Today we had a financial budgeting class and this is one of the things we found out:
Educational loans: The BIGGEST problem that the financial advisor deals with the clients that come to his office and many in the midst of a sobbing so real that its as if they were children. (USA)
Things of note: 1.56 TRILLION dollars in educational debt. What people don't know is: The difference between this debts and other debts you CANNOT DECLARE BANKRUPTCY with this debt. It follows you wherever you go and whatever you do.
88% of these people leave college with a $44,000 dollar debt AVERAGE
Interest 5-7% rate
Biggest problem is that people don't pay and the amount increases.
Two main programs to eliminate student loan debt:
1) Make a payment for 10 years WITHOUT MISSING ONE PAYMENT and the balance will be forgiven. 33,000 applied and 19 people achieved it.
2) Income Based Repayment, your student loan payments are capped at 10% to 15% of your discretionary income. After making consistent payments under IBR for 20 or 25 years (terms depend on when you borrowed), any remaining loan balance will be forgiven. (what they don't tell you is that they will issue you an income statement of the balance that year and will then owe the IRS all the taxes on that income) So if you knocked off $100,000 you immediately owe the IRS a minimum of $25,000.
What did he suggest?
Educational loans: The BIGGEST problem that the financial advisor deals with the clients that come to his office and many in the midst of a sobbing so real that its as if they were children. (USA)
Things of note: 1.56 TRILLION dollars in educational debt. What people don't know is: The difference between this debts and other debts you CANNOT DECLARE BANKRUPTCY with this debt. It follows you wherever you go and whatever you do.
88% of these people leave college with a $44,000 dollar debt AVERAGE
Interest 5-7% rate
Biggest problem is that people don't pay and the amount increases.
Two main programs to eliminate student loan debt:
1) Make a payment for 10 years WITHOUT MISSING ONE PAYMENT and the balance will be forgiven. 33,000 applied and 19 people achieved it.
2) Income Based Repayment, your student loan payments are capped at 10% to 15% of your discretionary income. After making consistent payments under IBR for 20 or 25 years (terms depend on when you borrowed), any remaining loan balance will be forgiven. (what they don't tell you is that they will issue you an income statement of the balance that year and will then owe the IRS all the taxes on that income) So if you knocked off $100,000 you immediately owe the IRS a minimum of $25,000.
What did he suggest?
- Do NOT get a student loan. Work and pay as you go. His 10 richest clients did not graduate. Yes, his top 100 clients, many have degrees -- not against education but rather you don't have to get into debt $200,000 and then be saddled for decades in debt. (He worked and got his degree)
- Get a working budget
- There are now 100 million new millionaires in the US. People who just budgeted and worked -- not inherited
- Don't buy a new car until you are a millionaire
- Invest
- Don't get ANY debt except a house mortgage.
