Optimism - Redefined

"But I prefer the optimistic view, which is that this recession will force us all to rethink every aspect of our society – from the way we run the financial system to the way we consume to the way we raise our children."

Does H&R Block Do Well By Doing Badly?

Cross-posted from FastCompany.com

Fast Company likes to cover businesses that do well by doing good. But sometimes the opposite is equally true. Earlier this year, the nation's leading tax-preparing company paid $4.85 million to settle a class-action lawsuit over its "refund anticipation loans"--high interest, high-fee cash advances of consumer's own money that California's attorney general, along with many others, said were deceptively marketed. H&R Block is still selling these loans, only with the effective APR lowered to 36 percent from the insane heights (500%?!) previously seen. The list of consumer complaints goes on and on--an overpriced IRA product, hidden fees and charges, employee identity theft. And to top it all off, just yesterday, they were ordered to pay $2 million to a software contractor in a fraud and contract fight.

Yet despite all these black eyes, and despite the strong emergence of do-it-yourself online alternatives like TurboTax, H&R Block is going gangbusters in the final sprint of tax season. They're doing twice as well as the Dow Jones over the past year, and their revenues are up this tax season as individuals and businesses cope with a tsunami of tax complications: foreclosures, unemployment claims, and billions of brand-new tax credits and incentives found in Obama's stimulus package. Tax preparers are leasing newly vacant storefronts to cope with the growth.

This is a company that demands you turn over all your financial and personal information for the year. it's hard to think of a business model that depends more on trust. So how long can H&R Block go on brushing off the bad press?

Well, everyone has to do their taxes. And most people would rather not think about them. H&R Block is fast, they have a ubiquitous, easy-to-recognize brand, and best of all--they have the ability to offer money to everyone who comes in the door. Sure, it's the customer's own money, but that doesn't matter. As long as there's a group of Americans--possibly less educated or less digitally savvy--who prefer not to spend time thinking about managing their money, retail tax preparers will probably continue to thrive.

I'll be talking about H&R Block and tax time on WNYC's Financial 411 Podcast today, you can listen here:

Don't Get Your Free Credit Report from FreeCreditReport.com

Quarterlife Crisis Canada Style

I hear great things about Toronto but apparently young people get depressed there too.

Kamenetz says “Debt and lower income can affect your choice of jobs. It can take longer to move out of your parents’ house or stop accepting those cheques and become fully independent. And many young people find themselves asking the question: ‘Why haven’t I made more progress?’ It makes people feel like failures when really there are larger trends at work.”

I'm only 28, by the way!

The Crisis of College Affordability

Great story -- written by a current student at U Michigan!--on how bloating tuition + recession is threatening to widen the class divide for younger members of this generation--even dividing older and younger siblings. If we don't fix this millions of people will have reduced prospects for the rest of their lives.

"The longer this crisis continues, the more our four-year public and private colleges are likely to be transformed (in the words of Richard Vedder, director of the Center for College Affordability and Productivity) into "gated communities of higher education" and engines of inequality. "

More Top College Spots for Rich People

Facing fallen endowments and needier students, many colleges are looking more favorably on wealthier applicants as they make their admissions decisions this year.

They're using a few different tricks so they can still pretend to be "need blind": admitting full-tuition payers from waiting lists, or admitting more rich international students. They're profiling kids: "many of these colleges say they are more inclined to accept students who do not apply for aid, or whom they judge to be less needy based on other factors, like ZIP code or parents’ background."

The Times concludes, " the inevitable result is that needier students will be shifted down to the less expensive and less prestigious institutions."

No kidding.

New Changes to Student Loans, From Obama and Sallie Mae.

Whenever a youth is ascertained to possess talents meriting an education which his parents cannot afford, he should be carried forward at the public expense.
James Madison

Obama is giving it a shot: trying to make Pell Grants an entitlement and cut student lenders out of business in favor of direct loans. But these measures have been tried and defeated before. Private lenders, led by Sallie Mae, have already started to battle again this time.

What's different this time? The credit crunch.
Exhibit A: Sallie Mae's new version of private, unsubsidized student loans replaces the "signature loan" with the "Smart Option" loan. The interest on these loans must be repaid while students are still in school. This reduces the overall cost of the loan as well as shortening the repayment period (avoiding negative amortization that comes with putting off the interest payments until graduation).

But that means Sallie Mae is getting less money out of each borrower, in exchange for reducing the risk; and the in-school payments make more apparent the full cost of private loans, which are often blithely ignored by families today. If families and students can't come up with the monthly interest payments, they will be more likely to stick to government loans and grants, or make hard decisions about whether they can actually afford the tuition in the first place.

