Ep 276 – The Perpetual Education Fund… Or Fraud?

Listener Essay

Posted May 1st, 2016

Randy is joined by Bob and special guest Aaron Tunell to discuss LDS Inc.’s Perpetual Education Fund, a program started in 2001 to help students in developing countries. But all is not as it seems on the surface.



  • CocoaCoveredHeretic

    I came here and started typing a comment when I was only about half way through listening because I thought you guys were being a little one sided about the negative points of using an endowment structure.

    But you pulled through and were far more balanced in your discussion than I even would have expected. I should never have doubted you! I love that you guys constantly try to see both sides even when you have to gaze deep into that top hat to see the TBM perspective.

    Great episode. I’ll add this as one more half truth that the church as told me.

    Thanks for all the hard work guys. Seeing a new IOT episode in my podcast app is the highlight of me week!

    • Dave Adams

      Maybe I need to finish the podcast. I came here to complain that, while love IoT and even liked this listener, I thought he missed the obvious point that an endowment type fund, where the principle is not spent is a common fund structure. U universities take money from alumna and do this very thing. But I will listen more before I render judgment. And again, I really like this listener.

    • Aaron Tunell

      Thanks, Cocoa. I agree that this shouldn’t be categorized as an outright lie.
      Half-truth seems to be the best description.

  • Orrin Dayne

    I listened to the 2001 Hinckley talk as a lawyer and readily understood that “the corpus whose earnings will be used to meet the need” meant that only the interest of the fund were used for loans. It never occurred to me that someone might misunderstand what “whose earnings” meant. It’s a good point that education level would effect whether people understand how the money is being used. (Listening comprehension levels would affect it too, I suppose.) I’d be interested to know the education level of the people contributing to the fund and whether they grasp how the corpus and interest are being used.

    That said, I couldn’t have cared less as a believer (or care less now) that the church is very conservative with its humanitarian spending in the PEF or otherwise. As a believer, I was fine with it keeping the institution alive at all costs because I saw it as the soul source of saving ordinances. Now, I’m fine with it because it’s a corporation and self-preservation is what corporations do. They would be failing the people who do give a shit about the corporation if they lived hand-to-mouth doing more charity work that put the corporation at risk. The church almost bankrupted itself taking a “if you built it they will come” approach to building new buildings during David O. McKay’s era. They learned their lesson that they actually can outspend their income.

    • “…the church is very conservative with its humanitarian spending in the PEF or otherwise.”

      Orrin, speaking of understanding and/or listening comprehension, did you miss the point that this is both NOT humanitarian spending and insidious because the Church wants people, especially people like you who apparently know better, to still think of it as humanitarian spending even after having it spelled out to them how it’s not?

      You made some good points, but jesus christ, your comment’s credibility really took a beating there halfway through, lol.

      • AxelDC

        If it works as a true endowment, it is charitable. They are providing low interest loans to students who would otherwise not have access to such funding. The interest from the loan is used to build the endowment, which is invested. The investment returns are going back out as loans.

        On its face, it is not as generous as directly using the donations, but over the long haul, it is a much more financially sound method of running a charity, which is why universities like Harvard and Texas use this model. Even if donations dry up, the fund can continue to operate and grow. Even if students default on their loans, which some will, the fund will have the resources to keep going.

        • Dave Adams

          Exactly. If I were someone with fiduciary responsibility I would manage these funds in the same manner. The only difference is that I might cap the fund once the interest earned would equal expected outflows.

        • Um, maybe we have different definitions of charity? Getting an interest-based loan is getting charity? Please explain.

          • AxelDC

            The PEF is based on the Perpetual Emigration Fund, which loaned money to European Mormons to emigrate to Utah. Upon arrival, they used the money to establish themselves, and once established, they were expected to replenish the fund by repaying the money.

            As long as the interest received is going to help other students get an education that improves their employability, it is definitely charity. Yes, direct scholarships would be more generous, but the fund would be smaller and eventually depleted without a growing endowment. If the idea is to create a large and growing program to help more and more students get education, then affordable loans help more people over time than scholarships. Scholarships rely on a constant stream of donations to keep the fund afloat.

            I believe the idea behind PEF is to help students in countries where such funds are not available. In the US, it would be competing with the Federal Stafford Loan program.

          • So if you give me something that I have to give back to you + pay for with interest… that’s charity to me based on what you do with the money on the other side? That’s a very generous definition of charity that lumps in those new car deals and is pretty contingent on knowing exactly how the institution uses this money… At least car companies are more transparent.

          • Travis Gower

            Bob, I guess the best argument for calling it “charity” would be that the person would never have the opportunity to earn the amount of money required to repay such a loan… if they had not been given the loan for their education.

            Overall, though, I’m with you. I think the church has plenty of money, and a reasonable guarantee of continued funding (from members), to be much more generous. More charitable, if you will.

          • Travis, I get the sentiment, but that still is a super broad definition which would include the sandwich I buy for lunch being charity because I had only had $3 in my pocket and that was the only vendor on the block selling sandwiches for $3. Furthermore, it’s a HUGE assumption, to the benefit of the Church (which has massive arbitrary restrictions on who can get these loans), to say that anyone the Church gives “charity” to in this way had no opportunity from any other institution (like kiva.org and other institutions that give out loans in developing countries).

          • Orrin Dayne

            It’s also a huge assumption that a person, who can get a loan on better terms elsewhere, would still go to the church for worse financial terms. (I will add the caveat that the overall terms’ effect change drastically post faith crisis, which is a very legitimate concern.)

            That said, Isn’t it fair to expect that people will use the PEF when it provides a better interest rate or just plain access to a loan period, just as it’s fair to expect that people will go elsewhere if loans on better terms and in fact available? Or is there evidence that the church duping these people into taking loans with financial terms worse than where they could get elsewhere?

            To me, it’s fair to expect that people are enjoying a benefit/gift/whatever provided by the PEF that they were not likely to get elsewhere.

            We can then go onto discuss whether the church is doing this altruistically or the church is selfishly making a sound investment given future tithing returns or whether it should be called something other than “charity” or “humanitarian.” That seems to go back to my original post, where I really could not care less that they are conservative or that they are motivated by self-preservation, so people can call it whatever they like.

