Stay Out My Pockets: Reflections on Federal & Emerging Student Aid Options
About 5 years ago, I paid off the first of several student loans — something worth celebrating, right? Nah, it wasn’t. See, this loan was part of the Public Service Loan Forgiveness (PSLF) Program; more on that later.
After graduating from Morehouse, I headed back home to Brooklyn. I had graduated with a BA in psychology–not the highest paying field, but I was still broke as a joke. Hell, I couldn’t even afford to comfortably purchase metrocards to get to and from work, so I walked a lot. People thought I just enjoyed walking everywhere, and I was like, “No fool, I’m just broke.” I wasn’t walking from Times Square to Brooklyn for fun! I returned home to earn $12/hour in a part-time administrative gig at a shiny law firm while pursuing a full-time masters degree in forensic psychology at John Jay. In the second year of my program, I juggled work, school, and a mandatory internship with a social service agency in the Bronx. As my internship came to an end, I was offered a job from my residency site for $32,000– come on son.
Though I can’t remember what I said verbatim upon getting the offer, I’m pretty sure my initial sentiments were along the lines of W…T…F! I was definitely in my feelings on this because Sallie Mae (now Navient) was knocking on my door.
That major that she majored in don’t make no money. But she won’t drop out, her parents’ll look at her funny — Kanye West
Up until then, I didn’t mind making fewer coins. I told myself that I was “earning my stripes” and “putting in the work.” I didn’t accept the job offer. Looking back, I realize that I wasn’t being real with myself. More importantly, accepting such a low starting salary would have likely had a profound impact on my earnings across the span of my career. The lower that starting salary is, the harder it is to climb. I didn’t want to start and end my career with a struggling bank account balance. Up to that point, I’d assumed that my graduate degree was going to provide a good payout. I was putting in the work with an expectation of making beaucoup dividends in the near future for this period of sacrifice. At the time, I literally couldn’t afford to eat lunch everyday, so some days I got by on snacks–not healthy snacks like trail mix, I’m talking about chips and Snickers because they were cheap.
Regarding my federal student loans, I had been operating under the assumption that my years of trekking across Brooklyn as a child protective specialist, teacher, and later at a series of education nonprofits across the country were being adequately applied to the Public Service Loan Forgiveness (PSLF) Program. The basic tenets of this program, established in 2007 by Congress, stated that if an individual spent 10 years teaching, nursing, policing or otherwise working for a qualified nonprofit while also making 120 monthly payments against their student loans, that the government would forgive whatever was left. As I neared my decade of service, I began hearing some rumblings from public servants in the news alleging that their claims of service and loan forgiveness were being denied. A 2018 report from NPR found that recent data from the Department of Education showed that 99 percent of applications for loan forgiveness had been denied…..I was in that 99%. Another WTF moment. Disgruntled and denied, I paid off my federal loan myself and got a two-sentence thank you letter which warmed my heart :-/
My social life also took a hit. When my friends were going to Buddakan (fancy restaurant back in the day, look it up), I was going to Burger King. By now you get the point that my lifelong earning potential was in jeopardy after having pursued a degree that I expected to have a huge payoff (a career in forensic anything was popular in the early 2000’s thanks to shows like CSI). I would have given anything to have a little breathing room to figure out a way to pay my bills and keep a solid social life, but the way my bank account was set up…
The way I see it, college age youth can avoid a similar outcome because jobs of today’s STEM field are plentiful, and Career Catalyst aims to connect young people with interest and talents to jobs of today and of the future. Regarding the Future of Work in America, a 2019 McKinsey report explores the problem of an expected talent gap resulting in $8.5 trillion in unrealized annual revenues by 2030. Young people need to be able to cultivate the knowledge and skills necessary to land them a job that will pay their bills through a living wage; one solution is investing in workforce training programs setting youth up for economic mobility.
The technology sector is becoming more accountable when it comes to young adults of color accessing training programs and education, thanks to institutions of higher learning and corporate foundations implementing equity principles in economics and college financing through Income Share Agreements (ISA) and Pay It Forward programs. ISAs are growing in popularity due to the inequitable Federal Student Loan Program and predatory lending through for-profit institutions responsible for the 45 million Americans owning nearly $1.6 trillion in student loan debt, of which $86 billion is held by Americans over age 60.
In short, Income Share Agreements are made between students and their colleges or vocational schools that provide funding for tuition and access to training, to be repaid by graduating students over a period of time according to projected income levels in their chosen field. There is no risk of default, and payments can be adjusted in the event of negative economic outcomes, giving students a more favorable approach to funding education compared to the traditional student loan. What’s more, ISAs are available to all participants without special eligibility rules, a nod to equity that could shrink the racial wealth gap. If a borrower does not get a job that pays a minimum income threshold, there is no repayment obligation, which puts schools on the hook to adequately train and prepare students for well-paying jobs. Higher earning participants are charged more for their ISA payments, and some ISAs have generous payout rates and cap what students have to pay back, providing greater protection against future economic hardship. What colleges and universities use this model? Click here to find out. Similar to ISAs, Pay It Forward focuses on connecting students to well-paying jobs and fairly sharing costs and risks of training.
Now, don’t get it twisted, this opportunity comes with risks, such as potentially deceptive marketing, high percentage interest rates and potentially lower protections for low-income participants who take on multiple ISAs or combine them with private loans, according to a report by Social Finance, Federal Reserve Bank of Atlanta and Federal Reserve Bank of Philadelphia. Furthermore, the United States Department of Education wants to classify ISAs as private loans with interest rates exempt from consumer protections. While ISA providers want to remove economic mobility barriers like interest rates, more evaluation is needed for how the program can be sustainable (since institutions must provide some of the financing expecting a return on their investments) and policy changes are needed to improve student loan programs, such as allowing ISA loans to be discharged in bankruptcy. For additional resources on the pros and cons of ISA’s check out this post from Career Karma.
In light of this information, still, the question remains: How can the ISA put low-income borrowers of color on the path to build wealth in an unstable/unpredictable labor market? How do Income Share Agreements align with Future of Work equity principles that can pave the way for increased investments from the private sector and institutions of higher learning? Is there a world in which these evolving student payment options align with Career Catalyst’s mission of creating inclusive pipelines to the STEM industries? In addition to building out this venture, these are the kinds of questions that keep me up at night as I consider how I might support a brighter future for today’s youth.
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