This Is What Happens When You Become Debt-Free at a Heart-Wrenching Cost

When it comes to getting a large financial windfall from a relative, you hope it’s from a long-lost uncle you’ve never heard of. Unfortunately, it rarely happens that way.

Most of the time, the payout comes with a painful loss and a range of feelings — even if you decide to use it for something your loved one would be proud of, like paying off student loans.

Rachel Smith and her husband, Travis, spent 14 months cutting back and working extra to pay off their student loans. When Rachel’s dad died unexpectedly, her mom gifted them part of the life insurance payout so they could become debt-free.

“I just remember feeling so confused, excited, happy, angry,” Smith said. “I mean, it was a full spectrum of emotions.”

The payout lifted the burden of their debt, but it also marked the start of a journey with no clear action plan or timeline for completion.

How They Started Paying Off Their $ 185K Debt

Rachel and Travis met as engineering students in Michigan. Rachel was an out-of-state student from Anchorage, Alaska, and took out $ 25,000 in student loans. Travis was an in-state student and thought he had about $ 60,000 of debt at graduation in 2015; he didn’t pay much attention to the exact balance.

Weeks after getting married in June 2015, they calculated their total debt and found Travis’ estimation had been off by over $ 100,000.

Their actual student loan debt was $ 185,000.

“I’m like, ‘$ 50,000 to $ 60,000, that’s a lot, but we’ll deal with it. We’re both engineers,’” Rachel said. “And then when it was that much more, it just shattered our world.”

To top it off, they were expecting their first child in a few months.  

They committed to paying off their student loans as quickly as possible. They waited until their daughter, Riley, was born and started putting all their extra income toward their loans in January 2016.

Thanks to a gift from her mom from her grandmother’s estate, Rachel knew she would be able to pay off $ 20,000 shortly after her graduation later in 2016.

The Smiths didn’t ease into a frugal lifestyle. They stopped going out, began budgeting, planned meals around sales and even made their own baby food.

They lived with family for a few months while they looked for a cheap rental. It allowed them to wait for something at the right price.

“It was a very dated rental,” Rachel said. “You would look at that place and go, ‘There’s two engineers living there?’”

They were putting thousands of dollars every month toward their loans, and they were ready to continue it for years to come.

After only 10 months of focusing on their debt, they’d paid off over $ 56,000, not including the gift from Rachel’s grandmother.

The Windfall She Never Wanted

Rachel Smith is pictured with her husband Travis and her daughter Riley and son Marshall.

Rachel’s dad had no known health issues, so when he was hospitalized in November 2016, no one expected he’d be gone just a few days later.

Rachel and Travis used their $ 3,000 emergency fund to purchase last-minute tickets to Anchorage and cover meals while they were there. When they returned to Michigan, they went right back to their frugal lifestyle.

A few months later in May 2017, Rachel’s mom called and said she wanted to pay off the rest of their loans.

Rachel knew her dad had life insurance. She thought she might get something someday when her mom died, but she never expected anything so soon or of that magnitude.

“I’d literally put in an additional payment that day for a few hundred dollars,” Rachel said. “I mean, we’re talking hours before.”

Rachel made sure her mom was positive about her decision. Then, she made a lump-sum final payment of $ 109,000 the next day.

But it seemed almost like blood money to Rachel.

“I felt like, ‘This is so wrong,’” she said. “Like my dad has died, and now my loans are getting paid off.”

Using Money to Honor a Legacy

Rachel felt guilt for a long time. She would’ve gladly spent years paying back the loans to have her father back.

Travis struggled too, but in a different way. The majority of their student loans were his, and this man he barely knew paid them off.

With their student loans gone, Rachel felt like the real debt began: the debt of obligation she felt to use her money even more responsibly.

They tried to do things with their money that would honor Rachel’s dad, including buying a house in a neighborhood where their kids could go to a good school. But grief and guilt intertwined with the joy that their investments brought.

One of the ways Rachel processed her guilt was through her blog.