          • Travis Gower

            I’m very much a novice when it comes to early Utah history, but I believe the original PEF ended up being a bit of a disaster (for the church and for participants). Can someone more knowledgeable corroborate this? It seems I read that participants were perpetually in debt to the church, because financial opportunity in Utah was pretty slim — unless you were Brigham Young.

          • Orrin Dayne

            Yeah, maybe you’re setting a higher bar for the definition of charity and humanitarian, which is fine.

            I don’t think I lack credibility for having a lower threshold for those terms because I don’t think I said the church deserves huge praise for its conservative (arguably painfully so) approach to giving.

      • Orrin Dayne

        Well, with “humanitarian” I intended to extending the conversation beyond PEF, like relief spending. And I don’t care that either are conservative.
        Also, I still believe that the PEF is humanitarian in the instances in which the loan applicants obtain loans that they weren’t able to obtain a loan or on better terms than those available to them. A loan that where they could never obtain one is a free gift of the ability to have a loan. A loan on better terms is a free gift of a lower interest rate. Those are conservative gifts, but humanitarian nonetheless.
        Is the PEF not humanitarian because it could be more generous with its giving? Is that your argument? Is it not humanitarian because it is limited to a subset of Mormons? If so, please replace the word with “charity.” Or does it fail as charity for the same reasons? Or does it fail as charity because it is not altruistic?

  • Phil Hampton


    Could you direct me to the Spanish Mormon podcast you briefly mentioned?
    I’d love to hear some stuff in Spanish as well.

  • Aaron Tunell

    Here are the graphs so you can see what we’re talking about on how the money is moving:

  • AxelDC

    I have no problem with the endowment model for the PEF. While giving the donations directly to students would create more loans initially, it would be a less financially stable model.

    The endowment model is that which is followed by universities like Harvard and Texas. They sit on a large fund, fed by donations, and use the interest to fund scholarships, research, and other educational expenses. Let’s say you start your PEF with $1 million, and earn 5% in sound investments. You would have $50k your next year to loan out. Then let’s say you get another $1 million in donations, for $2 million. The next year you have $100k to to loan out. Eventually, you get interest from student loans, which goes to feed the endowment. Soon you have $10 million, and your 5% earns you $500k. The fund keeps growing and eventually you have a huge base which generates millions to loan out.

    The direct model initially helps a lot more students, but the fund grows much more slowly. You earn nothing from investing, your end balance is near 0, and you rely entirely on new donations to fund the loans. Eventually, you get the loans being paid back, which helps build the fund, but if you are constantly lending it out, you have little earnings.

    Both models are assuming constant growth. There are three major threats to the fund: 1) Declining donations; 2) Market declines; 3) Student defaults

    The endowment model, with its large capital, has a lot more stability than the direct model. If donations dry up, the endowment keeps growing. The direct model dries up and dies, with only interest on the loans keeping it going. If some students default on those loans, which will happen, the fund becomes seriously jeopardized. The endowment can also handle market swings due to its diversity of funding and large balance.

    As long as the students getting loans are paying a small interest rate and their terms are easy, then they are better off with the fund. They can get better paying jobs and the loan is returned to help others. If the terms are onerous, then the student may be worse off.

    Hinckley explicitly said that earnings from the fund would be used. He never said the base donations would go out. This is exactly what happens to your donations to a charitable or university endowment.

    The two problems with the PEF are not its theoretical foundation. It’s the lack of transparency by the church, and a healthy skepticism over the financial matters of LDS, Inc. If they are allowed to siphon endowment funds to the church, then the PEF is a fraud. If those funds are used to keep the fund growing, then eventually it becomes a powerful and stable force for education.

    • Seth L.

      Thanks for this. Your thoughts were my impression as well. Stability wise it makes more sense to do this method. But all of that depends on what the church does with the funds and if they ever withdraw from the fund. This exposes a transparency issue more then anything. If they use it as intended then in 50 years it will be a force for good. If they remove funding at every opportunity for other things then it’s fraud.

      • AxelDC

        I think this boils down to a distrust of the church and its lack of transparency. If I were to develop a charity on my own that provided low cost loans to students who couldn’t otherwise get funding, I would follow the PEF model for long term stability and aid, reinvesting the loans and loan interest back into the fund, and then loaning out the interest earned from sound investing of the endowment. The direct donation model only works as long as the donations keep coming in, and then the charity folds without an endowment.

        The threat of LDS, Inc. absorbing the funds is real, but only because the church is suspect of many nefarious financial dealings, not because the endowment itself is a perverse model.

        • Seth L.

          Fully agreed. Ideally the fund would only ever be used for education purposes and would be transparent in those dealings. The Model itself is sound.

        • I’m still wondering why you’re calling this whole thing charity when it’s an interest-based loan model with preferential treatment given to Church-based schools. You know what’s even better charity then? The 0% interest rate offer I can get on my new car!

          • AxelDC

            First of all, the 0% interest loan never is. Your dealer is making money off the deal somehow, so false comparison.

            Second, if you are getting an education whereas you couldn’t before, then your life is improved. Charity does not mean hand outs. Like I said, you could give the money away, but then you can help fewer people for a shorter time period. As long as the interest goes back to helping people get educations, it most definitely is charity.

          • Haha, false comparison because the dealer benefits in some way other than the interest but the Church doesn’t under their scheme because… education. What a cover.

          • gem2477

            But if preference is given to BYU schools, these students can get loans elsewhere. I doubt anyone who can afford coming to the US to go to byu is that poverty stricken.

          • Dave Adams

            Because the interest rate is far below what these people would pay in a fair market. The loans are made in countries where credit is hard to come by. “Subsidized” would be the accurate term. Much like habitat for humanity doesn’t give away homes for free yet is still a charity.

        • Maybe I’m the only one who wants to protect the word charity for loftier goals, but if you guys want to include as charity getting a loan in exchange for not having sex or drinking coffee and believing in fairy tales… I dunno, to me that’s pretty perverse.

          • Seth L.

            The word charity is dead. We never use it right. I grew up thinking tithing was 100% charity. To me this is a spectrum. If it meets it’s lofty expectation and goals this is a lifetime fund that will only improve over the years.

            Now knowing my distrust in the church I can’t imagine them never touching that money or withdrawing it. So I doubt it meets this lofty goal. It’s a nest egg that has this side cherry on top benefit of maybe sending a few kids to school.

