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Hedge fund godfather pays off family’s student loan debts

Warren Buffett of Berkshire Hathaway, a huge Creighton Bluejays fan, at CenturyLink Center, Omaha, Nebraska.
Warren Buffett of Berkshire Hathaway, a huge Creighton Bluejays fan, at CenturyLink Center, Omaha, Nebraska.
Photo by Eric Francis/Getty Images

Do you wish a fairy godmother would whisk away all your financial worries with one sweep of her wand? Something like that happened recently for one Ohio family.
Irritated with Warren Buffett’s March Madness offer to give $1 billion to the person who fills out the perfect NCAA men’s basketball tournament bracket, Rhonda Hess, a retired kindergarten teacher wrote in to the Business Insider asking a good question:
“Why couldn’t Mr. Buffett’s organization instead of giving a billion dollars to one lucky person for something as frivolous as a basketball bracket (and I had three sons that play the game and love it),… help LOTS of families that struggle to always do the right thing and never seem to get a break on the hardwood court of life?” she asked.
To her surprise the answer came in the form of an anonymous offer from a partner at a hedge fund who paid off the student debt for two of her sons.
It seems her description of the family’s plight – like that of so many families – triggered a compassionate action for the anonymous donor.
Rhonda Hess said that life was good and she was happy that most months she could pay her bills, but she worried what the future would bring.
“The college loans drag on us like a ton of bricks. With them, we have no flexibility. Now we worry about things like how we are we ever going to replace the roof or the furnace when they quit. Any type of health issue would be devastating. Our finances depend totally on our prayer life and we are very thankful,” she wrote.
This is more than a story of the altruistic hedge fund executive. This incident illustrates an national economic crisis that is ruining quality of life for the middle class. The Hess family is only one of nearly 37 million student loan borrowers families who are currently repaying total U.S. student loan debt that has surpassed $1 trillion.
This massive burden is limiting life options and stunting the buying power of Americans across the age spectrum. More than 60 percent of that loan debt is held by people in their 30s and 15 percent is held by people over age 50. Like Rhonda Hess.
“Student loan debt is a clear and present danger to the American economy.” said Scott Ross, executive director of One Wisconsin Institute, which published a study on the impact of student loan debt.
As college costs skyrocket, high school graduates see college as the only way to get a job in the uncertainty of the post-bailout economy. College tuition costs have skyrocketed in the last 30 years from $8,756 in 1980 to $31,975 in 2010. More than 80 percent of all high school graduates now go on to college hoping to find the magic route to a good job.
The research shows it takes 20 years of payments of $499 a month to pay off the average undergraduate student loan (which hovers around $30,000). Students going on to graduate studies or medical school can rack up bills in the low six figures and can be saddled with payments of $650 or more for at least 23 years.
All that household income pouring into loan payments causes 20-somethings to put off major life milestones such getting married and making major life purchase such as cars and houses.
Student loan debtors were two-thirds more likely to own a used car rather than a new car and rent rather than own a home, Ross said.
What’s more, there is no statute of limitations on student loan debt. It is the only debt that follows you into bankruptcy and it ends up hanging over future generations.
“This is the statistic that ought to scare American’s: 120,000 people over the age of 60 had their social security payment garnished because of student loan debt,” Ross said.
“There are going to be severe long-term effects on our economy if we don’t do something about this,” he said.
So note to Warren Buffett any other conscience-stricken hedge fund partners out there: It’s going to take more than just helping Rhonda Hess to fix this.

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