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Student Loans: UGH! · Stuff You Should Know

0:01
Speaker 1: Welcome to Stuff You Should Know, a production of My
0:03
Speaker 1: Heart Radios How Stuff Works. Hey, and welcome to the podcast.
0:12
Speaker 1: I'm Josh Clark. There's Charles W. Chuck Bryan over there,
0:15
Speaker 1: there's Dave c the guest producer extraordinaire. That's right, Um,
0:21
Speaker 1: and this is stuff you should know about. Wait, don't
0:25
Speaker 1: go anywhere student loans now, really don't go anywhere. Yeah,
0:29
Speaker 1: this is uh, this is pretty dry. I mean, we'll
0:33
Speaker 1: add our funnies. I know we won't. We'll add our
0:37
Speaker 1: funnies like we always do. But uh, there's no getting
0:41
Speaker 1: around it that this is one of those stuff you
0:42
Speaker 1: Should Know episodes that sort of falls under the banner
0:45
Speaker 1: of p s A a little public service announcement for
0:49
Speaker 1: people to learn about something that they may not get.
0:52
Speaker 1: But it's just not scintillating. How's that to drive people away?
0:56
Speaker 1: I really think you're you hooked him for sure. No,
0:59
Speaker 1: listen for the funnies. And hey, man, if you're out
1:02
Speaker 1: there and you don't understand student loans, don't know what
1:06
Speaker 1: you're getting into, your high school student, or if you're
1:09
Speaker 1: already drowning in debt, already drowning in debt, we'll pay
1:12
Speaker 1: that debt for you to send us an email with
1:15
Speaker 1: your monthly bills and we'll pay them all on. Now.
1:17
Speaker 1: That should really clear up a lot of that stuff though,
1:18
Speaker 1: because um, it's it's not complicated, but there's just a
1:22
Speaker 1: lot to it. Yeah, but like the how we got
1:25
Speaker 1: into this place, because yes, there's student loans and applying
1:29
Speaker 1: for student loans and you know what you should know.
1:32
Speaker 1: But then there's also what you should know about after
1:34
Speaker 1: that when you join this forty five million clubs student
1:40
Speaker 1: loan debt holders or debt owers. Um. Who oh, like
1:44
Speaker 1: one point six trillion dollars worth of debt and like
1:48
Speaker 1: a lot of that, about a trillion of it I
1:51
Speaker 1: think a little less than a trillion has been generated
1:55
Speaker 1: since two Yeah, I mean there are a lot of
1:58
Speaker 1: progressives in this country. That's a you want to really
2:02
Speaker 1: kick start the economy in a long, permanent way, just
2:05
Speaker 1: forgive all these student debts. Yeah, and other people say
2:09
Speaker 1: you're a communist. Some people do. Um, yeah, you know.
2:14
Speaker 1: I should go ahead and preface this with my personal experience.
2:18
Speaker 1: I did not get a student loan. I went to
2:21
Speaker 1: school and college. You were a little behind me, but
2:25
Speaker 1: it wasn't as big of a thing back then. No,
2:27
Speaker 1: I saw in the nineties that average student loan debt
2:30
Speaker 1: for a bachelor degree, not a year, not a minute,
2:35
Speaker 1: a bachelor's degree was nine grand. Yeah, college used to
2:38
Speaker 1: be a lot cheaper. Um. State universities are still, you know,
2:42
Speaker 1: not the most expensive. But when I was going to
2:44
Speaker 1: University of Georgia, dude, it was like tuition for a
2:48
Speaker 1: full load for a quarter was something like six dollars.
2:52
Speaker 1: Not that much money in like pot, especially at Georgia's.
2:57
Speaker 1: So when my parents got to worced that part of
3:01
Speaker 1: the divorce was them, uh selling a couple of things,
3:04
Speaker 1: like we had an airstream camper and not like things
3:08
Speaker 1: that clearly the family wouldn't be using anymore. Uh. And
3:11
Speaker 1: so they agreed, like, let's sell these couple of things.
3:14
Speaker 1: And Chuck's the last one going through because my brother,
3:17
Speaker 1: of course had an academic scholarship. Of course, I didn't
3:19
Speaker 1: have to pay for anything. Uh, Chuck's he needs that
3:23
Speaker 1: money for school because he's not getting anything. He needs
3:25
Speaker 1: that camper money. I needed that camper money. So they said,
3:29
Speaker 1: let's put that in an account for Chuck to go
3:30
Speaker 1: to school. Uh. That lasted me a two or two
3:34
Speaker 1: or three years. Camper money did yeah, because Georgia was
3:38
Speaker 1: so cheap. It was a heck of a camper two Okay,
3:42
Speaker 1: but yeah, Georgia was really cheap and I was in
3:45
Speaker 1: living there was cheap and books were pretty cheap. Uh
3:47
Speaker 1: So that lasted me a few years. And then after that,
3:50
Speaker 1: I just, um, you know, I've been working since I
3:52
Speaker 1: was thirteen. Anyway, I was gonna say, you had a
3:55
Speaker 1: job throughout the yeah, totally. Um, And I just kept
4:00
Speaker 1: paying for my college after that. It wasn't like some
4:03
Speaker 1: big like, hey, I'm gonna pay for my school starting
4:05
Speaker 1: from now. I was just like, well, that money's gone,
4:07
Speaker 1: so I need to I'm not gonna ask my parents
4:09
Speaker 1: for it. Like I've been working since I was a teenager.
4:11
Speaker 1: They sold their camper, so I'll just keep working and
4:14
Speaker 1: pay for my my remaining education. And it was not
4:17
Speaker 1: that big of a deal. I live very well in college.
4:19
Speaker 1: You know what that's called is pulling yourself up by
4:22
Speaker 1: your bootstraps nineties style. I don't even feel like it
4:25
Speaker 1: was though. I was just like, hey, I wait tables
4:26
Speaker 1: and make pretty good money. I can afford that six
4:29
Speaker 1: hundred bucks a quarter. The thing is is like the
4:32
Speaker 1: idea of being able to live as a college student
4:37
Speaker 1: and pay for college and feel like you're doing fine
4:40
Speaker 1: waiting tables is it's just outrageous, outlandish everything. I cannot
4:48
Speaker 1: imagine leaving Georgia with thirty thousand dollars of student debt.
4:54
Speaker 1: I cannot imagine that. And that's well, that's one of
4:57
Speaker 1: the things that makes all of those people who say
4:59
Speaker 1: like whiners, you took out these loans, you owe them.
5:02
Speaker 1: We paid off our student loans when we went to school.
5:05
Speaker 1: All those older people who are saying that are missing
5:07
Speaker 1: the point that college has gotten way more expensive than
5:12
Speaker 1: the last ten about tennis years for um a lot
5:16
Speaker 1: of different reasons, but it turns out largely because of
5:19
Speaker 1: an Obama era initiative to make higher education accessible to
5:23
Speaker 1: more people. There were just a couple of safeguards that
5:26
Speaker 1: were put in place that really let this thing run
5:28
Speaker 1: rampant um. And that if you say, like like I
5:32
Speaker 1: paid off my student loans with no problem, why can't you,
5:35
Speaker 1: you're missing the point that that it's different. It's a
5:38
Speaker 1: different world now. Things are different, and it used to
5:41
Speaker 1: be before. When you had your first real piece of
5:46
Speaker 1: life long or long term debt. It was a mortgage
5:49
Speaker 1: for a house. You were paying for that house, and
5:52
Speaker 1: you were virtually guaranteed that at the end of that mortgage,
5:55
Speaker 1: that last mortgage payment, what you paid for that house
5:59
Speaker 1: was going to be less than what the house was worth.
6:01
Speaker 1: Then it was an investment. Now we're putting out teenagers
6:07
Speaker 1: into the world who have in some cases mortgage level
6:11
Speaker 1: debt um without having any income yet whatsoever. And when
6:17
Speaker 1: they pay off that last bit of debt, there's nothing
6:21
Speaker 1: that was a value necessarily associated with it because they
6:24
Speaker 1: had to get a college degree just to try to
6:27
Speaker 1: get a job. Whereas before it was like you got
6:31
Speaker 1: a college degree, and you you automatically, we're going to
6:34
Speaker 1: get a good paying a job. Are certainly a better
6:36
Speaker 1: paying job than you would have gotten with the high
6:38
Speaker 1: school diploma. It's a different world now, definitely, you probably
6:41
Speaker 1: don't get a student one either. Did you know, I
6:43
Speaker 1: luckily didn't need them. They had the Oh what was
6:48
Speaker 1: that the lottery paid for? Yeah? I think when you
6:52
Speaker 1: came along, that was in place. That started right as
6:55
Speaker 1: I was leaving. I think first year for me, was
6:57
Speaker 1: it the pel or was it it was the Georgia
6:59
Speaker 1: lottery pay for it? Uh? Man, I can't remember. I
7:02
Speaker 1: can't remember the name of it either, but it was
7:04
Speaker 1: a kind of grant that like like, yeah, you had
7:06
Speaker 1: basically a free ride in school if your d p
7:08
Speaker 1: A was high enough at an in state school, that's right,
7:12
Speaker 1: great deal. Yeah, and if you are a student, hope, Hope,
7:15
Speaker 1: that's it, hope, because I just remembered all of the
7:18
Speaker 1: parents saying you better not lose that Hope grant. I
7:21
Speaker 1: think it was like it was at three point or something,
7:22
Speaker 1: three point to something like that, because something definitely attainable.
