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Personal finance lessons for the new gilded age

[ 77 ] March 11, 2017 |

Struggling with crushing educational debt? You’re not alone. Fortunately, the crack journalism team at Business Insider has published an article profiling one Ebony Horton, who paid off her $220K student loan balance in three years. Lots of helpful tips here! Some highlights:

She had toyed with the idea of moving back in with her parents to save on rent, and when her father had a stroke in 2013, she knew it was time to make the transition.

Back home in Joliet, Illinois, Horton took a job as an operations manager at the nonprofit her mother runs.

Horton’s mother gave the couple a condo that she had purchased at an auction for $13,000 as a wedding gift. It became crucial in wiping away the hefty student-loan tab.

Horton and her husband lived in the condo for three months, but then they decided to move in with her grandparents down the street and started renting out the condo to bring in extra income.

When Horton’s grandparents moved south, she returned to her parents’ house, refusing to live in one of her rental properties because they were bringing in extra income.

And now for the coup de grace, the cherry on top that makes this column so of the moment:

To anyone who feels overwhelmed by the prospect of taking on student loans — or paying back any debt they’ve incurred — Horton has a simple message: “I just want them to feel empowered that they can pay if off. If I can do it, anybody can.

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Comments (77)

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  1. Linnaeus says:

    When you’re facing hard times, just sell some stock!

    • alexceres says:

      That’s some serious short term and suboptimal thinking. Why sell stock if mommy will float you with a check ?

    • aaronl says:

      Contrary the suggestion that this is a wealthy student from a wealthy family, I don’t get that impression from the information I see online. While I am astonished by the superficiality of the Business Insider piece, the story here appears to be that a two-income couple whose middle class parents are willing to absorb the cost of supporting them so that they can pay back one spouse’s student loan debt over a relatively short period of time.

      Had the subject of the story been paying back her student loans with only her own income and the rent from the gifted condo, this would have become a story of paying off student loans after 10+ years of living at home, which is to say it would not have been very exciting.

      Perhaps I can convince Business Insider to do a piece about how I paid off my student loans, while living on my own and supporting myself. My tips are pretty simple: Work during undergraduate and save as much as you can for graduate school, go to state colleges that offer good discounts for in-state tuition, be prepared to live a spartan existence for three to five years, and graduate twenty-five years ago. That last one? Sure, it would be tricky the current generation of students, but it seems to be the sort of detail that this type of article is inclined gloss over.

  2. Abbey Bartlet says:

    Eat the rich.

  3. bobbyp says:

    over $6,000/month payback….some condo! Some “rental properties”! JFC.

    • Warren Terra says:

      The condo rental income was presumably moderate (unless it was a money-laundering scheme, and at this point I’d put nothing past these grifters), but living rent- and utility-free, possibly paying nothing for groceries, while being given a presumably overpaid noncompetitive job is a pretty good way to rack up some savings. Possibly their only expenses were clothes, entertainment, and taxes – and I don’t know whether there’s any privileged tax status for income used to repay student loans.

      • Murc says:

        There isn’t. Student loan interest is tax deductible, but that’s it.

        And yeah, what Warren is saying makes sense. Even if you only make a modest income, say 40k a year, if you’re living rent and utility free, you can live a comfortable life on ten grand a year (that’s a little over eight hundred bucks a month in walking-around money, more than many people have) you can dump thirty grand into your debt every year. And presumably she was making more than that. So yeah, the condo rental was probably a drop in the bucket; the real steal was living rent-free.

  4. Zamfir says:

    How does this rental market work? Condos in Joilet cost tens of thousands to buy, and generate thousands per month in rental income?

    • NewishLawyer says:

      A quick Craigslist search showed that rent in Joliet seems to be between 600-800 a month.

      Plus the property was bought an an auction meaning it was probably sold undervalue and it was a gift so Horton did not pay anything.

      So yeah, you can rent it out and get some nice extra income. Put in a corporation and have lower taxes, etc.

  5. Joe Bob the III says:

    Well kids, with a little nepotism and lavish gifts of cash and property from your parents you could become a real estate developer – or even President of the United States!

    On a related note: What self-respecting non-profit board of directors lets the executive director give her own daughter a management job? That is absolutely unthinkable with any of the non-profits I know.

