So,
once again, I hope you’ll indulge me as I start with the topic of Education and
…something potentially incredibly Exciting.
Education and
something potentially incredibly Exciting
It
all starts with the following headline “Plan would make tuition free at Ore.
Colleges”. That headline in and
of itself is both intriguing and sounds a little like one of those “click here, hit the monkey and win a
million dollars” kind of annoying pop-ups.
That’s pretty much what I thought when I saw the headline.
But
– being the curious person I am – I decided to actually read the article and
several others, in an attempt to figure out if this was a bunch of B.S. hype or
what.
There
may be a bit of hype in the news coverage, but as far as I can tell, it’s much more
“or what” than any kind of B.S. The
following article has appeared in numerous online news links throughout the
country. I believe this topic is so
important that I am providing both the website link and the complete article.
---------------------------------
“On
college campuses across the United States, the eternal optimism of youth has
been throttled out by a fear of crushing student debt. That’s certainly the
case in Oregon, where the cost of tuition has soared as public funding for
higher education has declined.
But
the state Legislature this week approved an idea that might ease the economic
dread for future philosophy and art history majors. The concept — called Pay It
Forward — calls for students to attend public universities tuition free and
loan free. In exchange, students would have 3 percent deducted from their
post-graduation paychecks for about a quarter-century. The money would go into
a fund to pay for future students.
The
bill, which passed unanimously and is expected to be signed this month by Gov.
John Kitzhaber, directs the state’s Higher Education Coordination Commission to
develop a Pay It Forward pilot project for consideration by the 2015
Legislature. One question that must be resolved is how to fund the program’s
start-up costs, estimated at $9 billion, since the initial students who attend
tuition-free would be years away from entering the labor force.
Though
the timing was coincidental, the bill won final approval on Monday, the same
day that federal student loan interest rates doubled from 3.4 percent to 6.8
percent.
“I
feel as if the problem of student debt has reached a tipping point. It’s on
legislators’ minds,” said state Rep. Michael Dembrow, D-Portland. “And I think
it’s on legislators’ minds because it’s on their constituents’ minds. This is
something we’re hearing a lot about — at the doorstep, through our polling,
through our e-mail.”
The
Pay It Forward concept was originated by the Economic Opportunity Institute, a
nonprofit policy group in Seattle, and is based in part on a model used in
Australia.
A
classroom of students from Portland State University, along with the Oregon
Working Families Party, successfully lobbied legislators. Supporters say the
challenge is just beginning. They must ensure the commission comes up with a
pilot program that helps students and clears the 2015 Legislature.
“This
is going to happen because students demand change; I believe that firmly,” said
Steve Hughes, state director of the Oregon Working Families Party. “The
conditions are just absolutely ripe for this. We’ve heard so many stories of
student debt that are just beyond belief.”
If
the plan does take effect, it would provide some relief to students who are
unable to translate their degree into a decent-paying job. For example, a
student whose adjusted gross income is $600,000 over a 24-year span would pay
$18,000 for his or her four-year degree. A student who makes $2.5 million over
that same timeframe would end up paying $75,000. Someone who makes nothing at
all would contribute nothing to the fund. Someone who makes a billion would
contribute an astronomical amount.
“This
is not a loan,” said John Burbank, executive director of the Economic
Opportunity Institute. “You’re paying forward, essentially, so your
contributions would enable the next generation of students the same free
access.”
Students
who graduate from a two-year college would have 1.5 percent, instead of 3
percent, taken from their paychecks, according to the plan. Those who attend
some college but fail to graduate would pay a pro-rated portion of their
incomes.
Oregon
is the first state to take a step toward the Pay-It-Forward model. Burbank said
other states, including Washington, Vermont, New York, Pennsylvania and
Wisconsin, have expressed interest.”
Wow…Wow
and Wow!!! While this is very preliminary and nobody knows what the actual
outcome will be, I am so excited that the topic of student loan and debt is
being taken as seriously as it should be and…at least the Oregon legislature is
entertaining a very innovative approach to higher education.
