A Dose of Debt Reality

By | Student Debt, The Pragmatist | No Comments

Today, I attended a support group for individuals with crushing debt suggested to me by one of my readers.  Even I did not realize the situation was this bad. Yes, I may be irked by the government profiteering on our backs and the steady decline of the value of a bachelor’s degree simply due to the hubris of those who should be obtaining a vocational degree; however, I find my life to be rich in love, friendship, and purpose, despite any monetary shortfalls.

Today, I learned about those of my peers whose debt burden has led to health problems, divorce, and even suicide.  Listening to their stories, I sat there stunned.

In 1982, my parents got married.  My mother, the math major, crunched the numbers and told my father that they could not get married because the cost of starting a life together exceeded their income.  My father, ever the romantic, told her that love would prevail. He did so with such passion that she did indeed walk down the aisle to hold his hand and continue henceforth on the adventure of life together.  

As the Wall Street Journal corroborates; however, this is not the story we will be telling our children (if we ever can afford to have any).  {cite article}. Honestly, that fills me with a profound sadness. Until one has children of one’s own, life should be a journey of oneself. Not necessarily easy, but rewarding in experience and self discovery.  It is these life lessons that inspire the next generation to achieve greatness beyond their forbearers’ dreams. If we take away the hope, the positive experiences, the fulfillment, what exactly are we passing to the next generation?

Tomorrow, therefore, it is imperative that we fix the problems of today.  We must stop sending our future trades people to obtain degrees they do not need.  We must stop corporations from underinvesting in their most valuable asset, their employees.  And, dear god, we must sponsor programs like Third Estate’s Forgiveness Fellowship to throw a line to our future generation of parents, so that they do not drown in debt, the American Dream, unachieved.

 

Sincerely yours,

The Pragmatist

Mama Just Don’t Know . . .

By | Student Debt, The Angry Millennial | No Comments

So today Mother and Father were kind enough to help me move into my new apartment.  Don’t get me wrong, I’m grateful; however over dinner Mother again asked when would I be settling down, buying a house, and popping out some grandkids for them.  Once again, I explained that having my own home, children, and all of the other traditional milestones of life, were all expensive and beyond my reach, despite the fact that I have a respectable job that pays a “living wage”.  Between my rent, car payment, student debt, and groceries; only a small fraction of my income is left to, for example, save up for a down payment on a house. Of course, Father chimed in at this point saying that he and Mother had all of those expenses too, and they made it work.

It was their sheer lack of comprehension that really irked me, and led me to do some research, so that I could provide them with a cogent response.

So no, Mom and Dad, my situation is not the same as yours.  You may have the same types of debt in name alone at my age, and yes I may make more than you made, but wage growth has not kept up with the growth of the other expenses.  The fact is that the hills I must climb to reach those milestones are steeper than you can imagine. When I do reach those peaks, especially the one that involves progeny, don’t worry, you can make up for lost time by spending more time with your grandchildren than Nan and Pop spent with me.  I can’t afford daycare anyways.


Yours in solidarity,
The Angry Millennial

Survival Under the Shadow of Debt

By | Student Debt, The Angry Millennial | No Comments

Well, we’re all fucked . . .

It’s no secret that America is in the midst of a student debt crisis. But, most people do not understand that we are facing two distinct crises with two distinct groups.  The first group is those people who incur debt, but do not finish their education or alternatively earn a worthless degree. Whose bright idea was it to let you get a communications degree from a community college?  Go work in retail. You’ll learn at least as much and actually get paid for it. Also, if you got shit grades in high school, why on earth would you not go right into the workforce, or at most seek vocational training?  Instead, you continued to get shit grades, flunked out of college, and now are saddled with thousands of dollars of loans that you can’t afford. Good job genius.

These are the people who represent most of the individuals defaulting on student debt. Because they are never able to obtain the higher paying jobs required to pay off their debt, the lost individuals in this group, unable to discharge the debt in bankruptcy, have been squashed by a rock they could never bear.  And, the bankruptcy piece is key. If Lord Protector Trump is right about one thing, it is that our bankruptcy code exists to correct economic fuck ups, so that people can get on with their lives. Because the government is by far the largest owner of student debt (see my diatribe {hyperlink} on that issue), bankruptcy is not an option, and you basically have to die to get out of your student loan.

The bottom line being that we are forcing the lower-middle class into destitution and widening the wealth gap into a chasm.  We are stripping away what few comforts they would have been able to enjoy in their lives, if they had not taken on the student debt.  We are stripping away their hope for a better life. These people will continue to perform the same jobs that they have always performed, rent in the same neighborhood they would have rented in, and, apart from a small hit to consumer goods that can be corrected by selling more product abroad, the American economy will continue to go on.  The more alarming issue is what faces our second group.