7:27
Speaker 1: So uh, I mean our first bit of advice, We're
7:30
Speaker 1: gonna pepper some advice in here as old old dudes. Oh,
7:33
Speaker 1: so I should say shout out to my dad. He
7:36
Speaker 1: once I inevitably lost the Hope grant, he stepped in
7:38
Speaker 1: and helped pay for college for me. Yeah, the herbal Elvis.
7:43
Speaker 1: So uh, we want to give out a few pieces
7:47
Speaker 1: of advice here and there. Um, avoid taking student loans
7:50
Speaker 1: if you can. Yeah, try and get as much free
7:53
Speaker 1: money as you can, grant scholarships. What I don't get
7:56
Speaker 1: is why so many parents of these children didn't set
8:02
Speaker 1: them up for college. What do you mean start saving
8:05
Speaker 1: for college? Like by the time my daughters graduating high school,
8:09
Speaker 1: all her college is going to be ready to go.
8:12
Speaker 1: So if she wants to go to college. Um. One
8:15
Speaker 1: of the things that this this Obama era initiative to
8:19
Speaker 1: expand higher education, one of the purposes of it was
8:23
Speaker 1: to make it so that people lower income families, um,
8:28
Speaker 1: had an easier opportunity to go to college. Yeah. So
8:33
Speaker 1: they basically said, come all, who want to borrow money
8:36
Speaker 1: to go to college, regardless of your ability to repay, well,
8:41
Speaker 1: go finish. But I want to amend my statements to
8:43
Speaker 1: go ahead and so so. Um. A lot of people
8:48
Speaker 1: who started to get to go to college, their families
8:51
Speaker 1: didn't have any money to put them through school. So um,
8:55
Speaker 1: they I think for people whose parents have been planning
8:58
Speaker 1: for very little change. But it was that an entire
9:02
Speaker 1: tranche of Americans that hadn't really had much access to
9:07
Speaker 1: higher education all of a sudden did starting in two
9:10
Speaker 1: thousand ten. Yes, to be crystal clear, was not talking
9:14
Speaker 1: about those people. Did their parents just set them up?
9:18
Speaker 1: Romney thing right, remember when he said that. No, he
9:21
Speaker 1: was like, why don't you just go borrow the money
9:23
Speaker 1: from your parents? When he was binders full of women. Uh,
9:27
Speaker 1: was that Romney who had binders. Um, now I'm talking
9:31
Speaker 1: about the the tranche of kids whose parents could afford
9:36
Speaker 1: to save money for their kids college and did not.
9:41
Speaker 1: I don't know. I think one of the other things,
9:43
Speaker 1: maybe there are a lot of parents who are like,
9:44
Speaker 1: you know what, this is your education, you pay for
9:46
Speaker 1: it yourself. I think there are also a lot of
9:48
Speaker 1: selfish people in that generation of parents, narcissists too. Uh,
9:54
Speaker 1: did not plan for that stuff for their children because
9:57
Speaker 1: they were busy taking care of themselves, but they blew
9:59
Speaker 1: it all on. Hey. I don't know, man, I'm not
10:06
Speaker 1: I'm not saying that, but I just want to make
10:08
Speaker 1: it clear. I was not talking about less fortunate people
10:11
Speaker 1: that are totally now able to go to school. I
10:13
Speaker 1: think that was good that you amended that. But if
10:16
Speaker 1: anybody didn't know that that you weren't saying that, they
10:19
Speaker 1: haven't listened to stuff. You should know very that's true.
10:21
Speaker 1: We haven't even started this podcast. It's gonna be three
10:24
Speaker 1: hours long. No, we'll we'll blaze through this. Uh. There
10:28
Speaker 1: are different types of student loans. The main two big
10:32
Speaker 1: groups are federal student loans and then private sector student
10:35
Speaker 1: loans and so so again, after you've exhausted all chances
10:39
Speaker 1: for grant scholarship, any kind of free money, and you
10:42
Speaker 1: turn to right the first ones you want to turn to,
10:45
Speaker 1: or the federal governments, because the loans you get from
10:47
Speaker 1: them are top quality as far as your being a
10:51
Speaker 1: borrower is concerned. That's right. And there are a few
10:54
Speaker 1: different kinds of those. They are direct subsidized, direct unsubsidized,
10:58
Speaker 1: and direct plus plus is capitalized all the way across
11:02
Speaker 1: subsidized direct loans. Um, the Department of Education as your lender.
11:07
Speaker 1: I didn't know any of this stuff. Well it's new, yeah,
11:09
Speaker 1: I mean, I was just surprised at some of this stuff.
11:11
Speaker 1: But it's not I'm sorry, it's not new. These member
11:14
Speaker 1: stafford Stafford loans. Yeah, that's what they used to call
11:18
Speaker 1: direct loan. Okay, I remember, it's basically the same thing,
11:20
Speaker 1: but it's just radically expanded since two thousand ten. Okay,
11:24
Speaker 1: So I don't I don't feel as old as I thought. So, Um,
11:29
Speaker 1: the Department of Education is going to cover the interest
11:31
Speaker 1: under a few circumstances. And the interest is you're gonna
11:34
Speaker 1: hear that word a lot. That's a big deal with
11:36
Speaker 1: any kind of loan or credit that you get. That's
11:39
Speaker 1: that's where they get you. And this is specifically the
11:41
Speaker 1: direct subsidized loan that they will cover the interest. That's
11:44
Speaker 1: right if uh, you were in school at least part time. Uh,
11:49
Speaker 1: that is one during the first six months after you
11:51
Speaker 1: leave school. Don't you have to graduate, but you've either
11:55
Speaker 1: graduated or disenrolled or whatever unenrolled been dishonorably question rulled
12:03
Speaker 1: or if your loans are in deferment um. Only undergraduates
12:07
Speaker 1: can get these. They are based on financial need and
12:10
Speaker 1: the school is going to say how much you can borrow.
12:13
Speaker 1: You can't just say like, yeah, tuition's ten grand, but
12:16
Speaker 1: i'd really like thirty. Well even if even if you
12:18
Speaker 1: could do that, these things are capped because the interest
12:22
Speaker 1: is covered by the Department of Ed, like you were saying,
12:24
Speaker 1: which is a big deal. So if you go to
12:26
Speaker 1: school full time for four years and get your bachelor's degree,
12:30
Speaker 1: that whole time, you're not accruing a penny of interest. Yeah,
12:34
Speaker 1: and that's a big, big deal, huge deal. But there's
12:37
Speaker 1: a cap on this on the amount that you can
12:39
Speaker 1: borrow if you're a dependent student, meaning that your parents
12:43
Speaker 1: still claim you as dependent on their taxes and they
12:46
Speaker 1: could conceivably help you out or whatever. They don't have
12:49
Speaker 1: campers to sell exactly, or they've sold all the campers
12:52
Speaker 1: and now they're tapped out. Um, you can conceivably borrow
12:56
Speaker 1: UM thirty five hundred dollars and have it be subsidized.
13:03
Speaker 1: And I think over the course of your college career
13:06
Speaker 1: it's something like, uh twenty three thousand dollars or something. No,
13:11
Speaker 1: I'm sorry, it's UM thirty one thousand dollars for a
13:15
Speaker 1: four year degree. UM that could possibly be subsidized, which,
13:20
Speaker 1: as we'll see, is not enough to cover a four
13:22
Speaker 1: year degree basically anywhere these days. I didn't I didn't
13:26
Speaker 1: tell you what the second thing they sold though. By
13:27
Speaker 1: the way, we had a food truck. What this is
13:33
Speaker 1: pre food truck. It was a trailer. Didn't even call
13:35
Speaker 1: it a food truck. You know what it was called?
13:37
Speaker 1: What the food factory? What? What kind of food? So
13:41
Speaker 1: my dad and my mom would go to these arts
13:43
Speaker 1: and crafts festivals and set up and sell like hot
13:45
Speaker 1: dogs and hamburgers and popcorn and stuff. And they still
13:48
Speaker 1: got a divorce after that kind of experience together. Some
13:52
Speaker 1: might say it had a direct correlation burned the popcorn again.
