An article from Bloomberg.com shouted that overdue student loans are reaching an unsustainable 15% – and it got Dave’s attention.
The piece from Elizabeth Dexheimer spoke on expectations that student loans are at the greatest risk of delinquency this year than any time in our history. Information collected by Fair Isaacs Corp. showed that almost 60 percent of bank managers expect delinquencies to worsen in six months.
Student loans are a big problem. In the early 2000′s the prevailing problem was credit card debt, in 2007-2010 it was mortgages and dropping home values. We can expect this time to be forever known as the decade that killed college grads futures.
Taking out tens of thousands of dollars for a degree does not always pay off. This hypothesis is coming to fruition in the faces of young adults who thought everything would turn out OK but are not able to make the minimum monthly payments equal to a small mortgage payment.
Simply taking away the Federal guarantee for student loans could solve the problem for future generations. This does not take away the rights of anyone with the desire to further their eduction but it will cause everyone to consider the price tag before taking a tour of the college campus.
At first, course enrollments will drop. However, the result would have a favorable trickle-down effect. Empty seats in classrooms will cause colleges to get creative to draw students in or will have to lower costs.
Education is expensive. It is also valuable, but it should not cost us our futures.
This content came from a rant in the show on June 18th, 2012:
It’s the ability to look outside our own emotional paradigm. To the extent that we can learn to use critical thinking is the extent that we can move things around and get people to join us. The problem is we have culture that is trained to talk in soundbites and aren’t looking objectively to the issues at hand. We are looking at other’s problems and we aren’t looking at our own problems.
You can object when you respect
At least, at a minimum, go to an individual you may have some objections with and find out where he/she is coming from. At that point you can respectfully say that the guy is wrong but at least that he means well.
Pain makes gain
Sometimes a little pain will take you to a better place that you’ve never been before. That’s why (Dave Ramsey) push back against a Government program that is supposed to fix people’s lives. There isn’t enough money for the Government to fix everything. If you took all the money away from the rich it still wouldn’t be enough.
Business should be taxed more?
If you want to do away with apples you raise the tax on apples. Then people wouldn’t buy as many apples. When you tax the people who produce apples they won’t be able to make a profit and/or grow and people who work for the business will begin to lose their jobs. When you tax businesses you cause businesses to fail and it will actually hurt people. Broke businesses do not create jobs.
Stop demonizing business
We’ve demonized business, we’ve demonized CEOs, and we’ve demonized success. We’ve punished it and we are shocked that those elements of our culture aren’t hiring. In order for money to go somewhere it needs to be somewhere first. If you want businesses to hire people you need to help those businesses. Taxing corporate America into oblivion will not help create jobs.
“You don’t put your Grandmother’s pension in an IPO tech stock”. We immediately blame Facebook for the price going down when we all know single stocks are risky. That was the underlying message in Dave’s gentle rant today about an article released by VentureBeat.com titled Facebook’s first week is (almost) the worst of any IPO in 10 years.
Here are my thoughts about the article:
Not since Bush/Kerry
All the signs were there, tons of information was available and it should not have been any surprise that the outcome was not the way many people were told it would be. Days before the event, and even through the early hours, the media was propping up huge gains. But as the day progressed a different story unfolded, one that statistics and numbers supported: It was not as the news was reporting. This was true in the 2004 Presidential race between George W. Bush and John Kerry - the media was pointing to a huge Kerry gain until the real numbers started coming in and he actually lost. Ditto with the FB IPO.
Who is to blame when small investors lost money?
We can’t blame Morgan Stanley for the performance of the Facebook IPO in the first 6 days of trading. Yes, there were allegations stated in this article that claims “it was privately telling select investors that its revenue forecasts for the coming year were on the low-end of its previous guidance” as the IPO price was being set.
It’s the investor’s own fault for buying single stocks, especially when it’s the most covered and talked-about IPO stock being offered to the public. Where’s the “I overheard a guy talking about a hot stock” tip? (Well, that never works out either, so scratch that example).
What’s riskier: FB IPO or starting a business?
The only way you could answer this question would be to know more about FB than your small business or know more about your small business than FB. But your business might be right up your alley so investing in a single stock ON THE DAY OF RELEASE WITH NO PRIOR DATA BY WHICH TO MEASURE PERFORMANCE might be riskier. Maybe you have a long-term mindset and will buy-and-hold FB for many, many years which could very easily outperform a small business idea. It depends. So the answer to the question of which on is riskier is: Both.
