Podcast Episode - The Future of the Unknown


College, Credit Cards, FICO, Home Buying, Student Loans


May 24, 2020

Listen to Podcast Episode:

In this Podcast, Suze addresses the unknown that awaits all of us in regard to universities. About how what happens with universities affects more than just the students going to school or not.


Podcast Transcript:

May 24, 2020 and welcome to the Women and Money podcast, as well as the men smart enough to listen. Well, May 23 of 2020 was a really, really big day in our household, and the reason is this. Yesterday, KT and I, as well as KT's twin sister, Lynn, and her husband, Tom, my brother in law, KT's brother John, KT's sister Barbara, her husband, Don, their daughter, Sophia, as well as many others gathered around their computer screens, their TVs that their computers were hooked up to, and we all gathered around to watch my nephew, Travis Wendel Rase, graduate online from Bowdoin College, and that was a big deal. And it was a big deal because our family is a very unusual family and where they really love and support one another. We're there for one another. I mean I can remember going from New York to California to watch Sophia graduate from kindergarten. So we've been there the whole time to see these kids grow up, especially Travis and Sophia. And KT cried the whole time, she just cried the whole time. It was so very sweet. Anyway, that got me thinking a lot about colleges, how thousands and thousands, and thousands of kids throughout the United States this week are graduating, and they're graduating at a time when the economy is really crazy. When we have a very high unemployment rate, when you know this virus is still going around, and here they are now entering the world of the unknown. And normally, when a kid graduates from college, they enter the world of the unknown anyway. But now, we're entering the unknown of the unknown. What's good about them, however, is that they're all pretty strong, they're all pretty resilient. The kid who graduates today is very different than when I graduated in my time. And that I don't think that we were as strong back then, or as worldly, or really as wise. We might have been as smart book smart, but I don't think we were as worldly smart as these kids, the majority of them anyway, most likely are. So the good thing is, they're most likely really going to be able to deal with this. However, they're also graduating with a lot of student loan debt, and that's not necessarily a really good thing. So they're just going to have to figure out how do they deal with that student loan debt? However, I then started to think about my niece Sophia, and I started to think about her because she goes to the University of Michigan. She's going to go back there in a few months, and I was thinking about how I don't want you to go back, Sophia, I don't want anything to happen to you. I want you to be safe and sound, and I don't want you to be rooming with all these girls and who knows what happens? But that's not my call to make. So she's going to go back and she's going to rent a house with four or five of her friends. And who knows, is she going to be studying online, is she not? But I imagine the result of that will also be good. However, I think it's really important to take a look at this entire college situation right now, and the reason that I want to do this is that what happens with universities and colleges really can affect your finances far more than you have any idea. Yeah, I know it's already affected your finances in that you probably have Parent Plus Loans and your financing this and you're doing that, and that's how it's affected your finances. No, it can also affect all of your finances if you happen to live in a town where there's a major university or a city or whatever it may be. Especially one that has a very large football community where football is, or sports, but mainly football, is the really financial rock stone of your town. So let me just talk to you about my thoughts now about colleges, what you need to know, and the effect of not being able to have mass gatherings at sporting arenas and what that may do to your real estate and other things around you. So just stick with me here for a second, OK? So, there's a lot of good things about having just graduated, and colleges, and things like that. Let's talk now about the bad things that are going on, in my opinion, with colleges that affect those of you who have kids that are wanting to go back to their universities right now. Listen up. Now, it is true that there isn't one school out there, and I just think this is bad everybody, there isn't one school out there that returned any of your tuition dollars. They kept them all, even though the kids had to go home, had to go online. Nobody liked the online courses, they were far inferior to sitting in a classroom with a professor having that interaction and everything. But yet, you or your kid paid the exact same amount of money to study at home online as they did when they were there. Now what is that about? That is just bad, that is wrong. You know, you can go online anywhere right now, and you can look and take a course online at some of these universities, and they're half the price or even a quarter of the price. And then they're saying, but you still have to pay full price to have this course online. That makes no sense to me what so ever. All right, but they're not budging from that, they're not coming off of that stance, and I don't know what I think about that, but I do know that there are many schools that have been sued because of that. So you might just want to check in to see is your school that your kids are going to, or that you're going to, have they been sued for the fact that they're charging just as much to take an online course if your kid is registered than if they were going to the school themselves? Got that? Just check that because you might find out that you are owed some money if somebody wins that lawsuit. Next is that many of these schools did refund to many of you your room and board. Now, that's pretty good, that's pretty good. But what's pretty bad about that is you better know if that refund came from money that you originally paid for from a 529 plan, you better get that money back into your 529 plan. I think you have 60 days to do so from when you got it or I think it's July 15, whichever one comes later. You better get that money back into a 529 plan or you're going to be stuck paying taxes and a penalty on it. So again, if you paid for room and board from money from your 529 plan for your kid and now the school refunded you that money, it's got to go back into the 529 plan or you're going to owe taxes and penalties on it. And again, you only have until July 15 or 60 days, whichever one is later to do that. So, that's something you all need to think about. Let me go back to Sophia for a second, which is, I wanted Sophia to defer a year. I wanted her to just take one year off to do whatever it is that she wanted to do and then go back. Sophia then, and others, informed me that if they differ a