The Carr Report: Paying for school to get a job to pay for school!

by Damon Carr, For New Pittsburgh Courier

I recently had a Financial Planning session with a client. Young married couple. They’re both 25-years old. They have one child. I was impressed with the fact that a couple so young would seek out a financial professional. They wanted to be better stewards of their money. Their goal was to get out of debt and increase their savings.

As I reviewed their financials, I was again impressed! Great household income, earning upwards of $80,000 per year. Low household expenses. They were debt free with the exception of $35,000 in student loan debt. They had disposable income of approximately $1,700 per month after accounting for all bills and lifestyle expenses.

I explained to them that every 40-year old and older person wishes they’d thought like them when they were 25. I told them the sky’s the limit. If you adopt the plan I’m going to lay out for you, you’re going to be debt free with mega money in the bank. They were ecstatic!!

I ran some numbers and showed them that if they paid X amount towards the student loans, they could have those student loans paid off in 17-months – far shorter than the 20-year payment term they were on! It was that exact moment when they started back peddling.

They have been taking advantage of the COVID induced Student Loan Forbearance. No payments! No interest accrual. They were hell bent on riding it out until the end. I listened to their reasoning intently. I explained that if your goal is to get out of debt as soon as you can, why wait? You’re gainfully employed with available resources to tackle this student loan sooner rather than later. Still, they wanted to ride out the Student Loan Forbearance.

My job is to guide, let them decide. I modified the numbers to account for their wishes. We joked about it then concluded our session.  After I hung up with them, I created a meme.  The meme included a picture of an elderly lady well into her 80’s with a kodak smile and holding her thumbs up. The caption read, “30-years from now, people riding out those student loan forbearances are going like, STILL PAYING MY STUDENT LOANS!

I sent this meme to them. They called me back laughing loudly as they assured me, this will not be them. I then posted the meme on Facebook. This meme generated some interesting dialogue on Facebook.

Tasha chimes in, I want to return mine, I want a refund. I now owe $145,000!

Damon’s response: You think you got it bad? I recently talked to a girl with $80,000 in student loans with no degree. I’m reminded of a quote one of my friends’ mom told him. Boy you been going to school to long to be that dumb!

Autumn chimes in. I will die with them! Not to be outdone, Nicole says, I will die with them too! Once we have to start paying them back, I will continue to defer them! I have more years behind me than I have ahead of me. 

Nick, a guy with a Banking background replies to Nicole. You do realize, interest is still accruing while in deferment? Nicole assures Nick she got this.  She said she’s been doing deferments for years.

Gabriel chimes in. $5 – $20 per month for the rest of my life is cool by me.  She continues, if I live to be 100 years old, paying $10 per month or $120 per year for 60- years is better than paying the $60,000 balance I owe. I’m a nurse, they better forgive it soon.

Damon’s response: Gabrielle, It sounds like you’re on an income based repayment plan – with a bonus being: You work in a specific area or specific industry for so many years and make timely payments for 10-20 years, the balance remaining on your federally backed student loan will be forgiven.

Damon continues: Here’s why I find this interesting.  People in general don’t trust the government – Black people surely don’t trust the Government! But people of all hue are trusting the Government when they tell them that they will Forgive a portion of their Federal Student loans! Shaking my head!

Interesting Facts: Those repayment plans with a loan balance forgiveness clause have been around for over a decade now. You have people who did exactly what was required to be eligible for forgiveness. Millions of people applied for student loan forgiveness.  Less than 1% of those who applied for student loan forgiveness actually had their loan forgiven. I hope it works out for you!

Donna chimes in. People on this thread are going to be so very very sad. We were told “student loans can only be forgiven if you are permanently disabled or DEAD” (cue scary music.) This administration JUST forgave loan debt for the permanently disabled. Default on your student loans could get you fired or unable to find a job. I have worked for the government since 1998, paid my loans religiously, and still got turned down for PSLF forgiveness because I chose the “wrong” repayment plan back in 2001. The game is they WILL get their money! One sickness and you are in default. Your kids will have a hard time qualifying for sufficient funding for college because you won’t qualify for the Parent Plus Loan. They WILL get their money!

Damon here: Did you know COVID Induced Student Loan Relief – No Payments, No interest accrual, No debt collection ~ is being calculated as Student Loan Forgiveness? So…That forgiveness many are banking on may have already been forgotten!

Aside from mortgages, student loans are the largest debt category in America. Nearly 45 million people have student loans with an aggregate balance of $1.7 trillion.

I find it daunting that it cost approximately $233,000 to raise a child from birth to age 18.  Yet the average cost to pay for a child’s 4-year college education is approximately $100,000.

(Damon Carr, Money Coach can be reached at 412-216-1013 or visit his website @ www.damonmoneycoach.com)

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