Before her dad died, she had started a blog to chronicle her debt-payoff journey. She thought it would take several years. When her windfall came, she felt like she was a failure, like she couldn’t finish the race she’d started running.

While it took time for her to reconcile her real situation with her planned one, her blog gave her a place to grieve and process her loss through writing. It eventually gave her the foundation to leave what she says was a toxic work environment. She now works from home as a freelance writer.

It’s another thing she can thank her dad for.

The biggest factor in resolving their guilt was time. Now, Rachel and Travis view their financial decisions not with guilt or obligation, but as a part of her father’s legacy.

“It’s pretty much taken until this year to be like, ‘This is OK,’” Rachel said. “This happened. It’s OK to make sure you’re making the most of it and do things that do honor him.”

Jen Smith is a staff writer at The Penny Hoarder. She gives money-saving and debt-payoff tips on Instagram at @savingwithspunk.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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Ad Check: What Happens If California Limits Dialysis Center Profits?

California voters are being bombarded with ads in what is the most expensive ballot measure campaign this year. They are being asked to decide Tuesday whether the state should limit the profit of kidney dialysis centers to 15 percent over the cost of patient care, with revenue above that rebated primarily to insurers.

What exactly would happen if voters approve Proposition 8 is still vague, and the $ 127 million raised to persuade voters hasn’t made it any clearer.

Both sides are making bold statements. But even the Legislative Analyst’s Office, nonpartisan officials who advise the state Legislature, said Prop 8 could result in a “net positive impact in the low tens of millions of dollars to net negative impact in the tens of millions of dollars.” In other words: No one knows.

Here’s what both sides had to say and what they base it on.

Against Proposition 8

The dialysis companies, mostly DaVita and Fresenius Medical Care, have contributed more than $ 110 million to fight Prop 8, more than six times what the “Yes on 8” campaign has raised. Their ads feature concerned health care professionals and dialysis patients warning voters of the terrible effects Prop 8 would have on dialysis patients and taxpayers in California.

This ad is just one in a series in heavy rotation on TV stations across the state. Like most of the “No on 8” advertisements, it prominently cites the Berkeley Research Group when claiming Prop 8 “would force many dialysis clinics to shut down, and threaten the care that patients need to survive.”

The narrator of the ad goes on to say “studies show Prop 8 will increase health care costs by hundreds of millions of dollars,” again citing the Berkeley Research Group.

The Berkeley Research Group is a large international consulting firm hired by the “No on 8” committee to analyze the proposition’s economic impact. It was paid more than $ 200,000 by the committee, according to campaign finance reports filed with the California secretary of state.

The consulting firm — which is not affiliated with the University of California — based its analysis on financial data from dialysis clinics around the state, including self-reported totals for direct patient care, quality improvements and “non-allowable” costs. Non-allowable costs, which might include some management staff positions and corporate overhead costs, will be ironed out through a public rule-making process if Prop 8 is passed.

The researchers used their own interpretation of non-allowable costs, took that to calculate how many clinics would surpass the 15 percent margin, and then applied the reimbursements that Prop 8 would require to conclude that “most clinics will migrate to having negative operating margins.” The analysis estimated that Prop 8 would increase health care costs for taxpayers by between $ 12 million and $ 2.6 billion annually.

Whether that happens depends on how clinics could adjust their operations to decrease their expenses that are not considered allowable patient care costs.

There is nothing unusual about relying on consultants to supply ammunition for a political campaign. “The effort to marshal research to support an advocacy campaign is not at all uncommon,” said Edward Walker, a sociology professor at UCLA specializing in political lobbying by businesses. He also pointed out that the advocacy campaigns often try to distance themselves from the research they pay for.

The Berkeley Research Group report leaves no room for uncertainty. “It is certain that Prop 8 will result in the closure of numerous clinics and the withdrawal of dialysis services from hundreds of thousands of patients,” the report said.

For Proposition 8

The Yes committee is funded almost exclusively by the Service Employees International Union-United Healthcare Workers West. The union has long fought to organize workers at dialysis clinics. Rather than focus on Prop 8’s possible effects, the “Yes” ads criticize the dialysis industry in general. The labor union has contributed more than $ 17 million to the “Yes on 8” committee, the largest amount SEIU has ever shelled out.