          • If dead, then let’s not use it here! That’s like saying the word “truth” is dead but still saying the Church is true because they say it is and it’s habit for us to say it is too… break the cycle! 😉

          • Seth L.

            You are preaching to the choir here Bob. It makes no sense to call it charity if it’s payed back with interest!

          • Orrin Dayne

            If it’s not a charitable gift, is it a gift in any sense? Is a loan where they wouldn’t get one (or a lower rate than they would have) a gift? Or is the PEF just a quid pro quo business deal because the church is helping future tithe payers in the long run? (Just fleshing this out.)

    • Aaron Tunell

      You make some good points, many of which I believe we talked about during the discussion portion of the episode.

      I agree that many institutions use this model for generating loans or grants.

      The reason I take issue with the church’s actions here is that in their talks and literature, the word ENDOWMENT is never used. Instead, on the PEF website, and specifically during Hinckley’s talk, a Kiva type system is described. Such a system gives the donor much more sense of impact… Translation… more donations.

      I don’t necessarily take issue with the endowment structure per-se, but that there seems to be an effort to obfuscate how this really works.

      I’m glad there are people who understand how a loan-endowment system like this works. If Hinckly had used more accurate language in his talk, I wouldn’t be able to complain. In preparing this essay, however, I spoke with a number of people and NOT A SINGLE ONE was aware that their funds were being used merely for the purpose of generating interest. Everyone thought it followed the Kiva model. I think Hinckley’s 2001 talk makes it clear this was an engineered misunderstanding.

      • Dave Adams

        I remember Hincklry’s talk and I remember having this very discussion with friends immediately after. Few people realised that it was an endowment structure. It seemed obvious to me. I think the church would be free and clear of significant criticism IF…..if they had said, “we will cap tell fund once we feel there is sufficient capital to generate the interest required to fund the expected loans perpetually.” Capping the fund would suggest the motive isn’t to simply enrich the church.

        • Aaron Tunell

          I agree, Dave. Thanks for your comment.
          For me, if they had simply used the word “interest” instead of “earnings,” then I think the criticism would be unwarranted

          • Travis Gower

            Doctrine and Covenants 119:4 – “And after that, those who have thus been tithed shall pay one-tenth of all their interest annually”

            Mormonism: Where translated means inspired; earnings means interest; and interest means earnings.

  • Jason Nelson-Seawright

    I’m disappointed with this essay. It tries to generate a scandal out of one of the better things in recent Mormon history and does so with really no evidence. 1) The endowment model makes the PEF a genuinely long-term institution, and one that will survive even if donations decline and inflation rises. That’s worthwhile. 2) In most of the developing world student loans are pretty much unavailable and credit in general is basically out of the reach of the poor. 3) Is there any reason to think the PEF is a term endowment? If not why raise the issue? 4) If the church invested PEF funds in the big mall project, then that means profits from the mall at least in part go to help poor people.

    Okay, so some of this you raise sort of in the discussion. But it’s really not enough. These considerations add up, as far as I can see, to a complete negation of the original essay.

    • Orrin Dayne

      I agree. I was expecting to learn something I didn’t already know, e.g., some sort of insider information. I already knew that it was Mormons helping Mormons. I already knew the corpus didn’t go to applicants, but I respect, though, that people might not want to contribute to an endowment, so that’s fair criticism that they could make it clearer.

      To me, however, it’s counterintuitive to think people would take a worse financial deal. Thus, I’d like to see evidence that applicants are getting duped into take worse financial terms with the PEF than with other available options. In the absence of that evidence, I think it’s fair to expect that applicants are receiving a benefit they could not receive elsewhere.

      I do realize that the church is investing in future tithe-payers, so it may be less than altruistic. And it’s not a free gift or an interest free loan, which would be even more of a gift. So if people like Bob recoil at calling it “charity” or “humanitarian” I respect that they have a different definition than I.

    • Hi Jason, yours is certainly a valid perspective. As I recall, we never called it a scandal, that’s your word. But I get your point. I guess I’m puzzled by the sentiment that this is all actually a good thing coming from Mormonism, for once. You know, because they have such a great track record of things on the surface being exactly as they seem when scrutinized. The reason to question the structure of the program and the usage of the funds is because of the little details we do know. As for the structure, it includes attaching Mormon worthiness to financial agreements. On the usage, they changed their legal wording recently to make sure they could use this money how they want with no one being the wiser.

      One thing we didn’t get into (which you and I may disagree on) is the extent to which we should call this “helping poor people” in the traditional sense when the help has such strong Mormon strings attached.

      • Jason Nelson-Seawright

        Bob, I think that the loss of religious freedom connected with accepting PEF loans is a genuine issue. However, it’s an issue that is of a piece with the broader appalling practices of the LDS Church vis-a-vis higher education. So: if we were to say that the issue here is that the Free BYU campaign should expand to also cover PEF, great.

        • Perhaps I’ve read your comments inaccurately, but I’m still trying to figure out if you think there’s something about the PEF to be applauded or if you think it’s simply not as bad as we made it out to be?

          • Jason Nelson-Seawright

            I’m trying to say there’s no evidence of anything wrong at all with the economic side of the program, and at least some evidence that the program is an economic leg up for thousands of poor Mormons. However, I agree with you that some social aspects of the program are creepy, and that the LDS church as a whole maximally sucks at financial accountability.

    • Aaron Tunell

      I understand your point, Jason. Your criticisms are well-taken.
      As for attempting to generate scandal, I think “scandal” is completely subjective. Similar to the “scandal” that the temple names are reused on a monthly basis by date. It is only a scandal to people who don’t know about it already.
      Example: When I discovered the temple name issue, I was told by believing members: “Yeah, So? We already knew this! duh… Obviously God can’t provide a unique name for each person who visits the temple.”

      If you already knew this was a loan-based endowment, I feel that would make you part of the minority, something we discussed after the essay… particularly since this has not been clarified in LDS publications, and was actively described as a “rotating fund” in the rollout speech.
      So congratulations for already knowing. I guess the rest of us who were unfamiliar with financial lingo back in 2001 are just late to the game.

      • Orrin Dayne

        My initial reaction to the essay was disbelief at the allegation of some sort of cover up, when I had listened to Hinckley’s talk in 2001 and readily understood that donations were not going directly to PEF recipients.

