In May 2009, 23-year-old Kelly Space graduated with a
top-notch education from Northeastern University. And a degree in sociology. And, uh, $200,000 in student loans.
How did
an intelligent, responsible young woman find herself in an impossible situation
with a humungous debt and an unmarketable degree? I’ll get to that, but first let
me breakdown some of the financial particulars….
-Northeastern
tuition cost $30,000/year. Room and board was an additional $10-15,000/year.
-To pay
for it, Kelli took out $163,000 in student loans.
-While
in school, the interest accrued, so by the time Kelli graduated, the debt was
$200,000.
-Kelli owes $11,000 in low-interest government loans and $189,000 in a
multitude of private loans, some of which have interest rates as high as 9
percent.
-After
graduating, she entered into a two-year program in which her monthly bills were momentarily
reduced to $900/month. At the end of this program, she will owe $1,656/month.
I spoke
with Kelly about a year ago (and never got around to transcribing our interview
till now). At that point, she was still in the midst of her “fifteen minutes of
fame,” which began when she asked for donations on Gawker. The response
to her plea was mostly negative, with commentators claiming she was begging for
handouts and not taking responsibility for her actions, even though she’d been working
60 hours a week, residing at her parents’ home, and living a frugal, barebones
lifestyle—and despite all the sacrifices and hard work—hardly putting a dent in her debt.
What’s
remarkable about Kelli is just how unremarkable her situation is. Like her, many
students find themselves caught in a perfect storm of bad counseling, poor
financial education, and blind hope.
KI: Forgive me for putting the
question this way, but I think a lot of people are wondering the same thing. So…
ummm… What the hell were you thinking?
KS: I
was thinking that I’d get a really good education. Everyone always asks me, ‘Didn’t
you know [how much you were going to have to pay back] when you were going to
school?’ And the answer to that is ‘Yes, of course.’ But I don’t think I
understood the gravity and the enormity of that number. [A high school student]
thinks it’s normal to borrow when everyone borrows money to go to school. To a
lot of people, this sounds like an excuse, but honestly, if you’re not taught
something, how are you supposed to know?
Were you at all “financially
aware” before you attended college?
In high
school, you don’t learn personal finance. You hardly learn about economics. I
think that’s a huge issue. I don’t think I was stupid. You only know what you’re taught. I thought I was doing the
right thing.
How should we educate young
people so they don’t make the same mistake?
I think
it’s so necessary [that we educate them]. If we’re going to teach kids geometry
and English, why shouldn’t we teach them [personal finance], which will affect their
lives directly?
What made you want to get into
the best school you could get into, no matter the cost?
My
parents expected me to go to college. It wasn’t expected of them. I had
blinders on. It was only [college] that I could see at the end of my tunnel. During
my high school sophomore year, my history teacher told us, 'The one requirement
I have of you guys is that you go away to school. Don’t live at home.' Stuff
like that was instilled in me over and over. [It was all about] going away and
having this adult life starting at age 18 at the best possible place you can
get this education and get the best career. There was no talk of money.
In college, when did it hit you,
when you thought, “wow, I have all this money to pay off?”
My first
year, I was loving being away from home. In my sophomore year, it started to
hit me a little bit. ‘How am I going to do this?’ I knew I needed to sit down
and figure out how what kind of jobs I could get and what I should do after
graduation to ensure that I got the highest paying job. I was more optimistic
than anything. Junior year, it got a little worse. The recession hit, and I
thought, ‘The last thing I need is to graduate in a terrible economy and not
get a job with all this debt.’
You've been paying it off for a little over a year now. Has the debt gotten any smaller?
At
first, when I made a payment, the number didn’t move at all. I was just paying
interest basically.
How awful. ::sympathetic laughter::
Yeah,
it’s so depressing. ::laughs::. In October—when I was like, 'oh no, I only have 13
more months of these low payments.' Low! They’re $900 a month! ::more laughter:: And soon I’ll have to start paying $1,600 a month. Nothing
says depression like putting $1,000 toward a loan payment and not seeing the
debt decrease at all. Or even if you see it go down a little bit, the interest
shoots it right back up. It’s just so depressing. So when I got some
contributions, it was just such a great day to see that number go down.
Has the debt affected your
personal life?
The
depression has gotten increasingly worse since graduation. I don’t think it’s
affecting my job, but I do think it’s affecting my relationship with friends
and family. All I can think about is my debt. It’s just such a burden. My
posture… If you saw me standing… I can’t stand up straight. It just feels so
heavy. I’m constantly upset. It’s so overwhelming.
Do you think it’ll affect your
decision to have a family (if that’s something you want)?
There’s
too much of a wall in front of my face to see the future. If I still have this
debt in 10 years, in 15 years—which I’m hoping I don’t—I don’t think I’ll have
a family. I don’t think I’ll be married.