How to own FB and reduce the risk
I own a piece of FB, but it’s in one of my mutual funds. Because a mutual fund can contain anywhere from 90 – 200 different stocks the recent 31% drop in FB (as of the time of this writing) the chance of me losing all my money is very slim. That’s how to reduce risk: Don’t keep all your eggs in one basket and don’t bet all your money on one horse.
Lampo (Dave Ramsey’s company) posted a transcript with a way to listen to the actual audio recording on their website at DaveRamsey.com. The transcript below is not copied from their site, it was all me – typing as fast as I could while listening over-and-over to the podcast.
Dave Ramsey rants… STUPID on Education
Student loans are one of those “good debts” that people talk about when trying to find ways to pay for education. Our society has told us so often that getting a degree in something, anything, will help us get a good job when we grow up. Woe is the young person that listens to that flawed wisdom.
People who had too much “Good Debt”
On 3/13/13, three different people called into the Dave Ramsey show with over $100,000 in student loan debt – EACH
Mike and his wife have $130,000, of which $100,000 was from his wife who is now making $40,000 a year as a Minister.
April and her husband have $100,000 in student loan debt. She is a stay-at-home Mom with two kids that spent the equivalent of a small house on an education that she isn’t using.
Sarah and her husband have $130,000, of which $110,000 is from her private school education to get an undergraduate psychology degree and she is a stay-at-home Mom.
These are hard stories to hear. In classic Dave fashion he helped them walk through scenarios on what to do in order to get back on solid ground and start paying off these incredible loads of debt. I felt a rant comin’ on, and I was right. For the last 5 minutes of the 2nd hour he fervently explained his thoughts on what student loans do to our futures:
What was said (ranted):
OK, I gotta tell you I’m about to blow a gasket. For the first 2 hours of the show today I have taken $130,000 student loan calls from stay-at-home Moms and I am about to go into orbit. Listen, somebody has to parent. Where are your parents? If your kids are that stupid – jack ‘em up. Seriously, $130,000 to get a degree from Columbia in Divinity to get a $40,000 a year job as a Presbyterian Minister. $130,000 to get a degree – an undergraduate degree – in psychology, THAT’S CRAZY! THAT’S CRAZY!
So why? So when you have babies you get to go home and be a Mommy. Listen, I love stay-at-home Moms! You know what the #1 reason now I am finding out people can’t stay at home with their kids? Their FREAKIN’ STUDENT LOAN STUPIDITY! I’m not mad at this particular poor lady that just called, it’s this concept that is driving me bananas!
Listen, if you have 20 year old walking around or an 18 year old walkin’ around – grab them by the ears: “NO, you do not get a freakin’ useless degree from a private University that you cannot make a living with and then choose to be a stay-at-home Mom with $100,000 in student loan debt.” SOMEONE TELL PEOPLE THIS IS GOING TO HAPPEN – IT’S CALLED LIFE! It’s going to unfold, it’s how life happens.
(Imitating a student) “Well, I’m going to be a professional and then I changed my mind.” YOU LOST THAT OPTION! You lose these options when you go this far in debt! You are forced into the situation where you are choosing between your children and student loan debt to get a useless degree!
Do you know what a psychology degree without a Masters is worth? NOTHING! NOTHING! ABSOLUTELY NOTHING! You can’t get a job in a factory with that degree. You know what a psychology degree from Columbia is worth? NOTHING! NOTHING! It has no marketplace value. THINK PEOPLE! THINK!
This is what’s going on. You’ve lost your ever-loving minds America. You’re stupid about education. How paradoxical is that? You’re STUPID about EDUCATION! And you just wander in and go a get a degree and spend any amount of money on this degree and act like the freakin’ Student Loan Tooth Fairy is going to pick up your stuff. There is no Student Loan Tooth Fairy people! There’s not one, you have to think!
Your STUPID degree in a STUPID field that does NOT have a marketplace value does not guarantee you’re gonna get a job. As a matter of fact, it’s an indicator you are too stupid to hire! THINK! You have no judgment!
(Imitating a parent) “My 18 year old told me where they were going to school”.
Your 18 year old doesn’t have a brain – you have to tell them what to do.
“They get to participate in the decision so they think they had insight”.
They have no insight, THEY’RE 18! They’re stupid, their brain is mush.
DO NOT ALLOW THEM to go $200,000 in debt ”so they get a good Christian education in underwater basket weaving”. THAT’S STUPID! STOP IT! STOP IT!
It’s out of control people! Somebody’s gonna have to stand up and say “ENOUGH ALREADY.” And it’s not the institution’s fault; it’s your parent’s fault.
Parents: Tell your children “Don’t be stupid” and don’t assist them in this stuff. Don’t assist them to go hundreds of thousands of dollars into debt to get a degree that has no marketplace value. THIS IS REDICULOUS! THINK PEOPLE, THINK!