Possible Class Action Over Hidden Student Loan Fees

A Hofstra law school graduate has sued Education Finance Partners over fees he said were hidden, and a judge has ruled that the student lender can't force him into arbitration, paving the way for a class action suit. The highly annoying and according to the judge "unconscionable" charges had to do with the way payments were applied to the principal vs. the interest.

I have heard about this kind of thing before--this game playing is pretty common among lenders. I don't understand how the guy is going to get satisfaction from Education Finance Partners, however.
The company is now in bankruptcy & in 2007, they had to pay $2.5 million to settle charges brought by Attorney General Andrew Cuomo over its shady business practices.

20somethings Coping with the Recession

Emily Bazelon over at Slate is perfecting the feature-story-by-email-solicitation, a bit lazy, but hey we're all cutting corners these days.

A familiar refrain:
"the most strangling aspect, I think, is the perception of my Gen Y e-mailers that they dutifully set up their lives based on assumptions that suddenly no longer apply."

And even more familiar:
"If I were a touch more paranoid, I would think there has been a conspiracy to systematically entrap me and my fellow graduates into an endless cycle of debt. Student loans, buying necessities on credit because the student loan payments bludgeoned my bank account, racking up greater credit card debt than student loan debt, credit scores, having children, taking out another round of loans to pay for their education, wondering if retirement is possible when Social Security is a joke."

First Question Of Virtual Town Hall is About Education

Full Transcript here.

Smart Growth Manifesto

Read it.
I am going around delivering this message to students because I believe it's what they need to be thinking about.

20th century capitalism is eating itself. For the first time since World War II, global growth is forecast to turn negative -- and that's an optimistic forecast, relative to the possibility of a global lost decade.Today's leaders are plugging dikes, bailing out industries and banks as they fail. Yet, what negative global growth suggests is that the problem is of a different order: that we have reached the boundaries of a kind of growth.

Reigniting growth requires rethinking growth. The question Davos -- and most leaders -- are asking is: where will tomorrow's growth come from? Will it result from oil, cleantech, bailouts, China, or Obama? The answer is: none of the above. Tomorrow's growth won't come from a person, place, or technology - but from understanding why yesterday's growth has failed. The same growth models applied to new people, places, and technologies will simply result in the same crises, over and over again. We have to reboot growth: the problem is not what is growing versus what is not, but how we grow.

20th century growth was dumb. The central, defining lesson of the macropocalypse is that 20th century growth wasn't built to last. Dumb growth is unsustainable - if the world grows the same way that developed countries did, well, there won't be a world. Dumb growth is unfair: it's growth that's an illusion for many; just ask the American middle class. And, ultimately, perhaps most dangerously, dumb growth is brittle: it falls too easily into collapse, reversing many of yesterday's gains; just ask Iceland.

Recession and Generational Psyche

Interview with me from Grown Up Digital, the blog from the team that authored Wikinomics and Grown Up Digital.

For some deeper thinking on the effect of the recession on the Net Gen, I turn to Fast Company staff writer and author of Generation Debt, Anya Kamenetz. As Anya rightly noted in one of her Yahoo! Finance columns, “Economic dramas shape an entire generation’s beliefs about the nature of the economy and the risks involved.” That was a year ago and already she was postulating about how the Net Gen’s psyche might be shaped. Specifically, she noted that young people:

• Won’t expect to get rich quick.
• Will “get real” about consumption.
• Will buy on the cheap.

I spoke with Anya recently so I thought I’d ask her to elaborate on her thinking.

What effect do you think this recession will have on the psyche of people entering the workforce now?

“The climate in the last 10 years has been a very unrealistic one. We have been living in this huge bubble. For young people who are entering the 20’s now, this is really all they knew: Inflated expectations, ridiculous monthly consumer debt, and the idea that you don’t need to save for the future because you can just count on the equity in your house. But, when the bubble bursts, the paradigm shifts. For young people now, they are really looking around and seeing the world as being a very different place. For older people, it can be a lot more traumatic to have this happen, but for young people, they’re more ready to maybe accept that change.

And so, if you look at ‘The Greatest Generation’ that came of age during the depression and then entered World War II, they were able to achieve at incredibly high levels and get a great education. That legacy of the depression, obviously it was very hard for a lot of people, but it also led to realistic attitude about money, and a very practical down to earth determination to try to succeed, and some strong family-oriented values. I think that I’m starting to see the beginning of that among this generation. People are saying, ‘Well, you know, this idea of endless wealth and greed, it’s not something I really want to sign up for.’ Young people are forced to consider, at a very young age, what is really important to them and what they really want to have because they know they can’t have it all.”

So, really, this is good for us?