This ad starts out dramatically: “$ 150,000 a year,” the narrator intones. “That’s how much big dialysis corporations charge some patients, a 350 percent markup over the cost of care.” The ad doesn’t cite a source, but the figure roughly matches what industry financial analysts say private health insurance pays for dialysis.

Dialysis companies argue that the low reimbursement rate from Medicare — which covers about 90 percent of patients — is the reason they are forced to charge more for the 10 percent who are covered by private insurance. Those private insurance payments allow them to remain profitable. SEIU argues that high rates for private insurance contributes to higher overall health care costs and points out that the dialysis companies have a higher profit margin than hospitals in the state.

DaVita, a for-profit company that runs half of all dialysis clinics in California and is the biggest contributor to the “No on 8” campaign, reported profits of $ 1.8 billion on revenue of $ 10.9 billion last year, almost all of which came from its dialysis business.

The “Yes on 8” ad also cites an investigation by ProPublica, a nonprofit news organization, which found that the U.S. has one of the highest fatality rates for dialysis in the industrialized world. The narrator says, “Dialysis corporations make a killing, driving up insurance rates while patients report blood stains and cockroaches in their clinics,” while a quote from the ProPublica article is flashed on the screen. It says: “dangerous conditions, inadequate care, higher-than-expected mortality rates.”

While the ProPublica report did find troubling conditions in dialysis clinics around the country, the allegation of cockroaches was from a different report. ProPublica’s investigation examined records from more than 1,500 clinics in a number of states, including California, and it noted filthy or unsafe conditions in almost half of the units. But it doesn’t say the problem is any better or worse in California.

The “Yes on 8” committee’s communications approach is part of an ongoing campaign to challenge the power and profits of large dialysis companies, and organize their workers.

“This is in part a proxy battle between the labor unions and the dialysis centers,” Walker said. “It’s a way to increase the pressure and the leverage.”


This story was produced by Kaiser Health News, which publishes California Healthline, a service of the California Health Care Foundation.

Kaiser Health News

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‘Making a Murderer: Part 2’ Creators Tell All: ‘What Happens When Injustice Is Exposed?’

Photo Illustration by The Daily Beast

Upon its premiere in late 2015, Netflix’s Making a Murderer became an instant phenomenon (and sparked a true-crime documentary renaissance) by bringing to national attention the plight of Manitowoc County, Wisconsin, residents Steven Avery and Brendan Dassey, who in 2005—shortly after Avery was released from prison after serving 18 years for a rape he didn’t commit—were charged with the murder of Teresa Halbach.

Filmed over the course of 10 years, during which time Avery and Dassey were convicted and sentenced to life in prison, Laura Ricciardi and Moira Demos’ series was an exhaustive examination of injustice, laying bare the devious motivations and tactics (including planting evidence and eliciting a false Dassey confession) used by state and law enforcement officials to put the men behind bars. Depressing and enraging in equal measure, it was an expert non-fiction exposé, as compulsively addictive as anything released during our modern binge-watching era.

Fans of Making a Murderer are thus thrilled by its return for an all-new 10-episode run—except, of course, that like its predecessor, the series continues to paint a portrait of the legal system that’s destined to infuriate. Charting Avery and Dassey’s attempts to exonerate themselves with the aid of new lawyers (famed attorney Kathleen Zellner for Avery; Center on Wrongful Convictions of Youth co-founders Laura Nirider and Steve Drizin for Dassey), Ricciardi and Demos’ follow-up affords a detailed look at the myriad obstacles of the post-conviction process, the amazing possibilities afforded by forensic science, and the dogged obstinacy of the state of Wisconsin, which continues to uphold Avery and Dassey’s convictions even in the face of contradictory evidence. Multifaceted, eye-opening and heartbreaking, it’s yet another must-see effort from the directors.

Read more at The Daily Beast.

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