Our second group of Americans in crisis are those who take on student debt, do make those soul-crushing monthly payments, but are never able to amass the same financial cushion as their predecessors.  They will rent longer, have kids later, and underfund their retirement. These are our traditional homebuyers. This is both our middle and upper-middle class. Why is this important? These are the individuals to whom the Baby Boomers planned to sell their homes, the asset in which they hold most of their wealth.  Right now, America’s real estate market is enjoying a surge of pent-up demand from the Great Recession. But, when this game of musical chairs is up, what do you think is going to happen to the value of all of those McMansion cookie-cutter suburban homes? Crash, crash, crash.

In short, our current economic clusterfuck is screwing us all.  For those of you who see the writing on the wall, come live with us in our sustainable inner-city neighborhoods.  Yes, the ones that were abandoned a generation ago, and we can ride out this next crash together. We may even share our avocado toast.

Yours in solidarity,
The Angry Millennial

How Does Third Estate’s Points System Work?

By | FAQs | No Comments

At Third Estate, our goal is to give everyone a little more agency in how communities change and function.  Not everyone is the same, and that’s ok. Some people have the capacity to stand on the front lines of change, while others are best suited to supply the tools that move change forward.

From a technical standpoint, when you donate to Third Estate, we convert your dollars to points and provide you with a receipt that allows you to take a deduction on your taxes.  Further, we reallocate a portion of said points to ensure that those on the front lines have some decision-making power as well. Every decision-making point is worth a dollar; however donors only receive one point for every two dollars the contribute.  Think of it like TOMS shoes, where they send one pair of shoes to Africa for every pair that you buy. The other dollar (now point) that you didn’t receive is placed into a pool. From that pool, we take as little as possible to cover our overhead (5%), and distribute the rest to our resident partners on the front lines who have a different perspective on which individuals have the requisite skill set to continue to move the community forward.  No purchase is necessary for them. But, we think you’ll agree with us in that the existing community members should get a say in who their new neighbors are going to be.

One benefit of utilizing a points system is that when you donate to a campaign on our website that fails to raise the amount of forgiveness requested, we refund the points you spent on the campaign back to your account, so that you can allocate them to another campaign.  Points in accounts that have been inactive for a twelve months are swept back into the general fund.

For companies or individuals looking to make a specific impact through a significant donation, we are happy to work with the donor on a special arrangement that may not adhere specifically to the above rules.  For example, we are happy to work with donors to set up donor advised funds, charitable pooled income funds, or other specific vehicles that one might require for their own particular tax situation.

As always, if you have any questions about how we handle your money, please do not hesitate to contact us.  Our priority is to establish a working relationship with our donors that will persist for years to come. 

Battle debt! ~ Build communities! ~ Join the cause!

Community Land Trust Basics for the Homeowner

By | Homeownership | No Comments

If you live in an area where home prices are spiraling out of control, you’ve probably heard about someone trying to start a community land trust (“CLT”).  A CLT is a type of community-controlled nonprofit that limits rising home prices. Perhaps you’ve seen how rent control limits rising rents in cities like New York?  The idea is similar.

In essence, a CLT is a partnership between the members of the community and working class homeowners.  A homeowner gets a roof over their head at less than market-rate, and the community ensures that the home will always provide shelter to a low-income individual.  

To ensure that the homeowner keeps his or her promise of a perpetually affordable home, the CLT retains control of the land, while the homeowner owns the house itself.  There is no practical difference for the homeowner.

The homeowner will be able to mortgage the home and pay it off ensuring that it acts as a savings account just like any other home.  Further, just like how a homeowner’s association collects assessments for the betterment of all of the homeowners, the CLT collects lease fees for the same reasons.

It is when the homeowner goes to sell their home that the main differences between community land trust homes and market-rate homes come to light.  Because the homeowner entered into a partnership with the community when they received a subsidy from the trust to buy the home, to compensate the community for the risk of helping the homeowner acquire the home, any appreciation of the home’s value is divided between the homeowner and the trust.  The trust then uses their share of the profits to help subsidize the next homeowner. Let’s use numbers to help explain this.

At the start of the year, Joe, a renter, wants to buy a his first home.  Joe finds a perfect home in a neighborhood of $100,000 homes. The problem, however, is that Joe can only afford to pay $50,000 for the home.  Fortunately, the local community land trust is willing to help Joe, and puts up the other $50,000. In exchange for contributing $50,000, the CLT tells Joe that he can sell the house whenever he wants, but he can only sell it to another low-income person.  Further, when he goes to sell the house, the trust will get 80% of any increase in value, and Joe will get 20%.

A year later, the home is now worth $110,000, and Joe wants to sell it to buy a market-rate home so he can keep all of the profits for himself.  The CLT helps Joe find an eligible purchaser, and the home is sold to a new owner at a price below market-rate. To determine the portion of the $110,000 owed by the new owner, we must calculate the trust’s profits from the sale, which will in turn be used to subsidize the next homeowner.

From the sale, the trust receives its initial $50,000 plus its share of the increase in home value, $8,000 [(110,000-100,000) x 0.8 = $8,000].  Add them together, and we find that the trust now has $58,000 to subsidize the next homeowner. Therefore, if the home is worth $110,000, and the trust is willing to pay $58,000 to help the new low-income homeowner purchase the home, the new homeowner needs only pay $62,000 to purchase the home and live in a community where the homes are worth $110,000.