I’m okay
with sitting at home. I’m okay with not spending my money. I’m okay with
putting all my money toward my debt. Yet it doesn’t feel like the debt is
coming down at all. It just feels like I’m giving, giving, giving to this debt.
I’m making all these sacrifices for it. But there’s no positive result yielding
yet.
When do you think you’ll be out
of debt?
This is
something I need to be clear of before I can move on, be happy, and do things for
other people. I don’t know exactly when I’ll be out of debt, but I definitely
know it will not be 25 years from now. It’s going to be sooner than that.
What would you say to an
18-year-old girl who wants to go to the best school she could get into,
regardless of the cost?
I dream
of this. I’d tell her that she should start off at a community college for a
year or two. Get credits and good grades, and reapply to these great schools
she wants to go to. Maybe she’ll get more scholarship money. Maybe she’ll be
able to save up money so she doesn’t have to take out any loans. I
think those two years in community college—and maybe two years just
working—would give you such a different perspective.
[The other day I asked Kelli about her progress. Her debt is down to $140,000 and she expects it to be as low as $120,000 by June. She’s working in the legal department of a large media company and has moved out of her home and into a $500/month apartment just outside of NYC. She has
raised $12,000 on her site, on which she calls for better youth financial education and is trying to raise awareness about student debt. You can follow her on Twitter here, or buy what's left of her possessions on sale here.]
15 comments:
Reading "Linchpin, Are You Indispensable?" by Seth Godin ©2010, is the antidote to avoid how she was conditioned to put herself into that kind of debt.
God Bless her and the donors of 12k and counting. She seems like she's got a good job and she's proving herself to be reliable and entrepreneurial. I think she'll do fine.
The book about Daniel Suelo is coming out in March. He's been living entirely without money since 2000. I recommend following him on his blog too.
36
The goal is to hire as many cheap but talented people as possible, give them a rule book, and have them follow instructions to the letter.
Go to McDonald's. Order a Big Mac. Order a chocolate milkshake.
Drink half the milkshake.
Eat half the Big Mac.
Put the Big Mac into your milkshake and walk up to the counter.
Say, "I can't drink this milkshake ... there's a Big Mac in it."
The person at the counter will give you a refund, Why? Because it's easier to give her a rule than it is to hire people with good judgement.
42
The sign in front of your local public school could say:
Maplemere Public School
We train the factory workers of tomorrow. Our graduates are very good at following instructions. And we teach the power of consumption as an aid for social approval.
It's almost impossible to imagine a school with a sign that said:
"We teach people to take initiative and become remarkable artists, to question the status quo, and to interact with transparency. And our graduates understand that consumption is not the answer to social problems."
And yet that might be exactly what we need.
The fact of the matter is although she kept saying I'm not making excuses, pleading ignorance is indeed an excuse. When the base of your argument is that you were simply uninformed you have already lost that argument. Just one mans opinion, but one man that dealt with the same thing, but actually dealt with it rather than crying woe is me.
It puzzles me why so many wish to denigrate the poor woman. Pleading ignorance is an excuse, but that doesn’t mean it’s a bad one. Most 18 year olds do not get an education in personal finance. They have never had to deal with credit or debt, and the concept of an interest rate is completely foreign to them. (I’m saying these things based on my experiences as well as Kelli’s.) Yet these 18 year olds are thrust into a situation in which they must make a huge financial decision that—more than often—parents, school, and society has not prepared them to make.
“When the base of your argument is that you were simply uninformed you have already lost that argument.”
This makes no sense... She’s not making an “argument.” She’s merely explaining how she got into this situation...
“Just one mans opinion, but one man that dealt with the same thing, but actually dealt with it rather than crying woe is me.”
I don’t know how you can insinuate that she’s not dealing with the debt when it’s explicitly stated that she’s living cheap and working heavy overtime. Kelli has had to deal with unusually difficult circumstances. I know it may be difficult for a person like yourself to imagine asking for help, but if you or me or anyone else found themselves in a similar situation--where the debt never goes down no matter how much money is put toward it)--odds are that we would consider desperate measures, too, like her plea for contributions.
On another note, I'm amazed with how her story has given so many cause to self-righteously beam about how stupid she is and how great they are. We pretend that the student debt crisis is a matter of poor individual decision-making, but when a problem is so widespread, it becomes a national issue that must be addressed in public policy.
I attended high school and did not receive any education regarding personal finance. When I moved out I did not know how to write a check, how much utilities and rent cost per month, how to fill out a job application, or how much I might expect to earn per month at a menial job - the only type of job I was qualified for.
Now that I'm in my 30s and have been out on my own for 15 years I find it hard to believe that someone would willingly sign up for even $100k in debt/financing, but believe it I must because the numbers don't lie.
