VOL. 133 | NO. 122 | Tuesday, June 19, 2018
Lifeline for Debt
By K. DENISE JENNINGS
Student loans are a big topic these days with an even bigger and growing price tag for most families in America. Thanks to a young engineer with a financial mind, there may be a place for students and their families to go before they find themselves drowning in debt.
Bye Student Loan Debt founder Dan Mendelson is planning to market a print version of his online book to high schools, universities and banks. (Daily News/Houston Cofield)
A few years ago, Dan Mendelson came up with a plan to get himself and his new wife out of $150,000 in combined student loan debt in five years. The plan worked, and he decided it might work for other people too, so he wrote an online book, “Bye Student Loan Debt,” which educates people on how student loans work and how to navigate the process of getting them paid off quickly using different tools.
Mendelson and his partner, Ross Hornish, started a 45-day Kickstarter campaign to raise the $5,300 needed to finish up development and launch the company’s website (student.byeloandebt.com), which gives the book’s readers access to tools that calculate the specifics of their particular student loan debt repayment plan.
Bye Student Loan Debt began offering the ebook in December 2017 – one year after the Kickstarter campaign – and in February 2018, print versions were available for order.
“Bye Student Loan Debt” made it to the top 100 in an adult education ranking on Amazon, and Mendelson is pleased with early response to the book in both forms.
Mendelson is planning to market the print book to high schools, universities and banks to give graduates who will be heading down the student loan path. The book not only addresses how to pay down student loans, but how to avoid costly mistakes on the front end, and how to put your money to work after you have paid off your loans.
Market statistics show that total student loan debt in the U.S. is currently $1.5 trillion, which is $620 billion more than credit card debt, and it’s continuing to expand, Mendelson said. There are more than 44 million borrowers and the 2018 college graduates saw an increase of 6 percent in student loan debt with an average debt of $39,000.
But some good things are happening to combat this epidemic. Last year, Memphis became the first U.S. city to offer its full-time employees a student loan reduction program that pays $50 toward principal reduction on student loans. Some private companies in various industries are starting to offer student loan payment as a benefit to their employees. Borrowers can also use refinancing companies such as SoFi to help reduce their interest rates on student loans.
“There are things going on, but not a lot of action on the government or private level,” Mendelson said. “It’s making a very small dent in the $1.5 trillion.”
The problem of student loans can be traced back to the skyrocketing increase in tuition prices at colleges and universities. U.S. News recently reported that among the 300 ranked national universities included in their 2018 Best Colleges ranking the average tuition and fees at private national universities has jumped 157 percent in the past 20 years. Out-of-state tuition and fees at public national universities has risen 194 percent, and in-state tuition and fees at public national universities has grown 237 percent.
Some of the increases can be attributed to funding cuts to public universities, but Mendelson believes the biggest culprit is the marketing of government backed student loans.
“In my opinion, the biggest reason is that the government gives away so much free money to 18-year-olds who have no idea what they want to do, so it’s been easy (for the colleges and universities) to raise prices with no repercussions,” he said. “If everyone was given $1,000 to spend at Kroger, they could raise their prices pretty easily. It’s not to say that (the government) shouldn’t give loans, but that’s just one of the repercussions.”
Shelby County trustee David Lenoir, who’s also currently running for Shelby County mayor, has been heavily involved with improving the financial health of the Memphis community since the height of the recession and says what Mendelson is doing is valuable.
“When I came in 2010 we were doing everything we could to stop the bleeding in terms of the economy,” Lenoir said. “Now we’ve started the healing process and we’re thinking about how to improve the financial health of the community.”
Lenoir partnered with former Memphis Mayor A C Wharton to implement Bank on Memphis, the local version of a national initiative started in San Francisco. The program provides financial education and banking access to underserved, low- and moderate-income members of the community who were being lured and taken advantage of by predatory and payday lenders.
Through public and private partners, the organization offers a financial literacy app to reach people that traditional marketing might miss. The app has financial tutorials and videos on how to better manage your money.
“As we’ve moved beyond 2010 there aren’t as many problems, and people are starting to make money, so we’ve started targeting youth with a new program called On My Own, where we get into the schools and teach kids how to manage their money,” Lenoir said.
When Lenoir heard about Mendelson and his Bye Student Loan Debt project, he was impressed and believed that what he had to offer was imperative to the next generation of students, so he invited him to speak at a Bank on Memphis summit.
“I realized that net worth is not just your assets,” Lenoir said. “It’s not just about growing your 401(k) and IRA. It’s also about reducing debt. As the economy improves, the management and reduction of debt was really going to be the most important thing going forward.
“If we want folks like (Mendelson) and his colleagues in this next generation to come to Memphis and Shelby County and plant and grow, addressing the student loan baggage they bring with them is imperative.”