In case you were wondering how much money Joe received, he made back his original $50,000 plus his share of the increase in value, $2,000 [(110,000-100,000) x 0.2 = $2,000].  Thus, Joe now has $52,000 to put down on a market-rate home.

Should Joe instead decide that his first home is his forever home, and never sells it, he certainly has the right to do so.  Joe’s land lease agreement with the trust is a 99-year agreement renewable by Joe.

The point of a community land trust is not to help working class people find a “forever” home. Its intent is to be a stepping stone for market-rate homeownership.  Not only will the homeowner make more money in the long run with an unencumbered home, but moving to a market-rate home opens up space for another low-income individual to make the transition from renting to homeownership with the help of the CLT.  

Thus, after a few years of owning a CLT home, the homeowners should (1) understand how to take care of a house, (2) have built up enough savings for a downpayment on a market-rate home, and (3) earned a high enough credit score to receive a fair mortgage from a lender.

There is so much to know about these amazing programs dedicated to homeownership, financial independence, and overall community improvement. Please feel free to send us your questions!

 

Sincerely,

The Third Estate Team

Utilizing Debt Instruments in Lieu of Scholarships

By | Student Debt, The Pragmatist | No Comments

I recently had the pleasure of being invited to the unveiling ceremony at my university for a variety of new scholarships.  Many of these scholarships had pseudo strings attached such as “intended for individual who works in ___ field” or “to support an individual who resides in ____ community.”  Perhaps it is the cynic in me, but I realized that these conditions were completely irrelevant in terms of contract enforceability. Because hiring a lawyer is ridiculously expensive, it is more expensive to enforce the conditions of the scholarship than the scholarship itself.  While some organizations may take on that cost simply to make an example of the breaching party, most trustees will eat the loss as a cost of doing business and not wish to take away the support of the next awardee simply to pursue the individual who failed to live up to their promises.

After shaking off that notion as ridiculous, I remembered my friend from college who upon admission was inducted into this special group at the university based upon his admission essay, which was entirely fabricated.  The simple fact of the matter is that the manner in which most scholarships are set up does not protect the donors from individuals who write targeted grant letters for the sole purpose of obtaining the support. The shift in intent may not even be malicious.  The individual may have truly believed that they would live up to the requirements of the scholarship, but upon entering the real world, for one reason or another, had a change of heart.

Personally, I find this unequal balance of power to be unnerving, especially as the individuals contributing arguably more to the transaction have the least amount of decision making power.  Individuals providing their capital for scholarships have worked hard for their money, and they are entitled to receive exactly what was bargained for in distributing their assets. This is why I find Third Estate Ventures’ approach to the scholarship model so appealing.

Rather than extracting empty promises, Third Estate utilizes a debt instrument as their contract document and, whenever possible, chooses to deal in student debt.  Third Estate’s use of student debt is important because it is extremely difficult to discharge. All of which is music to my ears.

 

Sincerely yours,

The Pragmatist

Owned by The Man

By | Student Debt, The Angry Millennial | No Comments

How are all you people so damn calm?  Ignorance is not bliss. Ignorance just allows educated people to take all of your shit.  Ever wonder how you as a young college kid with an entry-level job and no education were able to get tens of thousands of dollars in student loans? Oh? It’s because people believe in you? Wake up dumbass!

 

The government owns almost all of our student debt.  They say they are lending to us to help ensure that everyone can get a college education, but I call bullshit.  It doesn’t take a genius to know that not everyone should get a college education, and anyone who has ever had the toilet break in their one-bathroom apartment knows that the arrival of the plumber feels like the second coming of Christ.

 

The real reason that the government is willing to take on so much risky debt is that student loans are a cash cow for the government.  It’s our teets that they are sucking dry. And, our government, unlike private investors, has special powers to milk us dry. True, private investors benefit from the fact that our student debts are virtually inescapable, but the government has the IRS as its enforcer.  And, while the IRS may not break your fingers like your booky’s friend Mickey, they can garnish your wages without a court order, seize your tax refunds, deny new student loans and grants, take a portion of your Social Security benefits, and charge very large collection fees.  To add insult to injury, the government keeps raising interest rates on their student loans. Oh, and I almost forgot to mention that there is no time limit within which the government must attempt to collect your loans.

 

The bottom line is that it is upon our backs that the government is balancing its budget.  To my friends who say that the government should just forgive all of our student debt and eat the loss, are you a blithering idiot?  Not only is the government relying on the interest profits, but how would we fill a $1.5 Trillion hole in our balance sheet? The magic genie?!  Do you remember what happened when America’s credit rating was downgraded? It was bedlam. This would be at least as bad, if not worse.

 

That’s when I came across Third Estate’s Forgiveness Fellowship.  From what I gather, they figured that not everyone would want to bend over and take it quietly from the government, so someone should be around to help break our chains of student debt bondgage.  Battle Debt! Build Communities! Join the Cause!

Yours in solidarity,
The Angry Millennial

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