        But I later realized that I was a 29/30 year old law school graduate in 2001. Thus, I had the benefit of both an education to understand (and an age to ponder) how the PEF would function. So my shock was the result of a blind spot on my part.

        If donors would not have given money to the PEF at the time if they had understood its structure, that is a problem.

        • Aaron Tunell

          there’s a reddit thread from 3 months ago that is illuminating as to the understanding of the lay-member regarding this topic
          Maybe it’s my own bias, but I feel like most of the criticisms I brought up in my essay are echoed in the comments

          • Jason Nelson-Seawright

            See, it makes sense that people might not have realized that this was the structure of the fund. So there’s an argument for educating people about that. But it also seems that it would have made sense to put that explanation in a non-alarmist context, by for example pointing out that huge numbers of nonprofits also use endowments, that the endowment model grows nonlinearly while the perhaps more intuitive model grows linearly, and so forth.

            A similar point about the interest charged. NGO folks and scholars have long debated about whether loans for education, microcredit, etc. should have an interest rate attached. Some programs that don’t attach an interest rate use really invasive social control programs to shame recipients into paying back loans (see, e.g., the Grameen Bank), and those which do neither don’t get repaid. Interest rates in the 3% to (perhaps? rumored?) 7% range sound high, but in much of the developing world they are not. In Peru, for example, interbank benchmark interest rates are around 4% — way higher than in the U.S. So these rumored interest rates are right in line with the cheapest rates in that market. Except one should remember that poor people have no access to the commercial credit market. Again, explaining all of this together with the information in a non-alarmist tone would probably be useful relative to the lay-member understanding. Framing this as shady dealing by the church when it’s actually pretty well in the mainstream of developmental NGO practices these days? Seems off key.

          • Aaron Tunell

            If it had been sold as an endowment from the start, I don’t think anyone would have been surprised, and this podcast and many other outraged members would have no reason to complain>
            The problem is it is being actively sold to the members as a Kiva system and nowhere in their official propaganda is the word “endowment” used.
            To the contrary, other wording is used:

            “The program is funded through contributions of Church members and others who support its mission. It is a revolving resource in which money is loaned to an individual to help pay for training or advanced education. When a student has graduated and is working, he or she then pays back the loan at a low interest rate. Repayments allow for future loans.”

            “Contributions to the fund and repayments from existing participants are used to make new loans to qualified students.”

            “The program is made possible by hundreds of thousands of individuals who donate money to the fund. All of the money donated goes to support participants.”

            This does not describe an endowment structure at all. It is decidedly misleading. THAT is the reason for alarm.
            Just like all of the pictures of Smith translating while looking at the golden plates.

          • Jason Nelson-Seawright

            I guess I’d just say that the large majority of nonprofit solicitations for donations are misleading on this order of magnitude.

          • I thought I made that point during some of our comparisons, but again, I think we have different opinions in terms of the value of emphasizing mainstreamness in the context of the one true Church operating what it claims to be a charity.

          • Jason Nelson-Seawright

            Yeah, honestly, to me the one true church frame is a complete non-starter and therefore not super-relevant. But another way to make my point is this: you could pick literally almost any other LDS church program than the PEF and that program would be worse.

          • Oh no you didn’t! You just used the “but there are worse atrocities in the world to talk about!” argument. Sigh. But I hear you, almost always a valid point even if an annoying one. 😉

          • Jason Nelson-Seawright

            Hah! To be picky, I used the rarely-observed-in-the-wild “virtually all atrocities in the (LDS) world are worse.” Anyway, this comment conversation has been fun enough to cancel out my initial disgruntlement. Color me gruntled…

          • Orrin Dayne

            It occurred to me that, because there is no transparency, it is possible that the PEF started as an endowment, but they switched to another structure. This would make Hinckley’s statement misleading and these later quotes closer to the truth! Anyway, just another reason financial transparency would be helpful.

          • Orrin Dayne

            Thanks for the reddit link. Some of the criticisms there resonate with me. Some don’t. And that’s OK. I love that the exmo community differs in opinion.

            In your essay, the “cover up” regarding how the corpus isn’t given to recipients was something I genuinely missed because it wasn’t my story. But I think it’s information people should know in case it matters to them. It didn’t make a difference to me then as a donor or now as an exmo, but I respect that it matters to you and may matter to current and past donors. Thus, clarity should be given.

            Financial transparency is an ongoing issue beyond the PEF. Diverting funds is an ongoing issue beyond the PEF. Demanding temple worthiness is an ongoing issue beyond the PEF. I guess seeing those issues in the context of the PEF doesn’t resonate with me any more than they do in the broader context. For instance, losing a loan due to a faith transition sucks, but losing a spouse is worse, so it’s hard for me to find the PEF context particularly compelling, if that makes sense. Maybe I’m just numb to it. They are legitimate issues, but I think those issues are more well known, unlike how the corpus is used.

            But that the PEF only helps active “worthy” Mormons or could be more generous or could be more generous faster or that the church benefits from the PEF, doesn’t bother me one bit beyond that fact that it sucks for faith transitioning members. It doesn’t bother me because the church almost bankrupted itself during David O. McKay’s era, and self preservation should be their top priority in my view. Second-guessing how much more the corporation could spend/invest in the PEF or any other effort (and thus implicitly determining how much risk the corporation could bear) isn’t interesting to me.

            However, if someone wants to say the church doesn’t deserve as much credit for the PEF or that it shouldn’t be called “charity,” I’m fine with that. But in the absence of evidence that PEF recipients are getting financial terms worse than what they would have gotten elsewhere, I would expect that the PEF is providing a benefit to them.

          • Aaron Tunell

            Well Said, Orrin

      • Jason Nelson-Seawright

        I did not in fact know how it was structured — so I guess I don’t deserve congratulations. If I had looked at the Wikipedia page for the program, I would have known. But, the key thing is that I know enough about how developmental NGOs are set up to know that running off of an endowment model is really standard, and that solicitations for donations are often imprecise. I totally get having a tendency to feel duped by the LDS church — for sure. But in this case, it seems a better way to put it would be that you marginally misunderstood a technical detail of the implementation of a program that actually falls within the mainstream of nonprofit practice.

        • Again, is it the tying temple worthiness to money lending that’s mainstream? Or is it the “reserve the right to use the money any way I wish” part? Two things: even if the entire package of how this is executed were mainstream (which we’ve demonstrated it is not), since when is mainstream the gold standard for the one true Church?