13:57
Speaker 1: So they sold the airstream in the food factory. Wow,
13:59
Speaker 1: we so would they sleep in the air stream and
14:02
Speaker 1: the food factory would tow the air stream? No? No, no,
14:04
Speaker 1: these were just local things. She goes set up for
14:07
Speaker 1: the weekend at the Yellow Daisy Festival in sal hamburgers
14:09
Speaker 1: all weekend to rednecks. Did they do it for fun? No,
14:12
Speaker 1: they did it to make money. My dad was always
14:13
Speaker 1: trying to make extra money. He always had these, Uh.
14:16
Speaker 1: I don't know about get rich quick schemes because they
14:18
Speaker 1: weren't but make a just enough money to cover the
14:22
Speaker 1: cost schemes. Yeah, he was great schemes. Yeah, it's funny.
14:26
Speaker 1: My brother's kind of the same way, but he's actually
14:28
Speaker 1: smart and uh and it does make money on the side,
14:34
Speaker 1: I said, way too much direct unsubsidized Our Wikipedia page
14:40
Speaker 1: so annoying. Uh, these unsubsidized direct loans you can get
14:44
Speaker 1: undergraduate and graduate students. Uh, they're not based on your
14:48
Speaker 1: financial need, even though the school is still going to
14:50
Speaker 1: say how much you can borrow. It can't be more
14:54
Speaker 1: than the costs to attend the school obviously, Um, and
14:58
Speaker 1: the interest rate is probably pretty low, but you are
15:01
Speaker 1: going to pay interest and they're accruing interest over the
15:04
Speaker 1: life of the loan. Um. That's a big deal. It's
15:09
Speaker 1: it's basically like like you're it's you're still accruing interest.
15:14
Speaker 1: So it's like a regular loan. But what makes it
15:17
Speaker 1: so much more attractive than say, like a private loan,
15:20
Speaker 1: which we'll talk about, is that the interest rate is
15:23
Speaker 1: fixed and it's low. The government's like, we're not trying
15:27
Speaker 1: to like screw you over anything like that. We're gonna
15:30
Speaker 1: loan you money. It's still alone, but we're gonna make
15:32
Speaker 1: the terms pretty good to just bend over and we'll
15:35
Speaker 1: make a deposit. You're still going to Wow. We where
15:39
Speaker 1: they're like teens getting ready for college listening to this
15:42
Speaker 1: with their parents right now. They get it. Yes, kids,
15:45
Speaker 1: ask your parents what Chuck just meant. They get it. Um. Okay.
15:48
Speaker 1: So there's direct subsidized, there's direct unsubsidized, and then there's
15:52
Speaker 1: the one that comes from the federal as that most
15:54
Speaker 1: resembles like a regular private lender bankload. That's the direct
15:59
Speaker 1: plus loan. Do you know what plus stands for? No?
16:02
Speaker 1: I should have looked that up. This is a house
16:05
Speaker 1: stuff Works article. By the way, very thorough. Um, I
16:09
Speaker 1: wasn't telling you I want to know to Uh, all right,
16:13
Speaker 1: so you look that up, but rare in show look up, Um,
16:18
Speaker 1: federal student loans. These are the direct plus. They are
16:20
Speaker 1: federal student loans UM borrowed by your parents or if
16:25
Speaker 1: you're a graduate student or a professional student. Let's say,
16:29
Speaker 1: what is it parent loan for undergraduate student whether you
16:34
Speaker 1: have it? Okay, but it doesn't really make sense in
16:36
Speaker 1: a second, Uh, really what am I missing? Then? Just
16:40
Speaker 1: go ahead? Okay, Um, if your parents are eligible, is
16:44
Speaker 1: just going to be based like your regular loan, on
16:45
Speaker 1: their their credit score and that kind of thing, and
16:49
Speaker 1: the cost of attendance where you're going to be going
16:52
Speaker 1: to school or enrolling in school is going to set
16:55
Speaker 1: that limit again kind of like the other ones. But
16:59
Speaker 1: your parents are just king this loan and these are unsubsidized,
17:02
Speaker 1: so they're unsubsidized. You can also borrow for an entire education,
17:06
Speaker 1: and you can also use them not just for undergrad
17:09
Speaker 1: but for graduate school too, which is why it doesn't
17:12
Speaker 1: make sense because the grad plus loan means graduate parent
17:16
Speaker 1: loan for undergraduate students. Somebody didn't think that one through. Um,
17:21
Speaker 1: Thanks Obama, but with with the with the plus loans um,
17:25
Speaker 1: that cost of attendance is a really big deal. And
17:29
Speaker 1: it's true with any loan. Every school you go to
17:33
Speaker 1: has the cost of attendance. And every year they calculate
17:36
Speaker 1: how much it costs for everything, for tuition, fees, books, transportation,
17:42
Speaker 1: room and board, everything, how much it will cost the
17:46
Speaker 1: out of the person pot um to go to the
17:51
Speaker 1: school for a year. But the problem and you can
17:53
Speaker 1: borrow up to that amount. You can't borrow pass to
17:56
Speaker 1: each borrow up to that amount. So you can say
17:57
Speaker 1: I'm borrowing and I don't need to spend a penny
18:00
Speaker 1: other than what I borrowed. The problem is is it
18:02
Speaker 1: may cost you less to go to school than that
18:06
Speaker 1: average amount, and so you've borrowed up to that amount,
18:10
Speaker 1: which means you're paying interest on money you don't need.
18:13
Speaker 1: And there's when you get these loans. There's a lot
18:16
Speaker 1: of different things, a lot of different processes there that
18:19
Speaker 1: it's going to go through. But the upshot of all
18:21
Speaker 1: of them is it doesn't come to you. It goes
18:24
Speaker 1: to the school. Never knew that. I didn't either, But
18:27
Speaker 1: the school says, okay, let's deduct for this and this
18:29
Speaker 1: and this, and oh, they have the scholarship, so we
18:32
Speaker 1: can take that out. They have this grant, we can
18:34
Speaker 1: take that out, and let's say that there's some money
18:38
Speaker 1: left over there. Then they will send you a check
18:41
Speaker 1: or deposit it directly into your account. But when they
18:44
Speaker 1: do that, you would be very wise to say, no, no, no,
18:48
Speaker 1: you guys, hold onto this. I'm gonna use it for
18:50
Speaker 1: next year. You can just roll that right on over.
18:53
Speaker 1: That's the best thing you could do with a bad situation.
18:57
Speaker 1: And the reason it's a bad situation is because you
18:59
Speaker 1: have borrowed too much and now you're paying interest on
19:04
Speaker 1: money that's just sitting there for a year in the
19:07
Speaker 1: school's coffers. They're actually making money off of that interest.
19:10
Speaker 1: You're paying interest on that money you're not using until
19:12
Speaker 1: next year. So the best thing you can do is
19:14
Speaker 1: really try to calculate the best you can, down to
19:17
Speaker 1: the penny, how much money you really need to borrow,
19:20
Speaker 1: and borrow that amount and not just borrow the cost
19:22
Speaker 1: of attendance because it might be less than that. Yeah,
19:24
Speaker 1: is the school really making money on that? Sure? Yeah.
19:28
Speaker 1: Anytime any institution has money that they're holding, they make
19:31
Speaker 1: interest off of it. I didn't know if it was
19:33
Speaker 1: like an s grow situation. I don't know, alright, I
19:36
Speaker 1: don't know. That's a good point. So that's a great point.
19:40
Speaker 1: Oh I thought you were You said you knew for sure.
19:42
Speaker 1: You just were thinking, Hey, they got the money in
19:44
Speaker 1: the bank. They're making some money. Basically, like Tony from
19:47
Speaker 1: Jersey would think. So, Uh, here's the deal. If you
19:53
Speaker 1: some private schools are really really expensive. Uh, you might
19:56
Speaker 1: not be able even if you max out, you may
19:59
Speaker 1: not be able to cover the call of your school.
20:02
Speaker 1: Take it or leave it here some more advice from
20:04
Speaker 1: your uncle Chuck. Don't go to one of the schools. Yeah,
20:08
Speaker 1: just don't do it. Go to a school you can afford.
20:12
Speaker 1: Because you know what, it doesn't matter. The one thing
20:15
Speaker 1: I saw, get that college degree. How many people have
20:18
Speaker 1: been like, oh, well, I mean there are some prestigious schools,
20:23
Speaker 1: sure where that really does matter that them. I don't
20:27
Speaker 1: think it really matters. I think it's more than the
20:29
Speaker 1: networking that's available to you those schools. That's what they
20:33
Speaker 1: say is necessarily a degree these days, I think. But
20:38
Speaker 1: the thing is they go to a big state school
20:39
Speaker 1: with so many more students in such a bigger net
20:43
Speaker 1: the thing I saw that was, like, the most foolish
20:45
Speaker 1: thing you can do is to go to a state
20:48
Speaker 1: school that's out of state for you, because you get
20:53
Speaker 1: at that state school is going to be virtually identical
20:56
Speaker 1: to the education you get at the in state school,
20:58
Speaker 1: but you're paying three to four times as much for
21:01
Speaker 1: that same education. But your parents don't live an hour
21:03
Speaker 1: I guess so. I guess so. But surely there's another
21:06
Speaker 1: state school four hours away or two hours away or whatever.
