College Investor with Robert Farrington
For the final season of Martinis and Your Money, I’m focused on delivering you the best of the best. The best of what I’ve learned over the past nine years of podcasting, the best guests, the best topics, and so much more.
This month, I’m focused on an important subject for over 43 million Americans: student loan debt. Because of COVID-19, the federal government gave student loan borrowers a three-year reprieve on payments; however, this month, they are returning.
Joining me today is Robert Farrington, America’s Millennial Money Expert and founder of the website The College Investor, to discuss what you need to know if you have student loans and also what parents of college-age children or soon-to-be college-aged children (like me) need to know to avoid student loans in their future.
What are we drinking?
Robert - Moscow Mule
Shannon - Gin and Tonic
Podcast Notes
Preparing for Return of Student Loan Payments
The first and most important step is to get organized.
Log into studentaid.gov and your loan provider. Check to see if your contact information is current. If your student loan provider changed, studentaid.gov will have that information. Updating this info ensures you won’t miss any critical communications.
A lot has changed in the last few years, and new repayment options are available. If your upcoming payment gives you sticker shock, don’t panic! Take time to explore all the options.
The SAVE Plan
For most borrowers, the new SAVE plan will be the best option. It sets your monthly payment at a percentage of your AGI and has the potential to cut your current payments in half.
Phase two of the SAVE plan, starting next summer, is designed to further reduce payments and change requirements for certain types of forgiveness.
If your payments are $0, each month counts towards the required time for loan forgiveness. You can make $0 payments for 20 years and have your loans forgiven.
The true gift of this program is flexibility. The older IDR plans have more strict parameters, and this program will look and feel different.
For most folks, there are better options than paying extra toward their federal student loans. Paying the government the least amount possible and maximizing forgiveness options is a fantastic strategy.
Time to Take Action
If you cannot pay, there is a 12-month on-ramp period where you can request forbearance on your loans for an additional year. The interest will continue to grow, but you won’t have to make payments.
Thanks to the COVID forbearance and extensions on that pause, it’s been three years since most borrowers have had to pay their student loans.
Unfortunately, there is no statute of limitations for federal student loan delinquency. The government has the strongest collection powers, and they will just take the loan amount and more, creating a vicious cycle.
With all of the changes over the last few years, now is the best time to take action, especially if you were delinquent in the past. Fresh Start is a new program designed to help borrowers get back on track.
Student loans are a completely different type of debt, so you have to approach paying them back differently. There is flexibility with your federal loans; the worst thing you can do is not take action.
Planning and Paying For College
Many borrowers don't truly understand the full implications of the loans when taking them out, which can cause challenges and resentment after graduation. College debt has become normalized over the last two decades, but there are ways to plan ahead and minimize the need to take out large loans.
Education is an amazingly powerful tool, and there are many ways to obtain an education. College is about networking and showing your diploma to future employers, but you can learn anything you want online.
When planning for college, a great mindset is, "How can I spend the least money to get the credentials I need to do the work I want to do as quickly as possible?"
Public colleges are only affordable if you are getting in-state tuition. Being an out-of-state student at a public college is incredibly expensive.
Planning for the Whole Experience
The school will provide financial aid packages, which include scholarships, grants, and federal loans. These are all just part of the package and may not cover the entire cost. This is where parent loans and private loans come into play. In general, it's best to avoid private loans.
Most aid and scholarships are front-loaded, so the first year of school will likely be your least expensive year. It's important to consider the cost for all four years of school and the stipulations for repeat scholarships.
When choosing a college, it's smart to consider both the academic side and your family's finances. Just like you keep a 'dream' and 'backup' school in mind for your studies, you should do the same regarding your finances.
College will be a fantastic experience no matter where the student ends up. We highly encourage family members to be responsible on behalf of the kid when prioritizing financial health and planning for college.
Don't be intimidated by paying for college. There are scholarships and opportunities for students in athletics, academics, and all types of specific groups. It's about planning, being intentional, and using all the available tools.
It's a good idea for parents to save for their kids' education if they can. 529 accounts are the most popular. The great thing is that 529 plans are becoming more flexible and can be used for more than just college.
Takeaway: My biggest takeaway is the importance of focusing on your student loans. I know you hate them and I know they suck, but unfortunately, like death and taxes, they are something you can’t avoid, especially with the taxing power of the federal government hanging over them.
Random Three Questions
If you were gonna start another blog or website, what would it be?
What is something you’re currently streaming?
If this was your last meal on earth, what would it be?
Connect with Robert & The College Investor
Website: thecollegeinvestor.com
Podcast: The College Investor Podcast
Instagram: @thecollegeinvestor
Youtube: The College Investor
Resources:
If you have any topics you would like me to cover on this podcast, or if you’d like to get in the financially naked hot seat, I encourage you to email me at Shannon@fingyms.com, or join the private Martinis and Your Money Facebook Page, and let me know what you want to hear.
In addition to hosting this show, I’m the founder and CEO of The Financial Gym. We are celebrating 10 years of this journey, and now, more than ever, I see the importance of the work we do every day. Rising inflation, the return of student loan debt, high interest rates on mortgages, and volatile stock markets make it a time when you need a best financial friend to help you make the best choices.
At Financial Gym, you get paired with a Certified Financial Trainer, who we call your BFF. Our team has coached clients through every financial season, whether they were living paycheck to paycheck or headed into Financial Independence and retirement.
To celebrate the final season of Martinis and Your Money, listeners can get 20% off of one-on-one training services. So what are you waiting for? Head over to financialgym.com to get started today. Our warm-up calls are free of cost and judgment.