          • Jason Nelson-Seawright

            See, if the discussion here had said:

            1) Like the rest of the LDS engagement with higher education, the PEF destroys religious liberty,

            2) Like any donation to the LDS church since 2013, a current donation to the PEF might legally be used for literally any purpose without your knowledge and consent,

            3) But the PEF is financially structured in a completely mainstream way and is pretty close to best practices in the development NGO world in how it makes loans,

            then we’d have no disagreements here.

            On the “one true Church” thing, yeah, okay. I personally have no expectation that the LDS church will perform adequately, so from my perspective a program that at least financially is in the mainstream is a huge win for LDS inc.

          • Aaron Tunell

            Thanks, Jason. Maybe that last part is a silver lining that I should have highlighted in the essay. I wish I had done so.

          • Cool. I think we’ve gotten to a great place here. Jason, I think our very different approaches to the “one true Church” thing is the crux of our disagreement. That is to say, for me, the Church doing something financially mainstream, yet calling in modern revelation while also attaching all sorts of nefarious things to it (your first two bullets above), is a HUGE deal. But I’m realizing more and more here that my own personal issues with that and its implicit ties to what the Church claims to be… well, that may anger me more than others.

          • Jason Nelson-Seawright

            Well, don’t get me wrong — I get plenty angry! I think that huge swaths of LDS church programs are terrible and devoid of positive impacts. In contrast to the missionary program, the church’s political activity, etc., the PEF is actually about a real problem and seems to have an incremental positive economic effect. So basically: it’d be great for humanity if LDS inc ceased all other activities and transferred 100% of funds to the PEF. 😉

          • If being an active Mormon wasn’t a prerequisite, then I might agree with you! 😉

          • Jason Nelson-Seawright

            So how about this ideal world? The LDS church dissolves itself and all leaders publicly apologize. All church assets are transferred to the PEF which keeps its financial structure but drops all its religious components. That’s a win, right?

          • Done. Problem solved! Now for you and I to figure out how to execute on this…

    • Paul

      Agreed. Nothing close to a scandal here. President Hickley should have said “interest” instead of “earnings”, but that isn’t enough to make a scandal. Church seems quite savvy at managing money, and then using it to further the mission of the church, which most members would think is the highest good, even more than pure giving to the poor. Even City Creek fits into Hinckley’s description of preserving the downtown Salt Lake environment which affects temple square and the church. I think the brethren put protecting and growing the church first, which includes its finances. Even though I have zero faith in the church I think there is far less financial misdoing in it than in most other organizations. I’m far more angry at the church for teaching its members not to think and believe in hurtful ideas than in them misusing money.

  • Dane Rowley

    I laugh my way through so many IOT episodes. It is therapy for me as I move slowly and deliberately through a transition from faith crisis and reformation to actually leaving. It’s rough, really rough, and laughing at it all has helps so much. This one about PEF is different. It hurts more. I LOVED the PEF program from the beginning. The second I heard it sitting in the BYU Marriott Center I felt that it was of God and resolved that I would start giving to it even as a very very poor college student. My ancestors came to the US/West through the help of the original PEF and I saw this as some grand but simple way of making good on it all. Years later (and close to $1000 in my own donations later) as I began my career in international education I even imagined running the PEF someday. Early on I realized that it was about giving a tiny % of the money to people who needed it. I know how endowed scholarships at universities work because I give them out to students. That wasn’t my problem. But over time this issue became wrapped up in a lot of other issues that I began to have with the church – a church the claims to be led by Jesus and HIs actual real life kingdom on the earth shouldn’t be operating by the standard industry practices like everyone else. Is it a company or is it Zion? Is it a tax-sheltered foundation primarily concerned with it’s own perpetuity and growth or is it willing to take the risk of giving up its coat and cloak too? It should be better, but it also claims to be better! It should give so much more. It should not hedge its bets on the ‘least of these.’ A good samaritan doesn’t charge interest for lifting someone out of oppression or bondage or poverty.

    So really, the issue for me isn’t that I didn’t know how the PEF follows standard practice for these kinds of things. The deeper issue with this is that the church continues to use the name of Christ and God in vain to further its own corporate and financial interests. Whether the leaders believe that by being a better and more successful operation it is getting ready for Zion is beside the point to me. I care less about whether they actually believe it or not or what their motivation is. I care about right action. Instead all we see is a very small derivative of right action that registers in the single-digits while the primary capital get spun off towards vast Florida land tracks, Philly real estate, bigoted political campaigns, shopping malls, perks for mission presidents and general authorities, ever more glossed up anti-Intellectual Reserve, and finally professionally trained and paid PR people to spin it all at the end of the day.

    • Travis Gower

      Yuuup. I was touched by the PEF announcement too, and I saw it as a great opportunity to help people like the ones I had grown to love so much during my mission in South America.

      Being financially illiterate, I had no hope of understanding how this actually worked. I was just glad that as a struggling college student (like yourself), I could put my money somewhere it would really make a difference.

      Sure, it makes some difference. Very little. But the overwhelming effect is to enrich an already extraordinarily wealthy church. That is “the difference” that my money made.

  • Aaron Tunell

    A number of the comments here are from the perspective of:
    “I already knew it worked this way, this isn’t a problem”
    To illustrate that this issue is meaningful to a wider audience than those who properly understood Hinckley’s financial-speak during his 2001 talk, there’s a reddit post from about 3 months ago where a number of commentors echo the problems we brought up in the essay, and have felt misled by the church’s lack of explanation.

    If you felt that you properly understood the PEF, then I think you might be in the minority.
    From 3 months ago:
    Discussion based on this essay:

  • Jenn

    Interesting stuff, especially in the comments here re: the ubiquity of the endowment model in academic institutions. I actually work for a non-profit that functions on an endowment model. That said, I don’t remember Hinkley’s rolling out speech all that well as I was in high school at the time, and by the time I started donating to the PEF myself I just assumed it was like the Kiva model which had become so popular by then. I guess that falls on me for not doing my research. Then again, the same could be said about the fact that I didn’t know Joseph Smith was shtupping 14 year old girls. So it’s pretty par for the course with my Mormon experience.