21:10
Speaker 1: I get wanting to be a your parents or whatever.
21:12
Speaker 1: I totally get that, but like, figure out another way,
21:17
Speaker 1: Like going to a different state school is a not
21:19
Speaker 1: a good idea, agreed, And you know you can just
21:22
Speaker 1: flush all this advice down the toilet. Kids, But um,
21:25
Speaker 1: what you really shouldn't do, I think, is go to
21:27
Speaker 1: that super expensive private school that has like students because
21:32
Speaker 1: you're not. The networking opportunities there are so slim, you know. Well,
21:38
Speaker 1: they say that people who borrow for a litteral liberal
21:42
Speaker 1: arts degree um typically have the hardest time repaying it,
21:48
Speaker 1: even if they come from the socio economic class that
21:51
Speaker 1: is more likely to repay it, that could repay it
21:54
Speaker 1: because the wages don't pan out to be anything that
21:58
Speaker 1: that can really pay off a really so you have
22:00
Speaker 1: a really expensive education and then reading poetry. Yeah that
22:05
Speaker 1: that that that doesn't graduate well. And it's not all
22:08
Speaker 1: about money totally. I totally get that. Chuck gets that too.
22:12
Speaker 1: That's not that's not the point, and it's not the
22:14
Speaker 1: answer to to everything. Money is not the answer to everything. No,
22:18
Speaker 1: But having lifelong debt you will never get out from
22:22
Speaker 1: under is it's it's hard to fathom at age seventeen.
22:27
Speaker 1: And so hopefully your parents are worried about this and
22:31
Speaker 1: saying like, hey, you need to be thinking about this,
22:32
Speaker 1: you shouldn't do that, and giving you good advice. But
22:35
Speaker 1: if they're not, please please seriously sit there and consider
22:39
Speaker 1: whether what you're going to spend an astronomical amount of
22:43
Speaker 1: money on is actually worth it. Yeah, because it's not
22:46
Speaker 1: just about money. But having that mountain of debt at
22:50
Speaker 1: twenty one years old really narrows your opportunities in life.
22:54
Speaker 1: And if you might think it broadens opportunities to have
22:57
Speaker 1: gone to the school, but if you've got nine thousand
23:00
Speaker 1: dollars in student debt, you it narrows your opportunities. It
23:03
Speaker 1: just does. I'm not opportunities but on the paths that
23:06
Speaker 1: you might be able to take right, well, you're probably
23:09
Speaker 1: going to be in a situation where you don't have
23:11
Speaker 1: the luxury of saying I'm gonna wait for a better
23:13
Speaker 1: job offer to come along. You're gonna be like, just
23:15
Speaker 1: give me a give me a job please, They'll take whatever,
23:18
Speaker 1: and you're gonna be very unhappy. What's more, there's a
23:21
Speaker 1: really high likelihood that the more astronomical your debt and
23:25
Speaker 1: the lower your wages, that you're going to default on that,
23:27
Speaker 1: which we'll talk about later. But once you start defaulting
23:30
Speaker 1: on loans, then you really are on a hard path
23:32
Speaker 1: because credit opportunities are closed to you. Um, you get
23:36
Speaker 1: harassed all the time. There's just it's it's there. It's
23:39
Speaker 1: a lot. It's a bad jam. Bad things can happen
23:41
Speaker 1: if you owe people too much money, even the federal government.
23:45
Speaker 1: All right, we should take a break. But it's really
23:47
Speaker 1: occurring to me how smart we are and how every
23:49
Speaker 1: child in America needs to be listening to us. Now.
23:52
Speaker 1: All right, we're gonna come back right after this. And
24:25
Speaker 1: you just made me really nervous. All Right, kids, we're
24:28
Speaker 1: gonna catch some heat for this, aren't we we're gonna Nah,
24:30
Speaker 1: we're gonna talk because I've guaranteed their parents that are
24:32
Speaker 1: gonna be like, hey, you should listen to this. Yeah,
24:34
Speaker 1: you won't listen to me. Listen to Josh and Chuck
24:36
Speaker 1: your stupid heroes. You want to go to Sarah Lawrence.
24:38
Speaker 1: Listen to these guys. Don't blow it all on pot alright, Lawrence.
24:44
Speaker 1: So now we're talking about private loans. Where is Sarah Lawrence?
24:50
Speaker 1: Is that Massachusetts? It seems like a massachuse every schools
24:53
Speaker 1: in Massachusetts, isn't it. A lot of them are, Yeah,
24:57
Speaker 1: they are all. That's one of the great spinal tap
24:59
Speaker 1: joke is uh when they talk about canceling a Boston show,
25:04
Speaker 1: they say, oh, sorry, it's not a big college down
25:10
Speaker 1: so uh and you finally saw it, right, I've seen
25:13
Speaker 1: it before. Yeah. I don't know why you can't take
25:15
Speaker 1: this kernel of information and subsume it into your general's
25:20
Speaker 1: awere and subsumed. So private loans um you there are
25:25
Speaker 1: a bunch of little bells and whistles that a private
25:27
Speaker 1: lender can offer you that a federal government loan will not.
25:31
Speaker 1: They can be like, hey, we'll knock off a little
25:34
Speaker 1: quarter for a percentage point if you sign up for
25:36
Speaker 1: auto pay. If you refer people, you might get a
25:39
Speaker 1: little kicked back. The guys they send to your house
25:42
Speaker 1: to break your legs are usually really well dressed and polite.
25:45
Speaker 1: If you pay on time, you might get a little
25:47
Speaker 1: discount along the way. So they're they're a little fun
25:51
Speaker 1: things like that that they can do that the federal
25:53
Speaker 1: government does not do or can't do. Maybe uh, sometimes
25:57
Speaker 1: they say you can defer this until you graduate six
25:59
Speaker 1: months after UM. We'll talk about defermance in more detail
26:03
Speaker 1: in a minute. But it's also a private lender, so
26:08
Speaker 1: the only thing they care about is taking your money, sure,
26:12
Speaker 1: and they know how to get They know how to
26:14
Speaker 1: lend it, and they know how to get it. One
26:17
Speaker 1: of the other things the other cons about UM going
26:20
Speaker 1: to a private lender for a loan is like they
26:22
Speaker 1: might say, no, you can't have it. That's a huge
26:25
Speaker 1: distinction UM from a federal loan. The federal government analyzes
26:29
Speaker 1: your ability to pay UM. As a kid, you're they're
26:33
Speaker 1: just gonna say, yes, fine, come on in, here's your money.
26:36
Speaker 1: If it's a plus loan and your parents are on
26:38
Speaker 1: the hook, they don't look at your parents credit score.
26:41
Speaker 1: They don't look at your parents debt to income ratio,
26:44
Speaker 1: meaning essentially their ability to repay the loan. I think
26:47
Speaker 1: they do look at their credit score. They look at
26:49
Speaker 1: their credit worthiness, and there's a big difference. Basically, they
26:52
Speaker 1: look to see do your parents have any negative reporting
26:55
Speaker 1: on them? Have they defaulted on other ones in the past. No, great,
26:58
Speaker 1: we don't need any other Yeah, I see what you mean.
27:01
Speaker 1: Not No, they pay their bills, but they also only
27:03
Speaker 1: have five percent of their income left after bills are paid.
27:06
Speaker 1: And this is a horrible hardship for uce. But please
27:08
Speaker 1: lend us the money. Anyway, a private lender is gonna
27:11
Speaker 1: be like your parents that the income ratio is too high.
27:13
Speaker 1: We're not gonna We're not gonna give you this or
27:15
Speaker 1: I hate to break it to the seventeen year old,
27:17
Speaker 1: but your parents are in a really bad financial situation.
27:20
Speaker 1: They had to sell the food truck and the airstream
27:23
Speaker 1: put you through. That's right, So the private lender may
27:26
Speaker 1: turn you down. That's another con too. Yeah. Um, you
27:29
Speaker 1: can get a co signer, of course. This is when
27:31
Speaker 1: you get um like usually when your parents on board
27:34
Speaker 1: or something. Um there of course on the hook court,
27:36
Speaker 1: just like they it is their loan, But lenders offer
27:41
Speaker 1: a couple of different things. You can get a fixed loan,
27:44
Speaker 1: you can get a variable loan. Those variable ones, you know,
27:47
Speaker 1: if anyone learned anything from the housing UH crisis, they
27:52
Speaker 1: can be very dangerous because they're based on a couple
27:55
Speaker 1: of things. The lib or London Interbank offered rate UH
28:00
Speaker 1: and the prime rate. And that's when if you have
28:02
Speaker 1: like the best credit in the world, you're going to
28:05
Speaker 1: get that rate. But in the variable rate can vary,
28:09
Speaker 1: and so three years into school you could be paying
28:11
Speaker 1: a different rate. Yeah, because those rates change, that prime
28:14
Speaker 1: rate and the library rate change, and so they're taking
28:16
Speaker 1: that as the base rate and then adding to it
28:18
Speaker 1: percentages based on your credit worthiness, and then that's the
28:21
Speaker 1: interest rate you pay. And because those base rates change,
28:25
Speaker 1: your interest rate changes, and if those go up dramatically,
28:28
Speaker 1: your monthly bill goes up dramatically from month to month.
