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Re-printed from the Huffington Post
by Ben Mangan
So, how are you feeling these days? Kind of like you are in the midst of a trainwreck? Well, you are. My last poll on a double-dip recession revealed deep cynicism among readers. Nearly 90% of respondents said we would experience a double dip. Granted, this was not a scientific poll – but it still represents a picture of the American mood on economic prospects.
As it happens, a double dip recession looks unlikely. This feels like a technicality to most people, though. The kind of economic pain Americans are feeling hurts - whether it meets the criteria to be called a recession, or in twisted irony, we call it a recovery.
As I reflect back on the years of challenge we’ve faced as a nation, one particular paradigm of catastrophe has become clear – something I’m going to coin as the Trainwreck. Gladwell gave us the Tipping Point and Taleb gave us the Black Swan event. And I am now giving us the Trainwreck, really wishing I didn’t have to. Trainwrecks are painful, complex and challenging to stop. There are a few Trainwrecks unfolding before our very eyes as I write this. I want to call your attention to one in particular – taxpayer dollars enriching the owners of for-profit colleges who are ripping off students.
You may have seen the recent flurry of news on this issue. The US government is figuring out what to do about for-profit colleges that operate fraudulently – by pressuring students to enroll with false statistics about what their degree can earn them. These students are doing their best to strive toward a better future – to get better jobs to support their families and improve their prospects in life. In a nation that has built the dream of prosperity so firmly on the foundation of education, this kind of fraud is particularly egregious.
Putting my own ethical assessment aside, here’s why everyone should care about this problem: For-profit, private colleges are eligible to receive grant money and subsidized loans that their students use to pay for school. Much of this government money then gets distributed to their share holders when they profit. Share holders really like profits. They pressure these schools to enroll as many students as possible to make sure they profit. Fraud ensues – as government inspectors found when they posed as students. My colleagues on EARN’s policy team blogged about this problem recently, writing a hard hitting piece that includes some gory details that may make your blood boil.
You can also read the damning NYT op-ed piece by an instructor from one of these schools. This teacher notes that for-profit colleges have drop out rates that are double their nonprofit counterparts, while they happen to receive a hugely disproportionate share of federal largess.
Trainwrecks could be described wonkily in terms of moral hazards and perverse incentives. But there is a more visceral description that also works. Trainwrecks happen when taxpayer dollars flow through lobbyist-created loopholes to fatten profits for companies that happen to be screwing over customers who are working hard to better themselves. In this case, it is our fellow citizens striving to get a piece of the American Dream and getting snake oil instead. This is a toxic recipe that is poisoning the American Dream.
To read this article on the Huffington Post, click here.
Last July, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This landmark legislation has helped create a much needed independent consumer watchdog, the Consumer Financial Protection Bureau (CFPB).
Although the agency is in the embryonic stage of development, its upcoming regulatory decisions will affect each and every American. Here’s what you need to know:
- The CFPB’s sole job is to look out for you, the consumer. It is responsible for making sure consumers get the protections they deserve by setting clear rules to hold banks, mortgage companies, payday lenders, and credit card lenders accountable. Once the agency is up and running, the CFPB will have broad rulemaking authority to actively monitor and regulate business practices that it deems deceptive, abusive or unfair.
- Established as part of the larger financial reform package signed into law in July 2010, the CFPB will be up and running by next July. Elizabeth Warren, a former Harvard Law professor, was chosen to help set up the Bureau, but government officials say she’s just a placeholder until President Obama nominates an official chairperson.
- The CFPB will streamline and consolidate consumer protection rulemaking by taking on responsibilities from already-existing entities like Federal Trade Commission.
- While the CFPB can regulate most financial institutions, it doesn’t have authority to regulate the financial practices of the automotive industry. So if you go to a dealership to buy a car, beware of their financing, as they are not and will not be regulated by the Bureau.
- We can expect to see simplified disclosure documents and product terms and conditions. This means you will have better information when making important financial decisions.
The formation of the Consumer Financial Protection Bureau represents a significant victory for American consumers – but don’t start celebrating just yet. Although the CFPB has broad authority to regulate financial industry practices, a bold and independent leader is needed to ensure the agency uses its power to protect the interest of American consumers. Until we know who will head the CFPB, we will continue to face more questions than answers about the Bureau’s priorities. Senator Chris Dodd, the architect of the financial reform package, claims that President Obama’s nomination will be made soon, so stay tuned.
In the meantime, check out this great video from the White House on what Wall Street reform means for you!