    I would love to hear a perspective from someone who has received a loan from the PEF. I’d be interested to hear how it was structured and what sort of pressures were applied to guarantee repayment. I’ve read elsewhere that the terms are quite onerous, but I’ve got no sources for that so take it with a grain of salt.

    • Aaron Tunell

      Jenn, your comment about it being “your fault for not researching” reflects my thoughts exactly. I believe it falls directly in the same category as the tergiversation of other historical issues that may or may not have been mainstream at their time.

  • Randy Quentin Meyers

    What songs were featured in this episode? All of them, please.

    • Aaron Tunell

      I’m not sure what the song was at the very beginning, that was added by the infants, but here’s a list of what I included in the essay itself:

      What God Wants Parts 1&2 – Roger Waters
      Money – DR Period
      Money – Pink Floyd
      Head Like a Hole – Nine Inch Nails
      16 Tons – Tennessee Ford
      I Want Money – Flying Lizards
      Techno Syndrome (Mortal Kombat Theme) – Praga Khan
      Pigs (Three Different Ones) – Pink Floyd

    • Here are the ones Infant-added:

      Grinder – Gary Clark Jr.
      blade runner – bignic
      Comfort Eagle – Cake

  • Duke of Earl Grey

    I still think the PEF is a good idea as long as the corpus isn’t being pilfered. Of course the church is going to leverage it to manipulate members into greater commitment to the church, but that describes every aspect of the church, so this is no more insidious than anything else they do. It could be more generous or effective, but I think the program is a net positive.

    One of my annoyances with the new tithing slips (but less bad than the new statement on how money will be used) was the removal of the PEF as a line item. Presumably members can still donate to it, but they’d have to know about it beforehand.

    Any ideas on why the line was removed? Does that mean the church feels like the fund has enough corpus, or maybe that they’re quietly phasing out the program and starting to put that sweet money to other uses? Or some other reason?

    • Orrin Dayne

      I hadn’t heard about the PEF for a while, so I wondered the same thing about whether they feel they have a sufficiently large corpus. I didn’t know it was removed from the slip.

      I also agree that the PEF is par for the church’s course of manipulating members. My view is that, if they were going to be pressured into being active and temple worthy anyway (as an average church member is), they might as well get a loan to help with education. The PEF (as well as everything else in one’s life) becomes a problem after a faith transition, but again, that’s the Mormon experience and not particularly unique to the PEF.

  • Wow, is this a bleedin’ shit storm of comments, or what? It’s weird. I’m going to see a guy tomorrow about setting up an “endowment” to keep a cheesy web site funded and accessible after I’m gone—hopefully till the sun burns out. I made the appointment weeks ago, then today, on the eve of my meeting, IoT explodes with endowment fund hooey. That must be “where it’s at,” as the kids say.

  • Bob Wood

    My two thoughts/questions after listening:
    First, I think the essay makes a good case that, assuming the only goal is to help kids get educated, the endowment method does not do as good of a job in the short run as a Kiva type system. It may, however, ultimately end up “assisting” (leave it to others to debate if it is charitable or not) more people in the long run +35 years. The thought that struck me, and I didn’t hear it come up, is how often I hear that the second coming is “eminent”. If you design a program with that long of a payout you must not think the rapture is that eminent.
    Second, I didn’t hear any discussion of the default rate on the loans and how that was factored into the models. I assume that it is pretty high.
    Thanks Bob for the work you did. I learned a lot about something I really hadn’t followed. On my list of “Reasons to Not be a Mormon” I am going to slot this in at about 45. Still on the list, but not that big of deal. But, it wasn’t on the list at all before last night.

    • Bob Wood

      My bad, I meant to say thanks Aaron. But really, thanks to everyone that was involved.

    • Aaron Tunell

      good comment, Bob. Yeah we did talk about the apocalyptic nature of the church being ironic in planning a system that wouldn’t be superior for 35 years.

      The loan default rate, however, is a good point and a very valid criticism. That would have been great to work into the model.
      At this point, I wish I had done a model that showed the results if endowment interest were used for scholarships rather than loans.

    • The default rate would definitely impact the kiva model more (since it would diminish the core amount more dramatically as compared to the PEF model where only interest is impacted by defaults) and make it so that the PEF model would catch up in effectiveness more quickly, as it were. That said, institutions like kiva know this and try really hard to minimize their default rates (and do a great job at it by comparison to standard default rates).

      So that is to say, if the Church were more focused on creative ways to minimize default rates instead of criteria to make sure no one can have sex or drink coffee, well, it’s a solvable problem if that criteria energy were to be channeled into something much more relevant. And, of course, if we just made the whole thing more charitable and a scholarship model, this would be a moot point.

      Or, a hybrid scenario, what if it were a loan only while you were in school, but once you graduated with your degree, it was forgiven? That’d be a huge incentive to finish your degree. Then again, perhaps it would be the group not finishing that would automatically default since they have no prospect of better work since they didn’t finish their degree. Anyway it might be something worth investigating as a new PEF model once we here in the comments section take it over. 🙂

  • Zelph

    Aaron Tunnell, Ex Mormones para Jesus!!
    Are you an ex Mormon for Jesus Aaron?

    • Aaron Tunell

      I definitely went through a strong Christian phase after leaving Mormonism. I set up the site as MormonesParaJesus, but about a year ago we changed it to ExMormones.
      I do still believe in God, but not the same way anymore. I would describe myself more as a hopeful agnostic/deist with some christian leanings.

      • Zelph

        I didn’t finish the podcast yet, I was just intrigued by your mention of a weekly youtube videocast you do and looked you up and came across your ex mormones para Jesus entry. Do you have a link for your weekly videocast? I’d be interested in checking it out. What post Mormon themed podcasts in Spanish do you know of are out there?

    • Aaron Tunell

      For a whille I was. 😉

  • Richard Ottley

    I served on the High Council in 2008 in Cebu Philippines. The PEF became a big push at that time because it finally was open to ALL applicants. Before it was only available to people based on the recommendation of a bishop or member of the stake. As a member of the High Council, we trained leaders on how to get the word out about applying for the PEF. Firesides and sacrament meeting announcements were used to spread the word along with applications to all return missionaries. Very few were offered the aid because the requirements were so rigorous. For example, no one was approved unless they had a plan to be able to start repayment after 2 years of receiving the funds. So a 4 yr college was out. A Trade school of 4-6 months was preferred.
    At the time there was a locallized non profit that trained return missionaries how to be entrepreneurs to start their own businesses. The program was funded by a rich former mission president. It did have a small tuition for the 4 month program, but the PEF would not fund this type of education because their was no guaranteed job upon graduation. As a TBM I was puzzled why the PEF was more focused on repayment then getting good members the education they we’re seeking.