Stupidity with education choices is about as paradoxical as anything I can think of. It’s got to stop. It’s destroying the American family, it’s destroying the economy, it’s ridiculous!
February 6th, 2012 (in the 1st segment of the 2nd hour) Dave read an article by CNNMoney.com about a bill by Congress that being reviewed that will ban welfare recipients from being able to use their welfare cards at strip clubs, liqueur stores, and on cruise ships.
The bill would force states to “develop policies” to keep this from happening
I’m a very skeptical person. How will this be enforced? We can develop and require all the policies we want but enforcing them is where money meets the madness.
What Dave ranted about
Elizabeth Lower-Basch, senior policy analyst at CLASP stated “…many low-income Americans live in areas where banks are scarce, making it hard for them to find an ATM, she said..” She is under the impression that the only ATMs are in one of those three locations.
As a bonus, he talked about a study that talks about cheating on taxes
The FDCPA was put into place by the Federal Trade Commission in 1978. Essentially it was designed to protect consumers from what I would call “very bad manners” by collectors and their tactics to get debtors to make a payment. I’m all for that! The problem is it is very difficult to enforce, like trying to stomp on all the ants before they get away. The collectors break the rules, change their names, and open up down the block under a different name (sometimes in the same place under a new name). In this case, it worked.
How can you prove unfair treatment by a collector?
Here is a short list of things you can do to protect yourself and possibly prove you have been treated unfairly:
Keep track of all calls with date, time, person you speak with, and the topics of conversation
Let the calls go to voicemail
Record the conversation with an audio recording device
There are a number of items on the market to record calls without having to wait for the answering machine to pick up. As long as you let the caller know you are recording the call (for training purposes, of course) then record the conversation. Have the caller note the date, time, and their name on the call before getting into the topic. This information can come in very handy in a court of law.
In the last segment of the 1st hour on 2/24/10, Leslie in Kentucky asked: “I have been told it looks good on your credit report to keep one credit card open. I have a CitiCard with no balance due. Should I keep it or close it?” After answering the question Dave went on a total rant.
He made a pronouncement: “I will officially announce today that I will endorse the FICO score and tell everyone in America to get their FICO score up when they fix the freakin’ thing”. I’m putting this 5 minutes of ranting down as the most annoying rant he’s ever done. He’s right and I enjoyed it, but he got really irritating. Blake tossed in some of the “sheep getting sheered” sound effects in the background, which didn’t help – except that it makes for REALLY GREAT RADIO.
I know Christmas is coming when Dave does his annual rant on the grim outlook on Christmas spending in various media outlets. Every year a journalist or news organization releases their study and commentary on how retail spending will be down this Christmas.
Never has an “I told you so” been so deserved when it comes to finances. One year ago the media and most of the financial advisors were screaming about the downfall of the economy. We had begun a recession, and by God we were going to make it a good one! But there was one man who went against the grain, different than the rest, a wiener in the steakhouse: Dave Ramsey. He was asked to appear on numerous television shows and interviewed for magazines and other radio stations. His message throughout the gloom-and-doom: Stay calm. Don’t sell. This isn’t as bad as it seems.
Last week the Dow Jones Industrial average hit 10,000 points again. We are not back to where we were two years ago and an additional 4%+ Americans are out of work, but all this pales in comparison to the news reports that caused thousands of US citizens to panic unnecessarily.
Facts: September 2008 the DOW was at 11,139.62. It dropped 21% by the end of the year and an additional 34% by March 9, 2009 (total 41% from September 29 to March 9). It has since gained 65% (6,547 in March compared to 10,015 on October 14, 2009). WOW! Using the same calculations and dates:
NASDAQ: Lost 26% from Sept-Dec 2008, lost an additional 19% through March 9, 2009 (total loss 40%), but gained 58% since then.
S&P 500: Lost 25% from Sept-Dec 2008, lost an additional 25% through March 9, 2009 (total loss 44%), but gained 61% since then.
And there is more to come, that is almost certain. If you review your mutual fund statements and concur with the facts that the market has increased 40%-60% since the low on March 9th, 2009 then you should join me in listening to the wiener in the steakhouse. Don’t freak out, things are not as bad as they seem, and we’re all going to be OK.
Another great “Dave’s Rant” that I’m sure you have already heard or seen. If you did not hear him read the article by William Jeanes (click here for link to the article) then you have to check it out. You can find Dave’s Rant in the 2nd hour of his 9/23/09 radio show. The article was well written and William Jeanes has some good horse-sense. Go check it out.