Susan C. Keating began her career as a trainee at First Bank System in Milwaukee. She worked her way up through the banking industry, eventually becoming CEO of a U.S. bank holding company. For the past 11 years, she has been CEO of the National Foundation for Credit Counseling, the nation’s largest nonprofit credit counseling agency. She was in Buffalo recently to meet with Consumer Credit Counseling Services of Buffalo.
Q: People really woke up after the financial crisis in 2008. Did it change their behavior permanently or are they starting to loosen up again?
A: My general assessment is that people are much more thoughtful and responsible than they were before the crisis occurred. However, what we’re now starting to see is that as the economy grows and unemployment goes down, people are starting to pick up and increase the amount of debt they’re taking on again.
We feel the opportunity through our agencies is to make sure that all the fundamentals are there, that people are working with some workable budgets, that they are careful about tracking what their spending levels are and just making sure that it doesn’t get away from them again.
Q: There are stereotypes about the kind of people who live in poverty or who are in debt. What have you seen that dispels some of that?
A: I have to tell you, we feel so strongly that we see a new face of poverty in this country. It’s our seniors, who have no funds set aside for a manageable retirement. It’s our kids who are carrying extraordinary levels of student debt. I mean they’re just strapped with this heavy burden of debt that can go on and on and on. It’s our military service members. And then we’ve done quite a bit of work around what we call breadwinner moms.
So these new segments that are our neighbors, our friends, our families, those are who we see today as the most vulnerable.
Q: Student loan debt is at crisis levels. How did we get here?
A: Some would say it’s that people taking on the debt didn’t have the information or the tools or the education to understand what they were signing up for. Others would say it’s really the universities that created the issues. The cost of getting an education has gone up just incredibly, it’s been exponential. You might say that it’s the policy makers that have not put the appropriate checks and balances in place.
Q: It’s a huge issue.
A: I think going into the elections in Washington we’re going to see this topic emerge more and more as something of serious concern. At $1.3 trillion, student loan debt has surpassed credit card debt. It’s now the second-largest consumer-related debt behind mortgages.
It’s going to have spillover in so many areas. Student borrowers are having trouble staying in their homes, buying cars or just basically purchasing the goods and services you’d think they’d be able to afford as graduates of universities.
It’s multigenerational, so it’s not just about the millennials’ capacity to have more discretionary income. It’s parents that can’t retire because they’re co-signing and helping their children to pay off debt as well.
Q: What will it take to set things right?
A: Some of it is getting people to the table. Whether it’s the government, the private sector companies, whether it’s the servicers – all of us have to consider that this is serious.
With some policy changes, education, some collaboration at the university level and so forth, I think there are ways to get at this but it’s complicated. It’s seriously complicated.
Most of these borrowers have multiple loans with different terms. It’s very confusing. Just having the kind of support from counselors and people that are advocating for them instead of trying to get them into other loans and so forth is very important.
Q: Do you think students need to re-evaluate whether they really need to go to college?
A: I think culturally, there is this strong American ideal that the way to economic prosperity and so forth is through getting a college degree. And what we’re finding is that there are people who perhaps aren’t suited to go on to a four-year college or on to graduate school.
So I think it’s kind of a repositioning here where it’s important to consider whether it’s realistic to think, given the debt that’s going to be taken on to receive that education, if it’s conceivable that the debt can be paid over a period of time.
There are also some abuses and predatory practices out there.
Q: Like what?
A: Well, there are organizations and entities out there that say they can either refinance some of the loans, or provide some support in restructuring them, but the student borrowers end up in even worse shape in terms of their ability to pay back those loans. Or they end up with incredible additional fees being tacked on and so forth.
That’s one of the roles that the regulators in Washington have really taken on. They’ve taken some pretty strong positions with companies and organizations to address it.