year depending on the university, they may have to re-apply to go back to that university. It's not just like you get to tell a university, I'm not going to go next year, and they say, OK, see in a year from now. Many universities set a date, and that date may have already passed for many of you, that if you want to take a deferral year, you better check with your universities because they may say that date has passed. Or, if you do take a deferral, fine, but then you're going to have to reapply one year from now. So they're really getting you coming and going. You would think that they would say, oh, I get it, I get you don't want to send your kid here. I get that you're all afraid something's going to happen to them. But no, that's not what they're doing. They're giving you a hard line saying, no, you can't defer, you passed your date, you're going to have to reapply. Now, why are they doing that? Why are these universities cracking down and not being generous of financial spirit? Because many of you had to borrow money, you know, had a go into retirement accounts, had to take out home equity lines of credit in order to send your kids to these schools, and you have suffered because of it. And now here you are, and maybe you don't have a job, maybe you can't pay the loan repayment back, maybe you're in financial trouble. But yet the universities are not budging, they are not being as gracious as the utility companies and the credit card companies, and the banks, and the mortgage companies, and your cable bills. No, they're saying this is how it is, take it or leave it, in my opinion, at least from the reports that I have been getting. Hey, if one of you out there has better news than that for me, let me know. And you would let me know, by the way, by downloading my app, you can do the Women and Money app by either going to Google Play or Apple Apps and search for Suze Orman. And that's how we communicate now. However, I can't find anybody with a positive story. So, I started to think to myself, why are universities, colleges, why are they also afraid? Well, it doesn't take a rocket scientist truthfully to figure out they are going to be hurting, seriously, financially, no matter how you look at this. Many of the larger universities or universities that have huge football teams and arenas and they get a lot of income from that. If they can't hold games, the hundreds of thousands of people that come into that city that want to be with their kids, and they go to the games with their kids, and they go out to eat, and they rent hotel rooms, and they rent cars, and they do all of these things, they're not going to be coming there anymore. And if they're not going to be coming there because games aren't going to be happening, do you have any idea of the financial impact that not only that has on the university, but it has on all the stores, the drug stores, the restaurants, everything, everything around that university? Maybe some of you even bought Airbnb properties to rent out because they're always under demand and now nobody's going to be renting them, and then that affects you. That is a big deal. Next, many of these universities have financial support from the state that the university is in. Well, guess what? The states are tapped out right now. They're not really getting federal support, many of them. Many of them have taken all of their money to buy ventilators and they just spent everything, they spent themselves bone dry. So they don't really have the money right now to help out the universities even on a state level. So, that's going to be a big deal. And that again is going to affect the university, financially speaking. So now you're having to make decisions that you're going to continue to send your kid to a $50k a year school, the $20k a year school, I don't care how much it is. And will that university have the funds to keep all the professors and everybody still on staff if they're not tenured? What will they be doing? Will they be laying off some of the professors and everybody that they can lay off to hire what? To hire more maybe cleaning people or maintenance people to make sure everything stays clean, but everything is about to change. So I think it's really, really important that we look at all this. You also need to look at financial aid. Many of you before this happened, these past few months happened, you did not qualify for financial aid. You may now want to go back to the university if you've lost your job, you don't have income. Guess what, everybody? You might qualify now for financial aid. So now maybe you go back and you can get it. However, maybe they'll say yes to you. But because of the lack of participation now with the states, I'm not sure they'll be able to, but it is worth a try that you should all do that. So are you getting the idea of how everything now is affecting everything else? And I was reading the other night how Hertz, Hertz Corporation is claiming bankruptcy. They've claimed it, actually, because nobody's renting cars. And where do a lot of people rent cars? When they go and visit their kids at a university, normally they don't drive there, they'll fly there, and when they get out, they rent a car and they go all around. And everything is being affected right now. So, you have major car companies that are claiming bankruptcy. At the same time, you have Twitter announcing that they're going to be able to have all their people, and from now on, the majority of their people working from home. Not just to the end of the year, like Google and Facebook did, but from now on, the majority of their employees are going to be permanently working from home. That has a big effect on Uber and everybody else. And are you all seeing, again, how this is all affecting how everything works? But yet everybody is so happy because you get to go to the beach this weekend. You get to have a good time, you get to go out to eat, and you think it's back to normal. It is not. Nothing about this is normal. You know, we're approaching the 40 million mark of people that are on unemployment. Really, about eight million of those people have found jobs, and so that really brings us down to about 30 million people that are on unemployment. Still an incredible amount of people. And the predictions are that 40% of those jobs are not going to come back. So it's going to be up to you to really figure out what are you going to do? How are you going to do it? Where are you going to live and what should you be thinking about? Now, I know I've been telling a lot of you about real estate and how I would just wait. So, I want to just give you a little clarification on what I'm thinking now about real estate. There will absolutely be areas that real estate will be fine and other areas that it will not be so good. I think that you are going to see a mass exodus, not a quick one, but people who will be leaving the city to go not quite to the suburb, but next to it. So they're calling it the "nextburb," something like that. And that's where people will want to be living. And they'll want to be living there because they no longer