28:30
Speaker 1: It can just kind of swing kind of wildly, and
28:33
Speaker 1: it's not good for the old ticker when you open
28:35
Speaker 1: those envelopes or get that email with your monthly bill. Yeah,
28:38
Speaker 1: we dodged a bullet with that with our house loan
28:40
Speaker 1: because we had one of those variable arms and it
28:43
Speaker 1: just didn't bite us in the butt. Oh that's good.
28:46
Speaker 1: We just got kind of lucky. I remember hearing about that.
28:48
Speaker 1: With the sub prime mortgage debacle. You know, people were
28:51
Speaker 1: getting these loans and the first four years it was
28:54
Speaker 1: easy street, and then year five would come and the
28:56
Speaker 1: payments would just balloon boing um. So yeah, that's variable rate.
29:01
Speaker 1: You can also get fixed rate, although it's usually higher
29:04
Speaker 1: than what you're signing up for, but you know exactly
29:06
Speaker 1: what you're getting through the life of the loan. And
29:08
Speaker 1: that's what the federals. Um, federal government loans offers a
29:12
Speaker 1: fixed rate, almost always lower than what you're going to
29:16
Speaker 1: get from a private lender. Right, So if you're going
29:18
Speaker 1: to a private lender, you're probably going because you have
29:21
Speaker 1: exhausted the money that you got from the federal government. Um.
29:25
Speaker 1: The private loans are still going to disperse the money
29:27
Speaker 1: to your school, which I didn't know as well. Um. Yeah,
29:31
Speaker 1: everybody's just going around you. That's that drives me crazy.
29:34
Speaker 1: It's like, I'm borrowing, give it to me the money,
29:38
Speaker 1: but they're like no, I guess because they're like they're like,
29:43
Speaker 1: you're seventeen, you can't be trusted. With check. You know,
29:48
Speaker 1: it's not the worst thing in the world to maybe
29:50
Speaker 1: do that, agreed, It would still drive me crazy though.
29:53
Speaker 1: So repaying these loans, there are a bunch of different
29:56
Speaker 1: ways you can structure these. With private loans, you gotta
30:00
Speaker 1: few different options, um full deferral, and deferral means, you know,
30:04
Speaker 1: while I'm in school, I don't want to work, I
30:06
Speaker 1: don't want to pay off this loan. So just give
30:08
Speaker 1: me the money, give it to me, and I'm not
30:11
Speaker 1: gonna work, and I'm not gonna pay anything until six
30:13
Speaker 1: months after I graduate. And they say we'll give you
30:16
Speaker 1: to your school instead. Fine, And they'll say, fine, but
30:20
Speaker 1: you're gonna be paying that interest. You know, that's still
30:22
Speaker 1: accruing the whole time, Right, You're not making any payments
30:24
Speaker 1: whatsoever until after you graduate or leave school six months
30:27
Speaker 1: after sometimes, But like you were saying, the interest is accruing,
30:31
Speaker 1: and like it's gonna be a bigger payment, and it's
30:33
Speaker 1: going to be an eye popping payment when you when
30:36
Speaker 1: you start finally making payments. Right, depending on how much
30:39
Speaker 1: money you make when you graduate and start paying, you
30:41
Speaker 1: can deduct some of that interest on your taxes about up.
30:47
Speaker 1: So that's nice immediate repayment means you're in school, you
30:52
Speaker 1: get this loan, but you start paying every month just
30:55
Speaker 1: while you're in school because you're smart, got a job
30:58
Speaker 1: at MEXICALI grill that's right, are making some payments. Start
31:01
Speaker 1: making those payments at least on interest. UM. You have
31:05
Speaker 1: an option, I think, whether to pay interest or not. Yeah,
31:08
Speaker 1: there's interest only payments to which is basically like, I
31:11
Speaker 1: want to pay all just the interest on my loan
31:14
Speaker 1: UM so that I know exactly what I'm paying when
31:17
Speaker 1: I when I finally start paying off the principle after
31:19
Speaker 1: I graduate. Or you can even make partial interest payments,
31:22
Speaker 1: which is just you're just keeping it from being is
31:25
Speaker 1: this tidal wave of interest when you finally start making payments.
31:30
Speaker 1: But also I think, and this is this is just
31:32
Speaker 1: a little bit for me. Just getting in the habit
31:35
Speaker 1: of making payments, even if it's just a little bit
31:38
Speaker 1: every month, has got to help ease that transition when
31:42
Speaker 1: you finally do start attacking it after college. We should
31:46
Speaker 1: have a little bell in here to day every time
31:47
Speaker 1: we give a little personal nugget, you know what we need.
31:50
Speaker 1: We need an arm extender so we can pat ourselves
31:53
Speaker 1: on the back loudly every time we give one of
31:56
Speaker 1: the that's a good idea, they make those a little
31:59
Speaker 1: robot arm grabbers. I also, I think we should just
32:03
Speaker 1: say saying one more time, even though our school was
32:06
Speaker 1: paid for, paid for it ourselves, and were we don't
32:09
Speaker 1: have student loans, we totally sympathize with anybody who struggle
32:13
Speaker 1: student loaned that like, that's that sucks, and like that's
32:16
Speaker 1: we don't want you to feel like we're talking down
32:18
Speaker 1: to you by giving you this advice. Not at all. Okay,
32:20
Speaker 1: that's very nice thing to say, though. Uh, federal loans,
32:23
Speaker 1: it's a little bit different with the repayment structure. Um.
32:27
Speaker 1: You can just like with the private loans, you can
32:29
Speaker 1: have that option of full deferral if you want, um,
32:33
Speaker 1: But federal government has this deal where between like ten
32:38
Speaker 1: and thirty years, they say you can repay this thing
32:42
Speaker 1: in a standard way or the extended way. I think
32:46
Speaker 1: standard is ten, extended is twenty five. But if you
32:49
Speaker 1: can solidate loans, it can go up to thirty. Yeah.
32:53
Speaker 1: In the private lending world, consolidations called refinancing. It's basically
32:56
Speaker 1: taking all of your loans and combining them into one
32:58
Speaker 1: new loan. Let's so called loan consolidation. Sure, but in
33:03
Speaker 1: this case, from what I saw, it's like the government
33:05
Speaker 1: calls this consolidation. The private lenders called refining. Yeah really yeah, okay,
33:10
Speaker 1: swear to God. But um, with the when you're consolidating
33:15
Speaker 1: the federal loans, you're not saving money. You're just making
33:18
Speaker 1: it easier on yourself. When you refinance the private loans
33:23
Speaker 1: or with a private lender, you're probably going to save
33:25
Speaker 1: money because not only can you consolidate or refinance your
33:30
Speaker 1: private loans, if you have federal loans, you can consolidate
33:33
Speaker 1: them with the private leander. They go in, pay off
33:35
Speaker 1: your loans the federal government, and they say, now you
33:38
Speaker 1: pay us. But maybe it's at a lower rate, maybe
33:41
Speaker 1: it's at a fixed rate. Who knows. Um, If you're
33:44
Speaker 1: doing that, you're probably doing it to make it so
33:47
Speaker 1: that you're paying less every month or over the course
33:49
Speaker 1: of the loan. That's right. If a federal loan, if
33:52
Speaker 1: you go to graduated repayment route over that ten years,
33:57
Speaker 1: repayments start low um monthly and then they increase over
34:01
Speaker 1: time with the supposition that your salary is increasing over time,
34:05
Speaker 1: which makes sense, And so that's I think the standard
34:08
Speaker 1: one or the graduated one, those are the that's the
34:11
Speaker 1: default setting when you start repaying your loan. But what
34:15
Speaker 1: a lot of people don't realize is that the federal
34:18
Speaker 1: government on their loans offer UM what are called income
34:21
Speaker 1: based repayment plans of sense, they're a really good idea.
34:27
Speaker 1: I saw I read a really um great article from
34:30
Speaker 1: Brookings I believe, basically saying like, here's all the ways
34:34
Speaker 1: that the UM, the student loan UH situation is just
34:40
Speaker 1: totally broken. But it's it's based on some really good ideas.