Until next week,
Senior Policy Associate
Photo credit: norwichnuts
It’s Financial Planning Week, and to celebrate, we’d like to call special attention to a close friend and colleague, Saundra Davis. Several years ago, Saundra co-founded our innovative financial coaching program, “EARN Wealthcare.” Today, she’s the president of her own company, Sage Financial Solutions, and continues providing high-quality pro bono financial planning to low-income workers throughout the Bay Area.
For her deep commitment to volunteerism and service, we’re excited to announce that Saundra will be honored this Sunday by the Financial Planning Association (FPA) with a 2010 Heart of Financial Planning Award.
According to the FPA, award recipients “embody the heart of financial planning and represent FPA’s Core Values of integrity, competence, dedication to relationship building and stewardship.” Saundra certainly fits the bill, having “volunteered thousands of hours over the past five years by serving as a key leader for the FPA of San Francisco Pro Bono Committee; coordinating monthly financial planning workshops for The Earned Assets Resource Network (EARN); developing the Financial Education Network – San Francisco (FEN-SF) and continuing to support FEN-SF by teaching professional development classes on financial coaching and financial planning; and developing the financial coaching adult education program for Project Read.” That’s a whole lot of impact on the San Francisco community.
But to best understand the impact of Saundra’s work, we only need look to a single woman, Dametra Williams, who — along with Saundra – was profiled in Financial Advisor Magazine this month. “A Bay Area single mother who was working for $10 an hour when she discovered EARN,” Dametra struggled with providing for her young daughter, “never being able to make ends meet. By the time Williams found EARN she had almost no confidence left about her finances… She compares herself unfavorably to her own mother, who managed to raise 12 children successfully.”
Flash forward to 2010. “With the help of EARN and its group of financial planners and coaches, Williams has created a budget and has saved enough that, with scholarships, she can get a college degree. She is sending her daughter to college and is starting her own small business. Now she is more confident, and tells others with a broad smile on her face, ‘We forget sometimes, how strong we really are.'” (For more on Dametra, read our previous blog post, “Dametra Williams: From Homeless to Prosperous.”)
And Saundra hasn’t stopped with supporting the dreams of people like Dametra. In addition to running Sage Financial Solutions, this powerhouse of a woman regularly travels the country to present on EARN’s financial coaching program. Most weeks, you can also find her running around the EARN office, constantly identifying new ways to improve our coaching services and expand our capacity to effectively serve low-income clients.
For your energy, your passion, and your dedication to service – Saundra, we salute you.
Until next week,
The EARN team
Last week was non-stop at work. Next week will be busy, too. And yet here I am, sitting at home on a sunny Sunday afternoon, doing what? Working. Last Friday, I planned to write a blog post for EARN, so I carefully blocked off some time on my Outlook calendar to accomplish the task. Then a deluge of EARN clients, whom we call Savers, came gushing into the office. It would have been a normal influx if my co-workers had been available, but they were out of the office. As I jumped up to help, I pushed aside my thoughtful time-management plan and chose to focus on my priority: serving EARN’s Savers.
This is only more ironic when you consider that the blog post I had planned to draft then (and which I am now writing from home) provides advice on how to take care of your well-being. Many helping professionals (nurses, therapists, etc.) experience burnout: we love interacting directly with people and want to share our empathy and warmth – that’s what brought us to these careers in the first place – but, by over-giving and over-empathizing, we risk wearing ourselves out.
If we are to stay dedicated to our missions and be effective at implementing them throughout the course of our lives, it is imperative that we learn to take care of ourselves.
I am just at the beginning of my quest to make a difference in the world, but I have decided to probe the topic of self-care prophylactically because I want to continue to enjoy the rich, stimulating moments I witness when EARN Savers break the cycle of poverty in their families’ lives. I’ve developed some techniques that keep me enlivened by my work. I hope you will find these useful, too. Oh yes, I know… you’re probably thinking, “What does Iliana know about avoiding burnout? She is clearly failing to achieve a work-life balance!” But this simply leads me to tip #1, the most important one of all:
1. Return to the topic of self-care over and over (and over) again.
You’ll think you nailed it. You’ll want to show off to all your friends and co-workers: “Look at me, I’m a little Buddha!” And then, several months later, feeling tired and tense, you’ll wonder how you managed to stray so far from the path to Nirvana. Don’t beat yourself up. Self-care is like a visit to your grandmother’s house: you need to go back every few months, sip some hot chocolate, and enjoy snuggling in your grandmother’s lap. Just because you soaked in her wisdom a year ago doesn’t mean you learned everything there was to learn. So, you’re feeling out of balance again? Perhaps it’s time to cuddle up and learn something more.