    • Lee Rudolph says:

      self-respecting

      I think I see where you made your mistake.

    • Warren Terra says:

      What self-respecting non-profit board of directors lets the executive director give her own daughter a management job

      Isn’t this explicitly illegal?

      Also, as I recall from glancing at the story yesterday the daughter (the one given the job) had been working in the DC area for a similar salary, before moving back to Joliet. This is pitched as if to justify the notion that maybe she was qualified for the nepotistic job – but I assume salaries are normally a lot lower in economically depressed Joliet, and that overqualified people are looking for those jobs. Even beyond nepotistically giving her the job at all, her mother likely overpaid her by several, potentially even many, tens of thousands of dollars a year.

      • Redwood Rhiadra says:

        No, it’s not illegal. While many companies have anti-nepotism rules, there’s no law requiring them to do so.

        (There *are* Federal anti-nepotism rules for public officials, but they don’t apply to private companies or non-profits. Or to the President hiring his son-in-law, apparently.)

        • Warren Terra says:

          I thought nonprofits faced additional regulation? After all, in a for-profit company nepotism is betraying the trust of or even stealing from the shareholders, but in a nonprofit the injured party is basically the government, by way of its tax authorities.

  6. Kalil says:

    The tumblr post where I first saw this article lambasted closed with a quote from Caitlin Moran:

    “The rich aren’t evil, as so many of my brothers would tell you. I’ve known rich people – I have played on their yachts – and they are not unkind, or malign, and they do not hate the poor, as many would tell you… No – the big difference between the rich and the poor is that the rich are blithe. They believe nothing can every really be so bad. They are born with the lovely, velvety coating of blitheness – like lanugo, on a baby – and it is never rubbed off by a bill that can’t be paid; a child that can’t be educated; a home that must be left for a hostel, when the rent becomes too much.”

  7. BigG says:

    So she “scraped together” almost $100,000 to buy condos on top of the one that was given to her – in order to make monthly income to make monthly payments on a loan of $132K. If she had so much cash lying around why didn’t she start paying off the loans before they racked up $90K of interest?

    This was totally not written with a straight face. My guess is the people writing Business Insider don’t have a high opinion of their readers.

  8. Gareth says:

    Getting $220,000 into debt to get an MBA doesn’t strike as very prudent to begin with.

  9. Tristan says:

    Hey, I’M 31! This is similar to what I’m doing in that I also live with relatives. The only significant differences are that I pay rent for it, they never gave me a job, and I’m not renting out property somewhere else that I got for free.

    Why are my results so wildly different!?

  10. Vance Maverick says:

    I’m going to be that guy and point out that “gilded” is the word you want. I don’t think this age, or these people, do guilds.

    There’s a sort of, not irony even in the broad sense, but impalpably thin silver or gilt lining in the fact that the people in this story are members of a minority that has not overall been able to share fully in the fruits of our economic regime.

  11. Thursday says:

    Jesus Christiansen! I don’t even have any family members who have $13,000 to spend, never mind using it to give me a frikkin’ condo!

  12. msdc says:

    Horton Hears a Whole Lot of Privilege.

    • Dennis Orphen says:

      It’s called Being Your Own Poor Person, a philosophy that I’ve been formulating, and starting to embrace. If being wealthy inevitably creates impoverishment in others, be both simultaneously. It also starves the rentier class of liquid funds. It’s not for everyone, but neither is the rat race.

  13. XerMom says:

    This seems very odd. Her parents were happy to hand over a condo for free, and they probably signed off on the loans for the other rental properties (I can’t imagine a bank handing out a mortgage to someone with so much debt and so little capital).

    BUT, despite getting both an undergraduate degree and an MBA AND having well-heeled parents, she somehow racked up a bunch of student loans without any personal finance knowledge.

    I’m sorry, but if you’ve got extra cash lying around waiting to be spent on your kids, why would you wait until interest had ballooned their student loans? Wouldn’t it make more sense to have paid more for the kid’s schooling so it wouldn’t grow so large? I suppose that doesn’t get you a write-up in Business Insider, though.