34:45
Speaker 1: It just needs to be fixed in some ways. It
34:47
Speaker 1: was written by Adam Looney. It's called a Better Way
34:50
Speaker 1: to Provide Relief to Student Loan Borrowers. Really interesting stuff
34:53
Speaker 1: on Brookings. But UM. One of things he says is
34:56
Speaker 1: like the default should be a repay um income based payment,
35:02
Speaker 1: the r e p a y E revised pay as
35:05
Speaker 1: you earn type, because what it is it says, okay,
35:09
Speaker 1: what's your income every year you you file a new
35:12
Speaker 1: income report UM, and then they say, well, they take
35:16
Speaker 1: a hundred and fifty percent of the poverty limit whatever
35:19
Speaker 1: the government says the poverty level is. They subtract the
35:21
Speaker 1: two and you pay ten percent of that that's your payment. Okay, So, um,
35:28
Speaker 1: it actually is is set up so that as you
35:30
Speaker 1: start to make more money, your payments go up. But
35:34
Speaker 1: if you don't ever really start to make more money,
35:37
Speaker 1: you may you pay about the same. So the whole,
35:40
Speaker 1: the whole idea behind all the income based repayment solutions
35:43
Speaker 1: is that if you if your diploma is paying off, great,
35:50
Speaker 1: If it's not, we're not gonna like, we're not going
35:52
Speaker 1: to treat you like the people who are benefiting from
35:54
Speaker 1: the college experience that they had you with the philosophy degree.
35:59
Speaker 1: Bless your heart. Go start thinking about existential risks. That's
36:01
Speaker 1: the best thing you could do. Uh. There are other
36:04
Speaker 1: different kinds of income driven repayment options. Um you talked
36:08
Speaker 1: about revised pay as you earn. There's also pay as
36:11
Speaker 1: you earn, income based repayment, income contingent repayment, and they're
36:15
Speaker 1: all just tweaked versions of sort of the same idea,
36:18
Speaker 1: where and you're figuring out how much you can pay
36:21
Speaker 1: out of your discretionary income, or rather they're figuring it
36:25
Speaker 1: out for you exactly. It can be you know, between
36:28
Speaker 1: ten and twenty years to pay off. It can be
36:30
Speaker 1: ten percent your discretionary income. In the worst case, it
36:33
Speaker 1: could be of your discretionary income. Um. But but yeah,
36:37
Speaker 1: it's it's a set amount and it's income. It reflects
36:40
Speaker 1: the amount of money that you make. So it's pretty cool. Um.
36:43
Speaker 1: The other great thing about these with the federal government
36:46
Speaker 1: that you are not going to get from a private
36:48
Speaker 1: lender is after the term of your loan, right ten years,
36:53
Speaker 1: twenty years, whatever, thirty years. I think if you get
36:56
Speaker 1: like the super duper extended version, they say, okay, well
37:02
Speaker 1: you tried to pay it off. Um, what this this
37:05
Speaker 1: amount that's left over, We're just going to discharge. You
37:07
Speaker 1: don't have to pay it. It's going to be forgiven.
37:10
Speaker 1: Oh are we talking forgiveness? I think? So all right,
37:13
Speaker 1: do you want to take a break first? Uh, yeah,
37:15
Speaker 1: let's take a quick break and we'll we'll get more
37:17
Speaker 1: specific about forgiveness right after this. We'll call it a
37:19
Speaker 1: cliffhanger things and chuck and chuck stop. All right, So
37:53
Speaker 1: you teased forgiveness so hard. You're the one, he said,
37:59
Speaker 1: bend over and I'll make a depot. I don't want
38:02
Speaker 1: to hear it from you. Um. Sorry again, parents with
38:06
Speaker 1: children listening, that's right. There is a plan called the
38:09
Speaker 1: Public Service Loan Forgiveness Plan that what you were talking about.
38:14
Speaker 1: Under certain circumstances, if you they will forgive your remaining balance, um,
38:19
Speaker 1: if you have been paying for that ten years or
38:21
Speaker 1: a hundred and twenty qualifying months. Um. You are working
38:27
Speaker 1: full time for a qualifying employer, which is government or
38:32
Speaker 1: nonprofit that is a true nonprofit. So you can't like
38:36
Speaker 1: go work for the Democratic National Committee or something like that. Yeah,
38:39
Speaker 1: it has to be a nonpartisan nonprofit, that's right, but
38:42
Speaker 1: it can't literally, from what I saw, any five oh
38:44
Speaker 1: one C three organization that isn't uh partisan or involved
38:49
Speaker 1: in labor unions, it would qualify. Yeah. But here's the
38:52
Speaker 1: thing is, uh, they's got a bit of a bad
38:55
Speaker 1: rap when that first wave came through because uh of
39:00
Speaker 1: these relief applications were rejected. But then other people pointed
39:04
Speaker 1: out that, you know what, some of these people didn't
39:07
Speaker 1: make those add twenty payments. Some of these people filled
39:09
Speaker 1: out things incorrectly on their applications. They weren't eligible. They
39:13
Speaker 1: didn't work for a qualifying employer. So like all the
39:16
Speaker 1: things you said you had to do, like a lot
39:17
Speaker 1: of people didn't do these so I don't know if
39:19
Speaker 1: we have a real good percentage number. I don't think
39:22
Speaker 1: they were just rejecting people like just for fun. Yeah. No,
39:26
Speaker 1: we'll have a better I guess better view of it
39:29
Speaker 1: next year, the next couple of years. But the point
39:31
Speaker 1: of it is to drive people into um careers like
39:36
Speaker 1: being a cop or a firefighter or working for a nonprofit.
39:40
Speaker 1: Because again, after ten years, just ten years of making payments,
39:44
Speaker 1: once you've made that hundred and twenties payment, they say,
39:47
Speaker 1: thanks for the memories. You don't have to pay anymore.
39:49
Speaker 1: Not bad, your your loan is gone, sometimes tens of
39:52
Speaker 1: thousands of dollars just gone, and you still get to
39:54
Speaker 1: keep that degree, plus your ten years into a career
39:57
Speaker 1: that you hopefully are really happy. Way, that's right, because
40:01
Speaker 1: that's what works exactly. Um. Here's the thing, though, is
40:06
Speaker 1: loan forgiveness. There's something called a tax bomb, and it
40:10
Speaker 1: works a little something like this. Uh, you eventually will
40:15
Speaker 1: get taxed because whatever they forgive you have to count
40:20
Speaker 1: as income and then you are taxed on that income. Right,
40:24
Speaker 1: they always got their hand out. So this, this is
40:27
Speaker 1: not gotten away with something. This is not for that
40:30
Speaker 1: ten year one the ten yere one did you say,
40:33
Speaker 1: is called the Public Service Loan Forgiveness Plan. That's right, Okay,
40:36
Speaker 1: that one the text bomb doesn't apply. This is for
40:40
Speaker 1: the forgiveness for just regular federal student loans where somebody
40:43
Speaker 1: has been paying for twenty years or twenty five years,
40:46
Speaker 1: whatever's left. The federal government says, you know what you
40:49
Speaker 1: did it you were you faithfully paid this stuff off,
40:52
Speaker 1: but you just never made enough money to really pay
40:54
Speaker 1: it off. So we're gonna forget about clear that you're
40:56
Speaker 1: not going anywhere in life. But but that that amount
41:00
Speaker 1: that's left over, we're going to we're going to count
41:02
Speaker 1: that as as income on your income text. So so
41:05
Speaker 1: you have thirty thou dollars, like, if you're a high
41:09
Speaker 1: income earner by that time, well we should pay Probably
41:12
Speaker 1: are right exactly. But let's say let's say all of
41:16
Speaker 1: a sudden, you just had a huge uptick in your
41:18
Speaker 1: salary and two years before that, twentieth year of payments
41:22
Speaker 1: come along, um, and you just still had a big
41:26
Speaker 1: amount left over. You could be paying thirty seven percent
41:30
Speaker 1: on that. So uh, if you had thirty grand left
41:32
Speaker 1: over and you're in the highest earner bracket, you would
41:35
Speaker 1: owe eleven grand in taxes on that debt forgiveness. The
41:40
Speaker 1: thing is, some people who know about this stuff say,
41:43
Speaker 1: there's no way the federal government is actually going to
41:45
Speaker 1: do this because we're not there yet. No, we've got
41:47
Speaker 1: about ten years before the first people whom are eligible
41:51
Speaker 1: for that will come. We will be able, we'll be
41:53
Speaker 1: able to test that. Yeah, and we should also point
41:56
Speaker 1: out that it's all relative. You know, if you are
41:58
Speaker 1: not in a high tax bracket, it could still be
42:01
Speaker 1: a big burden on you because you're not making that
42:03
Speaker 1: much money. Sure, but when you reach that that right, Yeah, yeah,
42:07
Speaker 1: you're right, you know what I mean. But hopefully some
42:09
Speaker 1: observers are saying they won't they won't do that to anybody.