Its a shame that people beat up on the ignorant for being just that. I hope that Kelli finds her way out of debt soon, and even if she doesn't, that she doesn't let this debt ruin her life in terms of happiness and relationships, and the possibility of family. It is only money after all.
Candace
The system here in Australia works reasonably okay. You have a choice (if you have the money) of either paying up front or taking out a HELP (Higher Education Loans Program) to pay your tuition fees. Some states also have loans which you can take out for other stuff like student accomodation. The loans are from government, which means they get indexed at inflation only, and you pay them back through tax once you earn over a certain amount. You can also make volontary repayments. Still, it took me almost 10 years to pay mine back and now I'm crazy enough to go get another one.
@ Ken
I am anonymous from 11:36.
I am not denigrating her. I am simply saying you made your bed now lie in it. Don't ask someone else to add some padding to the bed because you now find it uncomfortable.
In regards to ignorance not being a "bad" excuse. Let's see you try telling a cop that you didn't know you were breaking the law and see if says oh ok, well since you didn't know I guess I should let you go. Life doesn't work that way, and responsible people don't work that way.
"On another note, I'm amazed with how her story has given so many cause to self-righteously beam about how stupid she is and how great they are. We pretend that the student debt crisis is a matter of poor individual decision-making, but when a problem is so widespread, it becomes a national issue that must be addressed in public policy."
The problem with this line of thinking is that the people who did their research and aren't pleading ignorance are the ones that have to pay for it. Much like the people that over extended themselves on mortgages and other debt. They aren't the ones that end up paying for it, the responsible ones who managed their finances properly are.
Anon--
You say, “I am not denigrating her. I am simply saying you made your bed now lie in it. Don't ask someone else to add some padding to the bed because you now find it uncomfortable.”
The woman was putting all her paychecks toward her debt and the debt wasn’t moving. Believe me, I’m all about personal responsibility, but in legitimately dire circumstances I think it’s totally reasonable to ask for help… What was her alternative? Should she just let the interest rise and rise and rise? Should she stay in debt for the next 60 years of her life? Should she live in abject misery for entire life because of….. pride? Society exists in part to help out those who are less fortunate. And I’m sure if Kelli gets out debt and accumulates wealth of her own, she will pay “the debt of favors” with favors of her own.
You say, “In regards to ignorance not being a ‘bad’ excuse. Let's see you try telling a cop that you didn't know you were breaking the law and see if says oh ok, well since you didn't know I guess I should let you go. Life doesn't work that way, and responsible people don't work that way.”
Actually, life can work that way sometimes. If I turned onto a road and didn’t see a speed limit sign and was pulled over for speeding, the cop—if he believed me—would probably let me go and tell me the speed limit. (I’ve actually been pulled over and not given tickets by several very reasonable cops over my life.) You insist that “ignorance is not an excuse.” But ignorance is an excuse. There are millions of ways that we can be taken advantage of. What about old people who have their savings stolen by internet scammers? Is ignorance not an excuse for them? Shall we all just embrace this no holds barred, wild west, everything goes economy, and just leave it up to everyone to read and understand the fine print? You can’t expect to understand Greek if you’re not taught Greek. And you can’t expect to understand the language of finance if you’re not taught that. Millions of high school students are taught to go to college because that’s where they’ll find success and money and happiness; if they’re not educated about the risks, how are they supposed to know about them?
You say, “The problem with this line of thinking is that the people who did their research and aren't pleading ignorance are the ones that have to pay for it. Much like the people that over extended themselves on mortgages and other debt. They aren't the ones that end up paying for it, the responsible ones who managed their finances properly are.”
Should we just do nothing? Should we be content with the fact that 36 million graduates have student debt? You could make a point that debtors who made mistakes shouldn’t be “rewarded” for making those mistakes by having their debts absolved. But what if we were to craft “preventative” legislation? Perhaps we can craft legislation that will prevent a lot of these widespread problems from persisting.
You have to appreciate that this young lady has accepted personal responsibility for her debt while using her temporary fame to illuminate this student loan debacle. I applaud her efforts and am impressed with her progress.
Also if you’ll take the time to notice, many of Kelli’s donors include a note of appreciation for her situation. A lot of them identify with it all too well. God knows I do! We are still paying off my wife’s graduate school debt. We are getting there but I wonder sometimes if we’ll ever be done with it.
Hey Ken, been awhile since I’ve visited your blog. Congratulations on the book deal! I’m looking forward to it!
-Duane
@ Ken
I guess it's just a difference of opinion, which is what makes this such a great country. My last comment on this is regarding your
"You can’t expect to understand Greek if you’re not taught Greek"
This goes back to initiative. Why would someone move to Greece if they don't know Greek? That is essentially what this student, and many others have done. She moved to Greece and then said "wait a second, they don't speak English here? No one told me about that!"