2. Build an organization-wide practice of self-care.
Meditation and other stress-management techniques will not suffice if you are consistently working an 80-hour week. An occasional flood of work is to be expected, but if you are always feeling stretched thin, consider identifying systemic changes that would empower you to do your job well while avoiding burnout. Of course, you will need your management’s support to implement such changes. Examples of practices we’ve adopted at EARN include the following:
● Investing in technology. Our new database and email management systems have doubled our efficiency in certain areas.
● Valuing human capital. We keep in mind how much our time costs our employer (and thus, our funders) — for instance, if something needs to be delivered across town, it is cheaper for EARN to hire a bike messenger than to have me take the trek.
● Prioritizing annual goals. We plan our agenda strategically, ensuring that it is focused, effective, and aligned with our mission. This involves making difficult decisions about how to deploy our limited time and resources.
● Maintaining a sustainable pace. When people constantly work in a fast-paced environment, they tend to focus so intensely on getting the task done that they often don’t notice better ways of doing it. My team chose to temporarily decrease our intake numbers in 2010 so we could block off time in our schedule for innovative thinking. This allowed us to identify new ways to increase our level of efficiency – by slowing down now, we will actually be able to speed up and accomplish more with our time in the future.
● Speaking about self-care. We keep this conversation going in many ways. My favorite is the self-care check-in my team conducts as a group once a quarter, often through a creative exercise that allows us to decompress.
● Sharing our Savers’ success. We celebrate the impact we have had in our Savers’ lives – and the impact they’ve had on ours – by telling each other about exciting moments. Did a Saver just buy a home for their family and laud EARN profusely for the motivation we provided? Did another Saver just teach you a savings strategy you’ll want to try out yourself? We make sure to take a moment to enjoy these successes – after all, this is what EARN is all about!
3. Nurture your own well-being diligently.
Even if your company establishes a healthy environment, you will need to champion your own self-care. Diligent, kindhearted people who work in direct service positions are at a high risk for burnout; direct service creates an intangible stress that cannot be ignored. If you want to continue in your profession as effectively and enthusiastically as you began, consider making self-care a top priority. Here are some pointers:
● Develop awareness. I used to charge full speed ahead only to crash abruptly into exhaustion. To familiarize myself with my personal warning signs of an impending nosedive, I created a self-care assessment that I took on a weekly basis until it became second-nature. Feel free to create a personalized self-care assessment or find one online.
● Release stress/pain. Many people in direct service empathize so strongly with their clients that they end up carrying a portion of their stress or pain. Find ways to release this. Some people say that prayer helps; since I do not adhere to a specific religion, I developed my own ritual.
● Set boundaries. This was one of the hardest practices for me to learn, but given that there are only 8 hours in my work day and EARN has over a thousand Savers, I cannot spend an hour with each person who drops in. I learned to set boundaries by using coaching skills adapted from life coaching.
● Seek happiness. I’ve found that being surrounded by misfortunes can skew my perception of the world, eclipsing the joy, stability, and wealth also present in my midst. I try to balance my exposure to pain by spending time in nature, enjoying the company of happy friends, and feeling gratitude for all of the blessings in my — and EARN’s Savers’ — lives.
● Get re-inspired. Find people, movies, essays, and poetry that inspire you in your work and in your self-care, and then revisit them often. To get you started, here are two of my favorites: “Eleven Ways of Looking at the Long Haul,” David Rosenn’s essay on staying invigorated during many decades in social activism (thanks to my cousin Kathi for sharing this with me!), and “The Journey,” a beautiful poem by Mary Oliver.
4. Finally… follow tried and true advice!
There’s a reason certain tips are always listed in articles on stress-management: they actually work! Some of my favorites are: approach stress with humor, learn to distinguish valid stressors from the small stuff you shouldn’t sweat, meditate, relax, write in a journal, exercise, sleep, eat well, pursue hobbies, and seek social support.
These ideas have helped me (and my team) continue brimming with the enthusiasm we had when we first arrived at EARN. Nevertheless, considering the fact that I was up until 1 a.m. last night finishing my blog post, I’m sure I could use some advice, too. Have ideas? Please share them — I’m sure I’m not the only person who has more to learn!
Until next week,
Financial Services Associate
Bleary-eyed and groggy, I snap to attention at the sound of my blaring alarm. The clock reads 7am. Of all my waking moments, this one consistently ranks at the bottom of my list.