42:12
Speaker 1: Other people say, I don't know, you know, Like there's
42:15
Speaker 1: if you default, which we'll talk about in a second.
42:17
Speaker 1: If you default on federal student loans, they take your
42:21
Speaker 1: your tax refund. So who knows, maybe they will charge
42:26
Speaker 1: people with that tax bomb at the end. Maybe m
42:33
Speaker 1: So defaulting that means, well, it could mean a few things.
42:37
Speaker 1: If you're a day late, you're delinquent, doctor short, if
42:41
Speaker 1: you're if you're three months late, you're ninety days late.
42:45
Speaker 1: Then they're going to report you to the credit bureaus. Um,
42:49
Speaker 1: if you don't make a payment for two hundred and
42:50
Speaker 1: seventy days, then you're finally considered in default. And uh
42:55
Speaker 1: that you don't want to do that. You don't want
42:57
Speaker 1: to default on any loan in life, because it's the
43:00
Speaker 1: wrong thing to do if you can help it at all. Um.
43:04
Speaker 1: I know sometimes life happens in such a way that
43:06
Speaker 1: you can't, but if you can avoid defaulting on that loan,
43:10
Speaker 1: please don't. Yeah. The thing is is like when people
43:13
Speaker 1: are calling you every day, right when? Um? No, yeah, man,
43:19
Speaker 1: that took a second. Um, people are calling you and
43:22
Speaker 1: harassing you every day. Um. Apparently the federal government uses
43:26
Speaker 1: a company called Navigant, who are particularly despicable when it
43:30
Speaker 1: comes to some of the stuff they'll do. I think
43:32
Speaker 1: they have like five federal lawsuits filed against them in
43:35
Speaker 1: one year, and like the second largest competitor to them
43:38
Speaker 1: had like forty. So yeah, they're not very well liked,
43:42
Speaker 1: but they they they When they're calling and harassing you
43:46
Speaker 1: multiple times a day, the last thing you want to
43:48
Speaker 1: do is reach out to him and say, hey, how
43:51
Speaker 1: can I get back on track to paying you? Guys?
43:54
Speaker 1: You just wanted to go away, right, But like, that's
43:57
Speaker 1: the opposite of what you should do. If you find
44:00
Speaker 1: that you can't pay your bill, you should get in
44:02
Speaker 1: touch with your lender and say, I can't pay my bill.
44:04
Speaker 1: I need to make this more manageable. What can we do.
44:08
Speaker 1: The problem is one of the first things they'll offer
44:11
Speaker 1: is something called a forbearance, and that is just, hey,
44:15
Speaker 1: take a little time, you don't make any payments, get
44:18
Speaker 1: yourself together. Yep, maybe you need a couple of months,
44:21
Speaker 1: maybe you need a couple of years, who knows, but
44:23
Speaker 1: we're gonna put you in forbearance. So you're not delinquent
44:26
Speaker 1: on your account, you're not in default. But the problem
44:29
Speaker 1: is that you're still accruing interest and that's actually not
44:33
Speaker 1: the best solution that you want. You're like, yeah, so
44:36
Speaker 1: you turn the interest switch off, right, And they're like,
44:38
Speaker 1: oh no, no, no, we don't have to know how
44:40
Speaker 1: to do that. There is no switch, Like, oh sorry,
44:41
Speaker 1: couldn't hear you buy? Yeah, um, so you're not you're
44:44
Speaker 1: not in Uh, you're not in default, but you're still
44:46
Speaker 1: accruing interests. You're just not making payments. And the problem
44:50
Speaker 1: is apparently these um the servicing companies that actually make
44:54
Speaker 1: the collections on the loan payments for the government or
44:57
Speaker 1: for for private lenders. Even too, it's way more expedient
45:01
Speaker 1: to be like, hey, we don't want you to be
45:03
Speaker 1: in default anymore. How about a forbearance. Okay, we'll get
45:05
Speaker 1: you in the program by and it sounds really good
45:07
Speaker 1: to you exactly like, oh great, I could use six
45:10
Speaker 1: months or a year, but if they would take five
45:11
Speaker 1: more minutes, they would say, actually, if you're a federal
45:15
Speaker 1: loan um borrower, there's all these income based payments that
45:19
Speaker 1: are going to make it way more realistic for you.
45:22
Speaker 1: Rather than just kicking the can down the road and
45:24
Speaker 1: having to face this in six months when your forbearance
45:26
Speaker 1: is over, we could put you in one of these
45:29
Speaker 1: income based plans and you'll be better off. And a
45:31
Speaker 1: lot of people don't know that. So the forbearance does
45:34
Speaker 1: seem like a great basically gift from God all of
45:37
Speaker 1: a sudden, when actually it's a it's a it's a
45:40
Speaker 1: bite in the in the bottom, but from the horse
45:42
Speaker 1: God that you aren't expecting. That's good. Uh. We talked
45:50
Speaker 1: about consolidation, that is um can be a very good idea.
45:54
Speaker 1: Uh We what we haven't talked. Is rehabilitating your account.
45:58
Speaker 1: If you through a period in life where you default
46:02
Speaker 1: and you're like, screw it, I can't or won't or
46:04
Speaker 1: refuse to make my payment. Um, you can pick up
46:08
Speaker 1: a year later and say like, jeez, is it too late,
46:14
Speaker 1: and you know what they'll say, Oh no, calm yeah,
46:18
Speaker 1: get out that checkbook. You can rehabilitate that account, which
46:21
Speaker 1: is a really good thing. Start making payments again. That's
46:24
Speaker 1: all you have to do. Uh. And it's and if
46:27
Speaker 1: you couldn't afford that payment before, they'll even restructure that
46:30
Speaker 1: back to what you were talking about, to your income.
46:33
Speaker 1: Like if you let's say I have a salary reduction
46:36
Speaker 1: in life, and that's why you defaulted in the first place,
46:40
Speaker 1: pick up the phone. They will just answer the phones.
46:42
Speaker 1: They're gonna be calling you, uh, and rehabilitate it and
46:46
Speaker 1: say listen, well let's let's talk this through. Um, I'm
46:49
Speaker 1: a good person. I really want to pay this, and
46:52
Speaker 1: they'll say, great, well can you afford Let's look at
46:54
Speaker 1: your numbers and then you start paying it and then
46:57
Speaker 1: all of a sudden, if you've paid nine payments over
47:00
Speaker 1: ten months, then you're considered current. Your default status is removed.
47:05
Speaker 1: Credit bureaus think you're a great person again, and uh,
47:09
Speaker 1: you only get one shot at this though, right that
47:11
Speaker 1: rehabilitation you get one chance. Um, and that's just with
47:15
Speaker 1: federal loans, right, I believe, So I'm pretty sure that's federal.
47:20
Speaker 1: So um yeah, ultimately you want to stay out of that.
47:24
Speaker 1: There is a second chance with the federal government, but
47:27
Speaker 1: it's not necessarily easy to do. Um. So with one
47:33
Speaker 1: of the things that happened with all of the student
47:35
Speaker 1: loan there's like a student loan debt bubble that a
47:37
Speaker 1: lot of people are worried about because there's like one
47:40
Speaker 1: point six trillion dollars out there right now. Which is
47:44
Speaker 1: good in one way because with student loans, the system
47:47
Speaker 1: is set up so that the people who are benefiting
47:50
Speaker 1: from it now, people who are borrowing to go to college,
47:53
Speaker 1: are paying back into it later to benefit the people
47:56
Speaker 1: who need to borrow, they are coming behind them. Okay,
47:59
Speaker 1: so it's actually pretty interesting, good system. But the problem
48:02
Speaker 1: is with that much money out and as many people
48:06
Speaker 1: at risk of defaulting on these loans, a lot of
48:08
Speaker 1: people are worried about it. One of the reasons that
48:11
Speaker 1: people are worried about being of the risk of default.
48:15
Speaker 1: Among a large section are what UM some people call sums,
48:20
Speaker 1: people who have some college educations. You see that. Yeah,
48:23
Speaker 1: people who went to college and like didn't graduate basically. Yeah.
48:26
Speaker 1: And one of the problems from that Obama initiative to
48:29
Speaker 1: expand UM higher education was to say, oh, yeah, online
48:35
Speaker 1: colleges we've never heard of before, Sure, come on in, UM,
48:39
Speaker 1: barely accredited colleges, come on in, UM, like basically scams,
48:45
Speaker 1: come on in and take all this money. I won't
48:49
Speaker 1: very prominent, No, we can't. Okay, I looked it up.
48:52
Speaker 1: That didn't apply, not even accredited. Yeah, um. So uh so.
