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B&B #11: What to do with student loans

Chances are you have them. Chances are you have 10’s of thousands of them (average student loan debt for 2014 grad is $33k! $33k!).

So what do you do when you finish your degree and can barely pay rent, much less pay back a loan? This show goes over all the repayment assistance options, whether or not you should consolidate, and how to fit payments into your expenses.

We go in and help you figure out the best way to tackle your student loans without breaking your budget.

Episode Highlights:

Student loan debt passed $1 trillion in 2012.

40 years ago, having a college degree was more of a luxury than a requirement, and nowadays it’s hard to get a good paying job without at least having a 4-year degree.

Student loans [are] the last debt that you need to worry about. Even though you can’t get rid of it when you file for bankruptcy, it is the most forgiving within the time that you have to pay it…Start actually saving money before you pay your student loan debt, because you don’t wanna get that credit card balance up again, and you don’t wanna have to miss a mortgage payment because an emergency happened. So you want savings and you wanna pay down your credit card debt, and keep up on your other loans, and get your student loan debt payment as small as possible until you actually have extra money to put towards it.

Every year that you pay your student loan debt, one you can write off the student loan interest, up to $2,500 on your taxes….and the other thing is yeah, the loan is very forgiving, so if you need to forbear it..they’re not gonna take away your house if you don’t pay your student loans, you know.

The standard way to pay off the loan is you pay it off over ten years based on the loan amount.

Another program that Obama implemented in 2012 is called Pay As You Earn [PAYE] and this is the payment will never exceed 10% of your income, and the forgiveness period is within 20 years…this is one you would have to ask about.

If you feel like you don’t have enough money to save, see if you can reduce your student loan payments.

Any debt that is forgiven will count as income for your taxes. So if you have $20,000 or $30,000 of loan debt forgiven, you have to pay taxes on that.

It only really makes sense to consolidate your loans if all of your interest rates are pretty close to each other for the loans.

For refinancing your loan, this if for private loans really, getting–refinancing your loan basically means that you want to get a lower interest rate than what you are paying now…but here’s the thing. If you refinance your loan, that means you’re starting your loan period over. So let’s say your loan period is ten years and you refinance it, that ten years starts over the day you refinance it.

You’re like “Well, maybe I should take out a second mortgage or a line of credit and pay off the student loan.” Never do this. Never ever do this. What you’re doing by paying off your student loan debt with a mortgage is putting your house on the line.