    • Srsly Dad Y says:

      Apparently they were raising her to be independent. And they convinced her she is!

    • Murc says:

      I’m sorry, but if you’ve got extra cash lying around waiting to be spent on your kids, why would you wait until interest had ballooned their student loans?

      What makes you think they knew?

      There’s every chance she didn’t tell them until her straits became dire-ish. I know I didn’t tell my parents the first time I failed out of college until I had absolutely no other choice.

  14. Paul Campos says:

    This reminds me of an interview with Lauren Rivera, author of Pedigree, which is about how upper class people play the network game in school and at work. She was struck by how many people she interviewed who said something to the effect of “I came from nothing,” and then when she looked into it the person would have one parent who was a tenured professor at a research university while the other parent was a midlevel administrator at a DC federal agency or the like.

    • DocAmazing says:

      In fairness, maybe there’s a Maryland suburb called Nothing.

    • RobNYNY1957 says:

      Yeah, I had a middle class roommate at Yale. My idea of the middle class: We were now off welfare and renting an apartment. His idea of middle class: Colonial house on 40 acres in suburban Boston, same prep school as his father and grandfather, same college as his father and grandfather (not an option for me since my father had an eighth-grade education), plus the waterfront house on Martha’s Vineyard and the other waterfront house on Cape Hatteras (one for summer, and one for winter, don’t you see?). There were thrifty in the sense that they had never upgraded their shabby old colonial and Federal era furniture.

    • bobbyp says:

      You see this even amongst the not-stinking wealthy orders..the mildly successful people, small business owners, professionals, etc. They feel they “did it all on their own” and save all their social bile for the lowers, the blahs, the mexis, the homeless.

      But scratch under the surface, and there is usually the uncle who gave them a job, the parents who co-signed the business loan, who gave them a car in high school, who paid a good deal of the college bills, who left even a small estate at death, the friend who greased the skids into the popular fraternity/soroity, all those little webs of influence that go unremarked, but are really huge one-ups on the ladder of wealth accummulation.

      My favorites are randian contractors specializing in federal construction work.

      • BiloSagdiyev says:

        But enough about the Ryan famlly in Wisconsin.

        Now this may be meeere coincidence, but a large project by a private contractor scanning vast numbers of documents for the VA using nonunion private sector employees just happens to be in the hometown of Rep. Ryan. Whoever owns this contractor, I’m sure he, too, built that all by himself.

  15. Lot_49 says:

    Another example from the Ivanka Trump School of Female Empowerment.

  16. Dennis Orphen says:

    Live in Joliet with my grandparents? No thanks. Not to mention the fact that in the circles I run in living in Joliet means only one thing and it ain’t pretty.

  17. e.a.foster says:

    so the moral of the story is always make sure your parents have a spare apartment for you to rent out. First you need parents to have a spare apartment. Most people don’t have parents who have a spare apartment. Having that job with her mom’s non profit, ya, like very body’s mom has a non profit. it all helps, when you start with something.

  18. e.a.foster says:

    so the moral of the story is always make sure your parents have a spare apartment for you to rent out. First you need parents to have a spare apartment. Most people don’t have parents who have a spare apartment. Having that job with her mom’s non profit, ya, like very body’s mom has a non profit. it all helps, when you start with something.

    sure I did it on my own, but my mom gave me an allowance because my salary wasn’t high enough to live a “comfortable” life style and paid my debts off.

  19. Dennis Orphen says:

    After actually having the time to read the BI article, the information has been parsed, so to speak, by the Orphenbot 3000.

    A couple of possibly relevant points:

    First thing that struck me was this statement:

    after earning her MBA, but soon they became impossible to avoid. She began educating herself on personal finance

    Her undergraduate degree was in Business Administration. Then she earned an MBA. Then she realized she didn’t know enough about personal finance. Okay.

    The second thing is the non-profit she works at. It isn’t mentioned in the article. Okay, no problem, the Orphenbot 3000 specializes in finding things out, hell, I even make a living that way. It seems she works for the Family and Friends Adult Day Care Center. Fair enough. I even found a phone number for it, and a physical address. Google Street view shows a building with a sign on it, all good, even has a company name in addition to F&FADC. Then things get vague and peter out quickly.

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