Strategies for Eliminating Outrageous School Debt

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A report from the Brookings Institute shows that a trend is developing among Millennial debt holders: They’re taking longer to repay loans, if they’re repaying them at all.

Paying off debt is tough enough these days; but, it’s the interest incurred that’s the killer!

Minimizing the total interest paid on school debt while paying off that debt is one of the keys to building wealth.

Financial planners have identified the top 3 strategies for loan repayment: debt snowballing; refinancing; and, loan forgiveness programs.

But, are they right for you?

Debt snowballing can be simple. And, it can get you out of debt quicker than you might expect. However, when using this concept, your dollar works for you in just one way.

Refinancing is a popular choice. While it usually reduces the interest rate and saving money in the long term, doing so comes with a more rigid repayment plan and elimination of some loan forgiveness benefits. Again, under this option, your dollar works for you in just one way.

Loan forgiveness programs may be an option. If you’ve already refinanced, this is not an option. And, more likely, you won’t meet the program requirements, as they can be very specific. Again, even if you qualify, until forgiveness occurs, your dollar works for you in just one way.

How can your dollar do two jobs for you instead of one? How can you save that dollar while at the same time use it to pay off debt?

It can be done.

Contact us to find out how it can be done for you.

 

The Millennial Choice: Buy a Home or Pay off Debt

It’s a tough decision.

Doing both may seem impossible.

Roughly 25% of millennials hold student debt. Those with a 4-year degree hold an average debt of $25,000; other hold more, sometimes more than $100,000.

This level of financial stress effectively blocks home ownership, denying them the long-term stability leading to wealth creation.

While studies prove a college degree offers job stability, higher earnings, and even a longer life expectancy, over 80% of those between ages 22 and 35 with school debt confirm that debt restrains them from purchasing a home.

According to the New York Fed, the more school debt you carry, the less likely you’ll own a home. Sadly, that trend is unlikely to change anytime soon.

Although the vast majority of millennials say they’d like to purchase a home, most are about a decade away from having the savings to do so, according to 2017 data from Apartment List.

How can both be accomplished?

We can show you how.

Contact us to schedule your “I can’t believe it’s true!” appointment.

 

True or False: Saving for College = Less Financial Aid

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Typically, that’s true.

Unless you know the rules of the game…

The Free Application for Federal Student Aid (FAFSA) focuses on income and assets, primarily income. The FAFSA will assess income at 22%-47%, while assessing assets at roughly 5.6%.

Sure, for every dollar you save, you might lose 5.6% in financial aid. But, how many families can afford to direct 22% or more of their income toward the annual cost-of-attendance at their student’s school of choice?

So, in reality, if a family’s income can’t cover the cost, savings can be drastically impacted.

What should you do?

  • Don’t save money in your child’s name. Doing so could cost you up to 4 times as much in financial aid than keeping the money in your name.
  • Be careful when using a 529 Plan. While it may help a little with the family’s tax situation, such a plan can have a negative impact on eligibility for aid.
  • Minimize your income. Please don’t ask for a pay cut!! There are other ways to minimize income in favor if increasing eligibility for aid.

Please be aware, the more income and assets you have, the higher your Expected Family Contribution (EFC) will be. The higher your EFC, the greater the likelihood that loans will play a part in the offer of financial aid.

In fact, it’s almost a certainty that loans will play a big part in the financial aid offer.

Contact us for assistance in developing and implementing a college planning campaign designed to reduce your family’s EFC and improve its eligibility for financial aid.

Student Loans Prevent Saving for Retirement

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By the time the average American reaches retirement age, they have saved roughly $60,000 for retirement.

During the working years, Americans are racking up and servicing debt – mortgages, auto loans, credit card balances, medical bills, and decades in school loans.

While Social Security figures to provide a monthly income, even when coupled with the savings average, most Americans will be servicing debt throughout their retirement years.

This is not the American dream…

The country’s school debt balance grows daily, with more people holding more debt – currently around $1.5 trillion.

The dream of a comfortable, affordable retirement seems further and further away. It seems hopelessly unattainable.

Based on the way student loans traditionally are repaid, people aren’t able to both pay off their debt and save for retirement. And, if they don’t pay off their debt, they have little hope for retirement.

Right now, the magic of compound interest is on the side of the creditor, whether it be for school loans, credit card debt, auto loans, mortgages, or medical bills.

But, the tables can be turned…

The magic of compound interest can be moved to your side…

You can pay off all debt, not just school debt, while using those same funds to save for retirement…

You can have a comfortable, affordable retirement…

Let us show you how.

College Expenses Financial Aid Won’t Cover

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The right school has been identified, the decision made…

You know what the costs will be and you’ve got them covered…

Unfortunately, you may need to reconsider…

Surprisingly (yeah, sure…), while schools provide the projected cost-of-attendance for the year, those estimates can be rather inaccurate. Especially for those living off campus or out-of-state.

What do schools often underestimate?

The affordability of residing off-campus. It’s not just the rent (often, first and last month’s rent) and food; transportation, utilities, laundry, entertainment, travel expenses, and more must be considered.

Be sure to budget accordingly.

Don’t let the expense of living well during the 4-year adventure prevent you from living well once you begin life in the real world.