But day after oh-so-early day, there’s one thing that gets me out of bed and out the door to our San Francisco office: the story of Dametra Williams.
A single mother, Dametra worked full-time while living in a homeless shelter, building up enough money to rent a bad apartment in a worse neighborhood. Her daughter, Yvonne, risked losing a private scholarship due to poor grades. Hope was in short supply.
Then Dametra joined EARN, where she created a spending plan and set savings goals for her future. Eventually, Dametra saved enough money to hire a much-needed tutor for Yvonne, securing the grade-based scholarship that was keeping the teenager enrolled at a private high school.
Soon after, Dametra herself earned a private scholarship to Mills College — and, I’m excited to say, recently graduated. She’s now starting her own business in the Bay Area.
Dametra’s story isn’t meant to be kept in a box (or, in modern lexicon, a private YouTube channel). It’s destined to be shared, to inspire generations of hardworking Americans who’ve got the vision but lack financial resources and know-how.
That’s why in early July, EARN hired Matt Silva, our new Levi Strauss Communications Fellow, to document the powerful stories of our Savers. As he gets his feet wet, expect more videos, photos, and blog posts on our Facebook, Twitter, and YouTube channels — not to mention right here on the EARN blog!
When I walk into work every morning, I’m reminded of the triumph of the human spirit. Now it’s your turn to be inspired.
Until next week,
Social Media Fellow
In recent years, the sheer number of these schools has grown considerably, with enrollment climbing from about 365,000 students to almost 1.8 million. For-profit colleges draw the greater part — sometimes 90% — of their funding from federal aid. Since higher enrollment equates to more money, these for-profit schools have a strong economic incentive to encourage students to enroll. Unsurprisingly, a growing body of evidence suggests that this dynamic has led for-profit colleges to encourage students to take on heavy debt loads, often enticing students with false assertions about how much money they’ll earn upon graduating.
It is crucial that policy makers address the question of how the government ought to support these institutions, both to ensure fairness in policy making and, most importantly, to protect students. Heavily indebted students already face enormous financial strain, and the sputtering US economy, not to mention several decades of limited job creation, according to many pundits, will only make matters worse. If these students fail to complete their degrees and are forced to compete in the job market with college graduates, they’ll certainly face even greater obstacles.
Yet for-profit colleges portray themselves as champions for working people and minorities. The new ad campaign that Corinthian Colleges, Inc., a California-based corporation, rolled out in the New York Times and Wall Street Journal this week clearly indicates how the company seeks to position itself as sympathizing with low wage workers. But when situated within its pattern of abusive behavior — in 2007 alone, Corinthian was both sued by the State of California for exaggerating its record of placing students in well-paying jobs and federally investigated by the U.S. Department of Education for “waste, fraud, and abuse of federal education dollars” — this positioning looks downright fraudulent.
Posing as prospective students at 15 for-profit institutions, agents from the Government Accountability Office (GAO) recently discovered that admissions officials at for-profit colleges often engaged in fraudulent, deceptive or dishonest marketing tactics. Admissions officials also lied about the total costs of their schools’ programs, exaggerated the employment opportunities and salaries that prospective students could expect after graduation, and sometimes told students that they could not speak with financial aid counselors until after they had enrolled.
In 2009, students at for-profit colleges received more than $4 billion in Pell Grants and more than $20 billion in federal loans. These same students, however, defaulted on their loans at a rate of 11.6%, compared with 6% of students at public non-profits and 4% at private non-profit colleges. According to the Department of Education, in 2008-2009, students at for-profit schools were 26% of federal student loan borrowers, yet they made up 43% [pdf] — almost half — of defaulters.
The above findings reflect the moral hazards that emerge when a private for-profit industry thrives on federal subsidies without appropriate oversight. As a result of the GAO investigation, the Department of Education has recently proposed new regulations that aim to tighten eligibility requirements that private for-profit colleges must meet before receiving federal student aid. If these regulations are enacted, for-profit colleges will only be eligible to receive federal aid if 1) 45% of their former students are paying down the principle of their federal loans or 2) their students graduate with a debt-to-earning ratio of less than 8%.
The direct impact of tighter regulation would cause 5% of for-profit colleges to become ineligible for federal aid. In addition, 55% of for-profit programs would be required to inform students that they may not earn enough after graduation to repay their loans. Perhaps this will put us on the right track to reclaiming an educational aid system intended to empower students — not saddle them with a lifelong burden of debt.
Until next week,
EARN’s Policy Team
Photo credit: alancleaver_2000