“From a purely economic point of view, I think it could be [good for us]. It’s a mixed bag, right? Because on the one hand, the drama that you enter into upon graduation, it actually can determine your salary for years to come. So if you start in a down market or you have to take a job that’s not exactly matching your skills, it could have a long term effect on your income. But on the flip side, if you get into a habit of saving very early, you have the magic of compound interest on your side, plus you develop lifelong healthy financial habits.”

So, in the end, a generation known for being spoiled, having unrealistic expectations about work, and graduating university with an inflated sense of entitlement might actually end up being the “sensible generation.” I would add to Anya’s analysis the notion this will be a generation that will trust corporations even less than previous generations and will be more adamant in demanding integrity from their corporate and government leaders.

And while I hope all of this is true, I also know that there is a layer of insulation between the Net Gen and the economy: their parents. The extent to which many Net Geners will feel the impact of the economy is also dependent upon how well their Boomer parents are able to weather the storm and continue to provide for adult children that may still be living in their basements. Given that many Boomers are being forced to delay retirement, I would say the insulation is getting thin. In fact, if pensions shrivel up and forced retirements put a strain on the family coffers, the Net Generation may even have their own basements occupied by Boomer parents that need caring for in old age. I’m sure there is an entire school of psychology devoted to that topic, so I won’t even get started.

Rick Steves Knows What's Up

He's that "off the beaten path" nerdy European travel guy that your parents probably watch on PBS, and he's apparently really smart.

"A headline today said, "Americans lose 18 percent of their wealth." Well, no, it wasn't real wealth, it was a bubble. You're down 18 percent? You're not. It shouldn't have been up there in the first place. So get over it. Shut up. Go to work, produce stuff that has value. I really think the days are gone, I hope, when people can rearrange the furniture and get rich on it. You got to produce something."

Check out DIYUBook.com For the Latest

Hello folks,
It's book launch season!
between now and the summer I'll be blogging at DIYUBook.com, Fastcompany.com, and the Huffington Post as well as Twittering at Anya1anya.

Please come check me out at one of those places!
Anya

GDP = Gross DEBT Production

“We have an economy where we steal the future, sell it in the present, and call it GDP" - Paul Hawken

Good News, Bad News: Proposed Changes to Student Loan System

NYTimes.

1) Raise the maximum Pell Grant. Make it an entitlement (indexed to inflation +1%) for the first time. This is great news.
Problem #1: Tuition has been rising at inflation + 4 or 5%. Problem #2: Most students don't get the maximum Pell Grant. Pell Grant amounts are determined by the vagaries of the FAFSA form and the discretion of colleges.

2) Eliminate subsidies to lenders in favor of the Direct Loan program for Stafford loans. Cheaper for taxpayers. Problem: Private lenders, frozen out of the student program, will instead aggressively market private loans, which are more expensive for students.

3) Raise total subsidized loan amounts available by increasing the Perkins loan program. Problem: interest on Perkins loans is due while you are in school.

Overall problem: Raising federal tuition subsidies tends to lead to tuition increases. There are no countervailing measures to get colleges to examine costs.

Lawmakers Take $ From Student Loan Companies, Oppose Reform

Bipartisan, but united in greed...



Obama wants to save money by cutting subsidies to banks and thus eliminate the FFEL in favor of Direct Loans, which are much cheaper for the taxpayer. It was tried under Pres. Clinton and failed because of political flimflammery.
These senators and congressmen, the recipients of thousands in lobbying money, oppose the idea.
Even though the entire function of a bank-provided student loan program has been rendered hollow and absurd by the current credit crunch and the collapse of securitization. Banks have been pulling out of the program by the dozens. On top of the normal 95% guarantee, the federal government has made available TALF funding to buy up student loans to the tune of up to $200 billion. If Obama's proposal succeeds, this bailout money can be used for its other purposes--credit cards and auto loans, for example.

via TitaniumDreads, via Future Majority;

Boomerang Kids Story in Phila. Inquirer

I can't get it to load, but apparently I'm in here somewhere.

Not Something to Brag About

(Parody of this)

Obama Gets Tough On Education; What About Higher Ed?

This commenter said it better than I can:

It’s interesting that Obama, a part-time university professor, takes on teachers’ unions, but ignores rampant inflation in university tuition.

Why does Obama demand accountability of grade-school teachers, but not of universities? Tuitions have gone up 400% in about the last decade. There is absolutely no justification for such egregious increases.

Obama’s plans to offer even bigger tuition subsidies, without requiring reform of university finances, will simply feed more inflation that undoes the benefits of scholarships and loans.

Universities are run with the same condescension and air of entitlement that plagues Wall St., and taxpayers are footing the bill in both cases.