick you out of your house any more than you want to be kicked out. Call them and just be honest. Be humble and don’t go into the conversation expecting anything. Be grateful and courteous. A common outcome for these situations is lenders waiving 2-3 months of payments, and simply tacking them onto the end of the term. So they aren’t giving you a free pass…..just some temporary relief to get your financial life back on track.

Landlords are more hit-and-miss, as they too are typically subject to their lender’s decisions. But similar to lenders, landlords don’t want to evict you any more than you want to be evicted. Contact them as soon as possible, be humble and honest with them, and ask for some grace. Landlords, I implore you to step up and do what you can! This is your chance to play the role of the hero. Be the hero today and watch it come back around to you ten-fold after all this mess clears up. Show mercy and give whatever grace you can afford to financially stomach. We’re all in this together.

Contact your Federal student loan servicer

If you have Federal student loans and you lose income, immediately reach out to the company who services your loan (i.e. who you make your payments to) and ask for relief. All Federal student loan borrowers have the right to stop making payments through September 30th, 2020. If you haven’t lost any income, I don’t recommend you take this step…..it’s only delaying your eventual payoff (which I hope is soon!). However, if you’ve lost a meaningful amount of income and you’re feeling the financial stress, make the call and get these payment suspended through September. My tip of the cap goes to our Federal government for making this one happen! Thank you!

Cut back your budget

If you’ve lost income, it’s time to go on red-alert lockdown. Any spending that’s not absolutely necessary needs to stop. Food, transportation, and shelter. Everything else needs to go…..not forever, but for the season. You need to cut things back as far as you can to ease the pressure as much as possible. Hopefully you have an emergency fund available, in which case lowering your expenses will allow the emergency fund to last longer. Let’s say your monthly budget is $5,000 and your basic needs account for $3,000 of it. Let’s also say you have an emergency fund of $10,000. If you keep the same lifestyle, your emergency fund is enough to cover 2 months of living expenses. If you cut back to just the basic needs, your emergency fund can last you a bit more than 3 months. That extra month could make all the difference in the world!

Find near-term income

I know I’m probably playing the role of Captain Obvious here, but if we lose our job and we we don’t have a robust emergency fund to bridge the gap for several months, we need to quickly replace the lost income. Unemployment is a band-aid, not a cure. The cure is finding income that fills in the gap. Now this doesn’t need to be the job of your dreams. It just needs to be income. There’s a time and a place to find the job of your dreams, but right now the goal is to make it through all this pandemic mess. We need to have the utmost humility in this season of life. Grocery stores are hiring, big-box stores are hiring, delivery services are hiring. Start asking around in your social circles. Someone who knows someone in your circle is hiring. If you take the approach of “there are no jobs”, then you’re right…..there will be no jobs for you. However, if you take a proactive and positive approach, you will absolutely find work.

Re-assess what’s most important

Many of us have been working traditional jobs we don’t really enjoy because the world tells us we need something “secure”, and “safe”, and “reliable.” Whether we believe it or not, there’s no such thing as security. No job is secure, no job is safe, and no job is reliable. We’re all replaceable. I used to have a very “important”, high-profile job. I was extremely valuable to the organization and helped make them a lot of money. You know what happened when I left? They replaced me in two days and didn’t miss a beat. We are all replaceable. So here’s a question: if we truly understand no job is “secure”, or “safe”, or “reliable”, why are we making career decisions based around this false belief? If we finally come to terms with the fact there’s no such thing as security, that should free us up to pursue what we’re truly meant to do. What a liberating feeling!!

During this season of life, I beg you to explore what you’re truly meant to do in this life. You’ve already been forced out of your old career, so why not use this as an opportunity to reinvent yourself? We still need to find short-term income to get us through this mess, but we can also start to develop skills, relationships, and opportunities to propel ourselves into the next season of life so we can live it with purpose, with passion, and with meaning. I hope some of you join me in this pursuit, as there is nothing better. Let’s get through the scary, and move into the awesome. As with all terrible things, this too shall pass. The only question is what you’ll be doing after the clouds dissipate and the rough waters smooth out. For many of you, this new-found curse of unemployment will ultimately be the turning point in life. Many of you will look back and say it was the best thing to ever happen to you. I pray that for each and every one of you.

God bless each and every one of you. I’m sorry for what you’re going through, but also believe your future is better than your past. If there’s anything I can do to help, please don’t hesitate to reach out. We’re in this together!!!