Sam Bourgi: The Promises and Perils of AI in Financial Decision-Making

SPEAKER 02 : 0:00

Well, hi, it’s Mike Treen with Crawford Media Group. Today, we’re joined by Sam Bourgi. Sam is a finance researcher and analyst. And Sam, we wanted to talk to you about this paper you’ve written, some information you are helping people with about AI, student debt, and just what the pitfalls are with that whole situation. So thanks for joining us.

SPEAKER 01 : 0:25

My pleasure.

SPEAKER 02 : 0:26

So Sam, tell us about… people are starting to use AI to try to figure out ways to deal with student debt, other areas of their finances. What should we know about that? And what are some of the pitfalls that you’ve been talking to people about?

SPEAKER 01 : 0:43

Yeah, so obviously, since around late 2022, with the growth of ChatGPT, everybody has been really surprised, pleasantly surprised by all the advances that AI has made. And definitely, these large language models have made a lot of progress in terms of their ability to synthesize information and answer our questions. It’s basically like a Google search on steroids, basically. So what we found, we tried to kind of look at how these different chatbots are actually giving information. So we tested several of them. We tested ChatGPT, Perpexity AI, as well as Brock, which is the Elon Musk’s x.com AI search engine. And we found that these different programs, they do a pretty good job of giving you high-level information about student loans about the repayment plans about interest rates but they don’t really do a good job at really giving you uh an in-depth understanding of what the risks are and what options that you have and what kind of payment plans might work for you so we’re finding that people i mean these are good programs to use if you’re looking at a high level understanding of what you know student loan programs there are how you can use them but the more specific the information that you require, the less accurate they are. Unfortunately, if anybody who’s using these as a substitute for a registered financial advisor, they’re probably going to be disappointed because they provide very generalized information and they don’t give you specific information that you’re going to need to make an informed financial decision. Again, you know, very good for high-level research, but not as good for in-depth understanding of your personal circumstances and whether certain programs are good for you.

SPEAKER 02 : 2:31

You know, Sam, we have a daughter that just graduated from college, so we’ve kind of freshly been through this whole issue. And some of the numbers that you noted AI talking about, again – useful things may be to some extent with that information that we saw numbers up to 70, $80,000 a year for student, for a student to go to a university, these, uh, these models and talking about things like, um, uh, being able to graduate, go graduate debt free for, at least for some kids, including ours, that just was not realistic.

SPEAKER 01 : 3:13

Exactly. So tell us, that’s what you’re seeing with, Yeah.

SPEAKER 02 : 3:16

With that. Okay. And so what’s the answer and what are some of the things we should be looking for to get help that will really work for each of us individually instead of going to Glock and putting that in and finding it out later? That’s not going to work.

SPEAKER 01 : 3:35

Yeah. I think ultimately people who are searching for student loans or who want to look at different programs, You really have to look at things like personal impact and affordability. Can you really afford these loans and what the repayment programs are going to be like? We also want to have a better understanding of what alternative loan programs there are, which, again, these different chatbots do not provide really good information on. I mean, for example, there’s minimal and sometimes shallow understanding or warnings of private loans and how they can potentially impact you down the line. You also want to look at things like repayment programs and whether or not Going down a certain path, taking out a certain loan is going to lead to financial hardship in the future. I think a lot of times it’s going to require actually going to a financial advisor or looking at what exactly your college needs are going to be. How much are you actually going to take out when you compare tuition to living expenses? and then that way you can make a more informed decision. So what you’re seeing with these chatbots is they’re going to spit out very kind of generic, overly generic information that probably isn’t going to get down to nitty-gritty of how that’s going to apply to you specifically. So, yeah, that’s why you have to take a look at things like, you know, affordability, alternative loan programs, and what the repayment is going to look like down the line.

SPEAKER 02 : 4:58

We’re speaking with Sam Bourgi. Sam is a finance analyst with Investors Observer. And we’re talking about student debt, different options, using AI to talk through student debt options. And Sam, what would you say to even parents and students where the student’s done, they have this student debt, they’re trying to figure out how to grapple with that. Are there things to be learned for that person and their parents too in terms of your research?

SPEAKER 01 : 5:29

Yeah, I mean, the thing is once you’re saddled with that student debt, things become quite difficult. The best way to do it is to create a payment program and to make sure that you’re finding employment. Obviously, that’s getting a lot harder in today’s labor market. I’m sure you’ve looked at the recent labor market revisions. For sure. The BLS, they’ve overstated employment by 2 million jobs over the last couple of years. So basically, those 2 million jobs that were supposedly added were basically erased completely. So unfortunately, I mean, when it comes to when you have the student loans, the sooner you can start paying them back, the better. Early on in your repayment journey, you’re going to find out that a lot of your payments are going to be going towards interest as opposed to the principal. So you have to find a way to really manage that and to structure a repayment program that’s going to work for you. Also, you should try to be as aggressive as possible to pay them back early. I mean, that might even imply living at home for a bit while you repay your loans. We’ve actually seen that happen a lot more, young people moving back home so that they can get a handle on their student debt. And ultimately, I know this is not part of the question, but you also have to ask yourself, am I going to college for the right reasons? Am I going because I have a clear path for what I want to do? Or am I doing it because it’s kind of what’s been prescribed for me? The data is still pretty clear. People who have a college degree still end up doing better financially over the long term, but it’s also going to depend on what each student’s path is going to be like. If your path to employment doesn’t entail a four-year degree, then there’s no reason to get them and to get settled into debt. I think those decisions or those conversations have to be had by parents and by schools a lot sooner as opposed to just telling somebody, go ahead and go to college. Obviously, if you have the loans, it’s kind of too late for that. But, you know, you should try to pay it back as soon as possible. And that’s going to require maybe making some sacrifices as you start your working career.