To
that I say “Kudos”. I will be watching
the progress of this very closely. For
more information, here is the website to the Oregon Working Families Party.
http://oregonwfp.org/issues/debt-free-higher-education/
Eliminating Debt
The
Pay It Forward model would certainly provide a solution to eliminating student
debt. I’d like to concentrate on
consumer debt (which can also be tied to student debt). By consumer debt, what I mean is….credit card
debt. Swipe and forget about it debt,
until the monthly statement comes in and you have to pay the minimum on your
balance of upteen thousand dollars.
It
would be easy for me to say “Just do what
we do. Just pay off your balance each
month.” One, if you’ve never done
this before, it maybe be very difficult to all of a sudden develop this new way
of paying your bills. But – aside from
that, if you’ve always just paid off the minimum and if you use your credit
card on a regular basis, like most Americans do, then most likely your credit
card balance is quite high.
Current as of June 2013
U.S. household consumer debt
profile:
- Average credit card debt: $15,216
- Average mortgage debt: $148,443
- Average student loan debt: $32,054
http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/
I’ve
already talked quite a lot about student loan debt, and I’m not going to get
into mortgage debt right now. Perhaps
your credit card debt is lower, or perhaps it’s higher than the US household
average. Nonetheless, it’s probably
high; much higher than it should be.
I
know that this doesn’t sound like much fun at all (but I do guarantee that it
is much more fun than living with so much debt and in the end…it WILL be much
more fun), but I do want to stress what you can and what you SHOULD do to
reduce your credit card debt -- and
eventually get to minimal debt. You can
do an internet search and get oodles of suggestions on what to do. I’m guessing you already know what to do…and
it’s just a matter of doing it.
Reducing
or eliminating debt is a bit like exercising or starting a healthy diet
plan. We know it’s good for us, but
starting it up and sticking with it (at first) is really challenging. So, just like having an exercise goal or a
weight-loss goal, you need to have a goal for your debt reduction/elimination
plan. You need to write it down in a
conspicuous place and look at it each day:
“By such-and-such date, I will have “X” amount of my
credit card debt paid off.”
Whatever kind of statement works for you. It should be ambitious…but do-able. Stop reading…and start writing.
Now
that you have your goal, you have to figure out the steps to get there. Let’s say you’ve given yourself six months to
half your credit card debt (may that’s too ambitious, or maybe that’s
do-able). Now you back forecast so at
the ½ point, or at 3-months you’re half way to your goal.
That
part is easy…that part is just math. The
difficult part is the behavioral changes you need to make, in order for it to
happen. What kinds of behavioral
changes?
1)
Stop
using your credit card until you’ve reached your goal. Yep, put it away in your underwear
drawer. You can still use your debit
card – just not the credit card. Say
good-bye, have a going away party – whatever you need to do to separate yourself
from your card.
2)
Next,
you need to figure out how much extra (above your minimum balance) you will
need to pay each month, to get to your goal.
In order to be able to free up the extra money to pay down your credit
card balance, you may need to make adjustments to other areas of your spending.
3)
You
may recall that funny exercise I asked you to do where you collected receipts
and took a close look at your weekly spending.
If you haven’t already done so – please go back and read that blog entry
and do that exercise. If you want to
change your spending habits in order to free up funds to pay down your credit
card. If you don’t do this, you’re going
to say “But I don’t have any extra money
to pay down my credit card!” To
which I say, your job is to find ways to find the extra money….spend less or
generate more…to pay down your debt.
4)
Don’t
give up! It will be difficult to change
your spending habits and to pay down your debt.
Once you see your debt level start to drop, you will begin to feel
really empowered. Again, it’s a lot like
starting a new exercise program or healthy diet plan. It can be a real chore and a real bore
sometimes…especially at the beginning when you don’t see instant results.
It
isn’t easy to be discipline. It isn’t
easy to give up something you are used
to having…at least not at first. But, it
is worth it and at the end, when you’ve reduced your debt, it is an incredibly
liberating feeling. It is so worth it.
---------------------
Next
week, is “F”. Frugal living. This ties in nicely with eliminating
debt. What else is on your mind? Any comments?
It's time for a
disclaimer:
I’m not a financial
planner, nor am I a business guru. What I am is a very practical person with
(as my mother always said) “a good head on her shoulders”. I have good common
sense and am old enough to trust my inner core and follow my instincts.
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