48:59
Speaker 1: The the fact that this that the country was awash
49:05
Speaker 1: in easy money for college education and that no one
49:10
Speaker 1: was watching the sharks who were coming to soak it up,
49:13
Speaker 1: means that a lot of people went to schools that
49:15
Speaker 1: they got zero benefit from but walked away with a
49:18
Speaker 1: lot of money that they owed. And so these are
49:21
Speaker 1: the sum So basically these people would have been better
49:23
Speaker 1: off with just a high school education, because to an employer,
49:27
Speaker 1: a little bit of college doesn't doesn't help. You have
49:32
Speaker 1: to go graduate. Yeah, you don't walk in and say, well,
49:34
Speaker 1: it's spent three years and so close, Jim, Jim, Can
49:39
Speaker 1: I call you Jim? So close Jim. What's called the
49:42
Speaker 1: sheep's can affect, which is the actual increase in wages
49:46
Speaker 1: that you can typically expect from a college diploma. There's
49:50
Speaker 1: no proportion to it. If you get three years of schooling,
49:54
Speaker 1: you don't get three quarters of the sheepskin affect. It's
49:56
Speaker 1: all or nothing, and you only get it when you graduate.
49:59
Speaker 1: So if you don't eduate, you got nothing from that
50:02
Speaker 1: that increase in wages, and you actually owe money through
50:06
Speaker 1: student loans. So there's a big problem associated with student
50:09
Speaker 1: loans and a lot of people are kind of worried
50:12
Speaker 1: about it um And one of the things that there
50:15
Speaker 1: that is causing worried to our people have figured out
50:18
Speaker 1: how to take a bad situation to make it even worse.
50:21
Speaker 1: Because some lenders, and I think the federal government's among them,
50:25
Speaker 1: take student loans, package them up and sell them as securities. Crisis.
50:32
Speaker 1: It's exactly like the housing crisis, with one big difference
50:36
Speaker 1: that subprime mortgage crisis. Even if somebody defaulted on a loan,
50:40
Speaker 1: there was still a house that could be taken and sold.
50:44
Speaker 1: And I that sounds extraordinarily heartless. But I'm saying from
50:47
Speaker 1: an investor's point of view, there's collateral with the student loan,
50:52
Speaker 1: there's nothing backing it. If the person defaults, then you
50:56
Speaker 1: just lost everything from this investment. But the idea that
50:59
Speaker 1: people are like, oh, they're a student loan bubble, let's
51:01
Speaker 1: figure out how to turn it into an investment that
51:04
Speaker 1: is really ill advised. That's what I think. Something like
51:07
Speaker 1: a two hundred eight billion dollars of that one point
51:11
Speaker 1: six trillion is securitized. I think Mark Cuban one of
51:14
Speaker 1: his big deals as student loan, uh like paying it off,
51:19
Speaker 1: for relieving it, trying to help solve the problem. Yeah,
51:22
Speaker 1: I think he's one of the ones that's kind of
51:23
Speaker 1: been shouting like there's a big problem coming. There's a
51:26
Speaker 1: huge problem coming. I think a lot of people know it,
51:28
Speaker 1: but very few people know what to do about it.
51:31
Speaker 1: There's one other thing. There's a proposal by Rand Paul
51:34
Speaker 1: that was brought to committee on December third, nine, and
51:38
Speaker 1: it basically says you can get like fifty sid bucks
51:41
Speaker 1: out of your four oh one k penalty free and
51:44
Speaker 1: tax free if you use it to pay off your
51:46
Speaker 1: student loans. Yeah, that's a tough one. Uh, it's a
51:49
Speaker 1: math problem, Like, just do the math. Uh, it's sort
51:53
Speaker 1: of like robbing Peter to pay Paul. You're not gonna
51:55
Speaker 1: have that money later on, right exactly. But um, depending
51:59
Speaker 1: on how the numb first workout, it could benefit you.
52:02
Speaker 1: It could benefit you in the short term. But what
52:04
Speaker 1: some people are saying is like, no, dude, we were
52:06
Speaker 1: going to have a big enough problem with a lot
52:09
Speaker 1: of people not prepared for retirement thirty years. We should
52:14
Speaker 1: not be encouraging those same people to take whatever money
52:17
Speaker 1: they have saved a way for retirement to pay off
52:20
Speaker 1: their student loans. It's not a good idea. It's not
52:22
Speaker 1: for everyone. It could be for some people. It depends
52:24
Speaker 1: on how your life goes well. Yeah, Plus a lot
52:26
Speaker 1: of people are like, I don't have five grain in
52:28
Speaker 1: my four oh one k. What's a four oh one K?
52:30
Speaker 1: All I can think about is my student loan debt.
52:33
Speaker 1: It's a it's a it's a bad situation. I'm very
52:36
Speaker 1: curious to see what happens. Yeah, me too, And uh,
52:39
Speaker 1: go to go to school where you want to go
52:41
Speaker 1: to school, kids, But I'm telling you, try to make
52:44
Speaker 1: it someplace you can afford and really, really, really look
52:46
Speaker 1: at the benefit and the and and that that outweigh
52:51
Speaker 1: is if it's worth it you think to spend all
52:53
Speaker 1: that money? Just just think more about it. Well, you
52:57
Speaker 1: want to know one thing that's really despicable that came
52:59
Speaker 1: across that I did not understand, Chuck. The federal government
53:03
Speaker 1: is not allowed to share data on outcomes from schools.
53:08
Speaker 1: So like if you went to a private school and
53:11
Speaker 1: you just got a wash in debt and you make
53:13
Speaker 1: ten grand a year, there's no way to share that
53:17
Speaker 1: with prospective students who say, oh, I want to stay
53:19
Speaker 1: away from that school. I want to stay away from that.
53:21
Speaker 1: To Sarah Lawrence, the average salary is agoing senior is blank. Like,
53:26
Speaker 1: they don't share that. So the what we're advising people
53:29
Speaker 1: to do, it's very tough to do because the federal
53:32
Speaker 1: government is barred from sharing that information. I think, have
53:37
Speaker 1: you got anything else? Nope, this is a big one.
53:39
Speaker 1: We could talk about this forever. This one, Chuck, may
53:42
Speaker 1: have broken a record. I had sixty four tabs open
53:45
Speaker 1: on just student loans today. I believe it sixty four
53:50
Speaker 1: too many tabs. It's a lot of tabs. Okay, since
53:54
Speaker 1: I said it's a lot of tabs and Chuck said
53:56
Speaker 1: something horrid about deposits. It's Sime for listening mail. I'm
54:02
Speaker 1: gonna call this to listener mails because they're both pretty
54:04
Speaker 1: short and both uh corrections. Hey guys, been listening a
54:08
Speaker 1: long time, Really love the show. I finally have some
54:11
Speaker 1: info that I can share with you regarding a recent episode.
54:14
Speaker 1: Listening to the Coyotes episode and Josh was searching for
54:16
Speaker 1: a word, uh for something that is active at dawn
54:19
Speaker 1: and dusk, and I'm here to tell you that word
54:23
Speaker 1: is crepuscular. It sounds like a pete and pete kind
54:27
Speaker 1: of word. It does. The crepuscule is another word for
54:30
Speaker 1: twilight or dawn and dusk, So crepuscular means of the
54:35
Speaker 1: twilight or an animal that is active at that time.
54:38
Speaker 1: Hope that helps at your next tribute night. That is
54:40
Speaker 1: Sarah from Wisconsin. And now we're gonna read one from
54:44
Speaker 1: Bethany a correction uh for my pronunciation of tagalog. Hey guys, listen,
54:50
Speaker 1: we got a few of these. I listen to your
54:51
Speaker 1: show every day during work and love listening to what
54:54
Speaker 1: you have to offer. Because of my frequency of listening,
54:56
Speaker 1: I know you're always looking to improve pronunciation and want
54:59
Speaker 1: to be respect cool of other cultures. I'm currently on
55:02
Speaker 1: your latest short stuff on the murder of Tera Cita
55:04
Speaker 1: Bassa and our Bassa, and wanted to point out the
55:08
Speaker 1: correct way to pronounce the Filipino language. Chuck said, tagalogue,
55:13
Speaker 1: it's actually to galug you're thinking of those little Debbie
55:16
Speaker 1: cookies or no Girl Scout cookie. Now, I just didn't
55:20
Speaker 1: know that's how I pronounced it to Chuck. I just
55:22
Speaker 1: wanted to help where I can say thank you for
55:24
Speaker 1: continuing to produce awesome content year after year. Once again,
55:28
Speaker 1: it's to galag to to go long, I think, well,
55:36
Speaker 1: this is g a h g u A somebody else
55:38
Speaker 1: ad g u h. Boy, here we go. That's from Bethany,
55:43
Speaker 1: Thanks a lot, Bethany, uh and from Sarah to to
55:48
Speaker 1: listener mails to top notch ones. If you want to
55:51
Speaker 1: try your hand at sending a top notch listener mail,
55:54
Speaker 1: wrap it up, spank it on the bottom, and send
55:56
Speaker 1: it off to Stuff podcast and i heeart radio dot com.
56:02
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