SPEAKER 02 : 7:27

Sam, those are all really good, really smart. And I think, too, I wonder if there are choices to be made when the student’s getting ready to go to a school. If there’s a similar school, a similar program where they could get a full ride instead of a small partial scholarship. Some of those options, too, right, for the student and the parent to consider, even though the student might say, I’d like to go to that big-name school. What about the smaller school that might give them a wonderful education at a far lower price?

SPEAKER 01 : 7:58

Absolutely. Smaller school or even a local school, you know, as opposed to going out of state, for example, or going away. That’s going to add so much to your budget. debt burden later on and i know that a lot of people when they’re coming into college they’re not really worried about what happens in five six years you know but you should because getting saddled with that much debt it’s going to feel like a a noose around your neck you know to put it to put it very bluntly to you because you know when you’re trying to get your life in order or you want to save for a house which is becoming increasingly out of reach you have other payments you’re trying to get your financial affairs in order and then you have this massive monthly student debt payment And a lot of that has been added because of decisions that you could have probably made earlier, i.e., as you mentioned, going to a smaller school. Going to a local school, that’s going to save you tens of thousands of dollars on living expenses, tuition, all that stuff. So, yeah, I think we have to kind of take the glamour out of college. We’ve all watched too many movies about going to college and living that lifestyle. And I’m sure there’s benefits to it, but ultimately – the most important thing is, you know, your financial affairs because, you know, young people have to know if you don’t get your finances in order, I mean, life is going to be a lot harder. So the first thing that you can do is get ahead of it by not taking on unnecessary debt when you go into college.

SPEAKER 02 : 9:20

Sam, I think there’s a lot of common sense for our grandparents and parents that are listening because we’ve got both, you know, in our listening audience, certainly we have those both demographics. Um, What would be your final kind of your final comments on someone who’s got to, you know, say a grandparent has a grandchild that’s getting ready to go to college, starting to make those decisions, starting to think about where they might go. And then also the whole options of trade school, what’s right for the student if they’re really, you know, going to college for the right reasons.

SPEAKER 01 : 9:54

Yeah, so. Going to college doesn’t make somebody better or worse. I know there’s been a lot of that conversation growing up that you got to go to college. You got to go to college because of all the opportunities. It’s the, the economy has changed. Things have changed. And what we’ve seen is that a lot of kids ended up going to college because that was what they were told to do or advised to do, even though college might not have been the best path for them, given what their skill sets are, given what their career ambitions are. You have to ask yourself, what do I want to do in my life? What do I want to do? And does that require a college education? If it does, fantastic. Go get one and try to find a way to do it so that you’re not breaking the bank. But if the path is not college, if the path is toward trade school, the path is towards opening a business, whatever the path is, and it does not require college, no need to fit a square peg in a round hole. You can just go to do that alternative path without having to actually go to college. I just think that there’s a conversation that has to be had. I know that a lot of kids feel pressured to go because that’s what they’ve been told their whole life. But ultimately, you’ve got to begin with the end in mind. What do I want to do with my life? And maybe when you’re young, you don’t know the answers, but you shouldn’t be freestyling with a $40,000 a year tuition if you really don’t know. Get some certainty on what you want, what your skill sets are, what you’d like to do, and then work backwards. Does that path require college? Obviously, if I want to be a lawyer, I got to go to college. Obviously, if I want to be a doctor, I got to go to college. But if I want to do something else, if I want to get into the trades, for example, I don’t necessarily have to go to college for that. And that’s where the conversations should be had. And having those conversations early are going to save you a lot of trouble down the line. So I think we have to be more open with the youth, letting them know that you don’t have to go if that’s not what your calling is. And getting that information across as early as possible, I think, is useful and it’s very helpful.

SPEAKER 02 : 11:50

Well, great wisdom and advice. Great information from Sam Bourgi. Sam is a financial advisor. analyst with Investors Observer. And Sam, how do people get connected with your paper on this information and anything else with Investors Observer?

SPEAKER 01 : 12:05

Absolutely. You can visit us at InvestorsObserver.com. That’s investors with an S, InvestorsObserver.com. You can read our reports for free. You can read all of our articles. We cover the financial markets in a way that everyone can understand. And we try to dissect really complex information into the you know, very actionable, very easy to understand articles and research reports. Visit us and yeah, hopefully you can learn something.

SPEAKER 02 : 12:30

Well, you’ve helped us a lot with student debt, just the promises and perils of chatbot advice and how we use that. Sam, thanks again for taking the time with us. We’re really grateful.

SPEAKER 01 : 12:39

Oh, my pleasure. Thank you so much.