I am lucky in that my mother talked to me about financial matters while I was still a sprout. Brought up in a generation that did not talk about money, even to their children, she told me how much money she made, told me how much our mortgage was, explained loans and amortization and savings and credit cards.
When it was time for college, she had me fill out the financial aid forms to the best of my ability. I turned over grant checks to her (since I was living at home). I wasn't ignorant, but it was because someone taught me. I wouldn't have known to research such things on my own. I also didn't grow up in a culture that assumed I would go to an expensive university and get the best education money could buy.
It seems to me that Kelli did the best she could with the information she had. It's just that the info was bad, and the paradigm is flawed. And, it sounds like she is making amazing progress against her towering student debt.
Roxanne
The Good Luck Duck
Duane—I agree. Thanks for the congratulations.
Anon—You say, “Why would someone move to Greece if they don't know Greek? That is essentially what this student, and many others have done. She moved to Greece and then said "wait a second, they don't speak English here? No one told me about that!"”
They go to college (aka Greece) because that’s what they’re told to do pretty much from birth. And they’re making this decision when they’re 16 or 17 years old. A 16 year old is not a fully developed human being. They have not had a chance to make all the mistakes they could make and learn from them all. They do assignments that their teacher tells them to do. They go from one place to another according to alarm clocks and classroom bells, hardly of their own volition. They live under their parents’ roof. They’re not self-reliant or independent. Some are, but most aren’t. They are very vulnerable and impressible, and it’s not their fault for being fashioned this way. And because of this, when they make the misfortunate decision to take out more loans they can pay back when everyone’s telling them to, it’s not entirely their fault either.
Roxanne—You said it better than I could. I agree completely.
I'm coming to this late (obviously) but I think the most disturbing thing here that few people are talking about is not just the amount of "actual" debt, but the way that student loans are not subject to any normal laws. This whole ballooning interest thing, that they can't be discharged in bankruptcy, that in many cases student loans would be considered predatory lending in any other scenario, etc etc etc. Some may say that $40k on top of $160k isn't that much, but I beg to differ. The whole mental aspect of "I'm not really even touching the principle" is clearly debilitating.
It's sickening and awful and I wish Kelli all the best in this fight. She's getting a ton of bad press, which makes me respect her telling her story even more. How can anyone else learn if no one shares experiences?
I am a former foster care child, divorced my parents aka emancipation, single/teen mom, sexual abuse victim, child abuse victim, yet put myself through college and went onto to earn a Master’s degree. I am proud of the accomplishments I made BUT my choice to put myself through college while making 17K a year as a single mom and not live on the system has landed me 120K in debt with student loans. My defying the odds came with a huge price. I didn't take the easy way out, I fought. I brought my son up with good morals, values, role models etc. Do you know what the statistics say about foster care kids, single/teen moms, abuse victims? I am seeking change. Change in our foster care system, student loan system, etc. I hope that you will visit my site, read more about my journey, and join me. Maybe you can relate, maybe you know someone who can, maybe?
I can relate to Kelly, although our circumstances are much different. I went to a public college, never studied abroad etc. I understand the outrage of some about her website, but am wondering what their take would be if it was someone like me. Someone who chose to stay off the government system even though they could have taken advantage of it? Someone who chose to put their child first, work full time, take out loans to cover the expenses that their 17K a year job didn't cover? Does it make it different?
Regardless of how a person has got to where they have, there are serious flaws in our system and it is time that we all join together to create change. There is no excuse for the way our system is set up!!
Check out my site to read more www.defyingmyodds.wordpress.com
I am a former foster care child, divorced my parents aka emancipation, single/teen mom, sexual abuse victim, child abuse victim, yet put myself through college and went onto to earn a Master’s degree. I am proud of the accomplishments I made BUT my choice to put myself through college while making 17K a year as a single mom and not live on the system has landed me 120K in debt with student loans. My defying the odds came with a huge price. I didn't take the easy way out, I fought. I brought my son up with good morals, values, role models etc. Do you know what the statistics say about foster care kids, single/teen moms, abuse victims? I am seeking change. Change in our foster care system, student loan system, etc. I hope that you will visit my site, read more about my journey, and join me. Maybe you can relate, maybe you know someone who can, maybe?
I can relate to Kelly, although our circumstances are much different. I went to a public college, never studied abroad etc. I understand the outrage of some about her website, but am wondering what their take would be if it was someone like me. Someone who chose to stay off the government system even though they could have taken advantage of it? Someone who chose to put their child first, work full time, take out loans to cover the expenses that their 17K a year job didn't cover? Does it make it different?
Regardless of how a person has got to where they have, there are serious flaws in our system and it is time that we all join together to create change. There is no excuse for the way our system is set up!!
Check out my site to read more www.defyingmyodds.wordpress.com
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