have to come to the city five days a week, to work at Twitter or one of those places. Probably what you're going to see happen is that there will be buildings but a small unit where employees go once a week so they get that communication with other employees, face to face somehow. But most of the work will be at home. So what that means is that if you're looking for a place in the city like a New York or a coastal city, there is where I think you're going to be seeing real estate not doing what you want real estate to do. However, in these nextburbs right next to the suburbs, not that far out from the city, smaller units, smaller homes, efficient homes, those are the properties that are probably going to continue to do very well. Now, will foreclosures happen? Absolutely. Why aren't they happening right now? They're not happening right now because of how many forbearances have been given on the mortgages so that people don't have to be paying their mortgage right now. And nobody needs to give up their home right now. When those mortgage payments have to be paid, that's when we will see what happens. But if you're looking for a piece of real estate, you're leaving the cities and you're going a little bit further out and you're downsizing and all, OK. If you want to do it, if you have the money to do it, I still think maybe you should wait a little bit, but I don't have a problem with that. Did that make sense to all of you? I do think you need to be careful just talking about cars again. I gave you the example that Hertz filed for bankruptcy. There are going to be so many cars now, they have a lot of used cars that people aren't using. So if you need a car, that's maybe where you should look. I'm very serious. So, do not rush to buy a new car right now when the markets are going to be flooded with used cars that really they keep in pretty good condition. And where does this future of the unknown take us? I think you're going to see for colleges, for work, for everything like that in the future, I think you're going to see commercial real estate really take a hit. A big-time hit. You're going to see multi-family homes not increase in value as much as single residences, small, outside of cities. You're going to see cities become really places that the extremely wealthy people live because it's just too expensive. And that people now who have to watch their money, they will be, in my opinion, leaving cities. I do think the colleges of the future are going to be very, very interesting. I think you're going to see technology companies combine their expertise with many of these universities and come up with incredible online life-like courses. We may even see an augmented reality where you put out a, you know, little headset, and you're like with the professors and your friends and everybody. But, I think the future of higher education is changing, and I want to say to you out of everything, I think that is really good. Because I think it has been really bad the amount of money that has been spent on a college education, and we have exed-out of our higher institutions, many of these fabulous students that just can't afford it. And if they do go there, they have student loan debt that they're paying for the rest of their lives. So, if we can alter what's going on with higher education and develop courses that give the kids their social interaction, somehow give them an experience of true learning within a classroom without even being in a classroom or whatever it is, and technology is going to be able to do that. Then maybe, we can have a United States of America where nobody gets into student loan debt just simply to do what? To get the education that they deserve. I am now working with a company that will be applying to see how many credits this course that I created to be taught at universities on personal finance. The most complete, comprehensive course you could ever want your kids to take. You'll probably want to take it, but it's for universities right now. How many credits it will be worth and then how can I enhance this material with me being able to teach it online? What can I do to make this course relevant so that when kids leave the university, they have a complete financial education? Because really, everybody, what good is it doing that you're educating these kids in liberal arts and sciences and then all these things and they leave and they don't even know what a FICO score is? What is that about? So even I'm working with this magnificent company to create something that's never been created before so that your kids can take a personal finance course from me. I love that, and I hope you will, too. But this is the future. I mean, I don't know, maybe we should take the buildings that Twitter is in, and we could, they're not going to obviously be needing as much because they just told everybody they can stay at home. And wouldn't that be incredible if Twitter or somebody could develop a university in there where the kids come? It's very inexpensive and they have online learning centers all over inside, but the kids still get to communicate. I don't know, that might be a good use of commercial real estate. That's what I wanted to talk to you about today. There's so much I have inside of myself that I want to make sure that you know about so that you can get more out of less money. And I just don't think that that information is out there for the masses. So I started this entire podcast by saying, what a great day this was, and this is a great day and this is a great week. And it's a great week because the future is maturing and I can only wish and pray and hope that the students that are graduating this year, and next year, and the year after that, and the students that have recently graduated can really look at this world and use their talents and use their knowledge and to not let the happenings of today keep them down. But where they can rise above, they can rise up and create a new way for people to learn, a new way to not have to go into debt just to get an education. A new way to communicate, a new way to socialize, a new way to be financially independent, to be strong, to be smart, and to be secure. Happy graduation and especially to my Travis. In providing answers neither Suze Orman Media nor Suze Orman is acting as a Certified Financial Planner, advisor, a Certified Financial Analyst, an economist, CPA, accountant, or lawyer. Neither Suze Orman Media nor Suze Orman makes any recommendations as to any specific securities or investments. All content is for informational and general purposes only and does not constitute financial, accounting or legal advice. You should consult your own tax, legal and financial advisors regarding your particular situation. Neither Suze Orman Media nor Suze Orman accepts any responsibility for any loss, which may arise from accessing or reliance on the information in this podcast and to the fullest extent permitted by law, we exclude all liability for loss or damages, direct or indirect, arising from use of the information.

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