    Great pod cast. Listener essays are the best.

    • Brad

      Richard, thanks for your post. I’m curious. You mention very few people were offered the aid. What was the demand like where you were at? Did a lot of people apply?

  • Rick

    Can you imagine if the LDS Church put as much money and effort towards actually helping those in poverty and need of education as they do in lip service? They could actually be a force in the world.

  • Jaasiel Rodriguez

    Listening to the 2:00:00 mark while riding the Blue Line in South Central LA. #shitIsRealTendermercy #100

  • J T

    If you become unworthy while using the PEF by drinking coffee or screwing your girlfriend, just lie to the liars and DON’T TELL THEM! hahahaha

  • Elizabeth Thatcher Lucas


    Just listened to the podcast. I agree with the criticisms. I did find this website, and it does seem to indicate that the fund is a perpetual endowment. Still seems pretty stupid to not fund the educations on a kiva-type model, given the immediate returns education provides for not only the individual, but the whole community. It would be interesting to see if the infants could get any more pointed clarification on this from church HQ. I doubt it, given past efforts of members to get answers to much of anything. But if they would, it would be fantastic to hear their jusrification for delaying doing good for those in such dire need, esp given their belief in Armageddon. Furthermore there seem to be (differing) claims of 50,000 and 40,000 educations funded thus far. If the lower # were assumed to be true, what would it indicate about the principal amt of money in the PEF, if it were assumed that the fund earned a rate similar to a conservative mutual fund? I’m guessing you’ll farm this project out. I’m no guru with graphs, and I’m also lazy. But I am curious.

    • Shadrak

      Thanks for this link, I should have read your comment before my post.

      This website says over 65,500 loans, probably thru 2014.
      If thats the case, and with this infographic, there have been a fairly steady 4800-5100 students/year. Perhaps there are only 5,000 students in the world, outside the USA and Canada, who can qualitfy in any year.

      If I remember from the podcast, the average loan is $2k/year and the average is 2 years then the fund commits about $20M/year, which is probably on the high side. A govn’t bond avg return is 6%, thus for interest to be $20M it would need a principal of $330M.

      What’s interesting is that the number of students funded/year has not really changed in the 14 years since it started. If the fund was fully funded for 5,000 students to start, and the fund has grown but no extra students funded, unless the loan amounts are a lot more than at the start, the PEF is a cash cow.

  • Shadrak

    Aaron, I wonder where you got the evidence that the PEF is an endowment type fund? Everything on the lds websites claim it’s a revolving fund, that it’s based on the original PEF revolving credit model, with no mention of an endowment. And, as you pointed out above from the PEF website, the contributions go in then out in a more direct way than an endowment would suggest. The only easily searchable reference to it being an endowment is Wikipedia, but it also has no source for its claim.

    It seems you rely on Hinckley’s phrase, “From the earnings of this fund.” Why would “earnings” refer strictly to interest earned from an untouchable endowment? Couldn’t earnings be the best word here because there will be multiple sources to the fund? Namely, initial seed money, continuing contributions (donations from individuals and church), loan payback, loan interest, as well as fund interest. It seems this definition is more in line with the fund’s description.

  • Aaron

    Late to the party (and haven’t read all the comments will, will do so after typing this up). Interesting listen but it felt entirely one-sided on a program that from my perspective actually does some good. The attempts at showing the other side were entirely “I’m going to play devil’s advocate for 3 minutes here, but state this fact up front so that everyone knows the facts I’m about to advocate here are actually bogus” sort of way. That is to say, if the panel felt they were being fair the tone certainly said otherwise.

    Throughout, I had a few thoughts:

    1) What do actual people that have used the program have to say? Admittedly this isn’t IoT’s job to do that research. If I cared I should do it myself. Still, it felt to me like outsiders picking something apart that they had little knowledge about. Were users constantly harassed and mistreated when paying back the loans? Were users generally unhappy that they were given loans in the first place? My impression based on listening is yes, but when I actually think about the facts presented the answer isn’t expounded on either way.
    2) Model – what of defaults? This seemed to be treated as an afterthought, as if a good portion of these loans aren’t highly risky from a repayment perspective.
    3) A little too nitpicky of Hinkley’s talk. I actually think the facts were more or less presented correctly (me being a CPA that works with or around quite a few such structures) without going crazy with details that would bog down the talk. That said, I’m guessing there isn’t a place on the church’s website to really go into details of the program. And the church’s financial transparency is quite poor. So I let this point slide. Still, to my ears we were demonizing Hinkley a bit much.
    4) The discussion went to fraud quite quickly, which was disappointing. If there’s reason to believe there’s been mishandling of the funds than I’m all ears. Otherwise I don’t understand why the discussion went there.
    5) WAY too much emphasis on the direct funding being so much better than the church’s model, as if church’s model doesn’t have it’s pros. In some ways Aaron’s excel charts are as deceiving as Hinkley’s choice of words (in that the majority of people will take things at face-value and never research things further).

    As I wrote, the church’s financial transparency is poor so it opens itself up to these types of discussions. And I did enjoy the highlighting of this program, something that I previously only sort of knew about (and have done some mild research on since). And finally, great to get Bob in another podcast, he has been missed. I’m just dissapointed that the podcast will stand alone as THE facts about the program, which will override the actual good the program probably does.

    • Hi Aaron, thanks for your feedback! We addressed some of your points in the bazillion other comments here, but I thought I’d add a bit:

      1) Agreed that getting feedback from people who used the program would have been nice. The closest we got are some of the commenters here and on the FB page, who have shared their experiences.

      2) As for defaults, check out my earlier comments on this for more on that. One thing I’d like to add: we shouldn’t be too quick to assume these loans are particularly risky in the larger financial context. That is, the loans are only going to full tithe payers. So, financially speaking, wouldn’t it be great if you were a bank and could offset financial risk by making sure you only chose those people who agreed (and have already done so) to give 10% of their income to you forever independent of the loan?

      3) Fair enough. I actually like Hinckley, relatively speaking… in the hierarchy of GA douchebaggery, he’s actually not high on the list.

      4) The discussion went to fraud because of all of the misrepresentation of this being something it’s not. You’re right that we don’t know if, or to what extent, there’s more traditional financial fraud. But the Church playing by the book of financial loopholes, prophetic pronouncements, and lack of transparency felt particular fraudulent in spirit. I think we demonstrated clearly that they are gaining so much more than they are giving, but they don’t position it that way.

      5) I agree that we should have emphasized that the Church’s choice of model isn’t uncommon and could be fine. It’s just an odd/wrong choice given the conflicting messages / prophetic pronouncements as to the point of the whole thing. In the same way that it would be odd/wrong if Mormons did start choosing to give fast offerings only in the future and only a much smaller amount via the earnings fraction of what they otherwise could give right now.

      Thanks again for listening and sharing your thoughts!

    • Aaron Tunell

      Thanks for your comment
      1) In preparing the talk, I talked to 4 or 5 people I am connected with through social media and they indicated to me it was just a simple loan. In fact, that it was more frustrating than a normal loan because of the involvement of the church and morality standards. They did not see it as a nefarious program, however, in that the only reason they were in it was to get a loan, which was the service provided. In addition, they indicated they had an attitude of desire to get the loan from the church because it’s like getting a loan from the Lord.
      2) Defaults are a real concern. They do not impact the corpus, however, therefore it still makes more sense if this is a charity to give grants rather than loans.
      3) I think we discussed this in the podcast. Hinckley did use some financial language that may have been understood properly by some audience members, but not all. Additionally he describes the fund as revolving, which is a direct lie. No funds revolve, no matter how many times they say it. This seems like an intent to deceive.
      4) The fraud was in the way the church sells this program to the members in how it describes it to them. There is almost no documentation anywhere that indicates the low impact each donor’s money makes. Thus it is an obfuscation. That would be the only fraud I could see, everything else is legal
      5) We discussed the 35 year return in the podcast I believe. In fact, I think I went into detail about it myself. It was an important point, I believe. But I wonder if you would like your fast offerings to begin to have an impact in 35 years or today?

  • Megan Foote

    The PEF was one thing I thought the Mormon church did well and I learned a lot from this discussion. It’s insane that I felt so many warm fuzzies when donating to this fund, however, I want to add that the “gold standard” Kiva also has a lot of serious issues. After I resigned my LDS membership I was so thrilled to donate to Kiva because it was a way to actually do good in the world…until I learned that it didn’t actually do as much good as I had thought. A rash of articles came out a couple of years ago talking about everything from the insanely high 100% interest that the borrowers pay (on capital given to the banks at 0% interest) to lending agents encouraging defaulted borrowers to commit suicide in front of them.


    • Randy_Snyder


  • Jose Galdamez

    The timing if this episode was uncanny as it came out the week before we paid off the balance on my wife’s PEF loan.

    She is originally from Peru with her diploma coming from Cibertec Institute in Lima. She studied there for three years at a cost of 18,000 Peruvian Soles (about 5,385 USD). World Education Services just confirmed that her degree is the equivalent of an Associate’s Degree here in the U.S.

    While I can’t say I’m too happy about the inefficacies of the endowment model, I would be remiss not to express gratitude for the benefits it provided my wife by way of a discounted loan.

    The LDS church charged a very low fixed interest rate of approximately 3%—barely enough to cover inflation. By contrast, my graduate school loans under the hospice of the U.S. federal government are being charged a 6.55% fixed rate interest.

    We also had the opportunity to save approximately $700 by paying the balance off early. Her balance in April 2016 was $2,212.50. We paid $1,528.46 to cancel everything out. Had the church gained any profit from her interest, I’m sure this would have cancelled that out.

    Now all that said, she wouldn’t have been able to pay the PEF loan so soon had she not moved to the U.S. Her monthly income as a graphic designer was 1,500 Peruvian Soles, the equivalent of 500 USD. That’s not quite poverty level, but it isn’t middle class either. Once you take away tithing and cost of living, not much is left. Paying the minimum each month meant she would be stuck with the loan for at least 8-10 years. By coming here, the instant conversion to the dollar meant that we could pay the loan off at least three times faster. One U.S. Dollar is usually the equivalent of 3 Peruvian Soles.

    Another thing to consider is the sheer luck that PEF happened to support a loan for a low cost institute like Cibertec. PEF is virtually useless for most Peruvian universities as the public universities are completely subsidized by the government and the most prestigious (i.e. costly) universities are not supported at all. For example, PEF will not provide loans to Pontifical Catholic University of Peru (PUCP), the #1 ranked university in the country. It’s easy to assume that PUCP is blacklisted because it is a Catholic school, but in reality all high-cost universities are banned.

    It’s a given that Peruvian students studying at the most prestigious universities are likely to be financially secure the remainder of their lives. If the church weren’t so parsimonious with its endowment model, perhaps it could afford to send more LDS students to these better institutions, thus bettering their lives and boosting tithing revenue.

    In practice, Peruvians taking advantage of PEF are likely to only benefit if they choose to attend three-year institutes or trade schools. I am curious if anyone things otherwise.

    • Randy_Snyder

      I have no idea but thanks for the first hand insight. You seem to describe the discrepancy I often feel about what the church does and what it could do.

  • Ron Hill

    It’s no surprise that a religion formed and founded by a sociopath (BY was one too IMO) is a nest bed for sociopaths and sociopathic behavior.


  • Nancy

    The take home for me is that none of us ever knew what Mormon inc. did with any of the money we gave. The only thing this has done for me is not want contribute any money to any charity.

  • tooelecommuter_2011

    I recall sitting in the conference center, down close to front’n’center via tickets from a very high up connection, for this priesthood session. I immediately felt grateful to have been present to witness the announcement of such a great thing. As others have said, it was a real distinct moment in General Conference because it wasn’t the usual regurgitated drivel. In retrospect, this announcement served to reinforce my shelf, which at that time was being totally ignored by me anyway. Cut to 15 years later, and big surprise – it’s all a facade. So maddening.

  • gem2477

    My issue with this is the preference to church owned schools. If the person can make it to the united States to go to BYU, they can get a loan elsewhere. They don’t need the church to act as a bank.