Speaker 1: Welcome to How to Money. I'm Joel and I'm Matt,
Speaker 1: and today we're discussing private student loan considerations and pitfalls
Speaker 1: with money Pro Megan Landrus. So last week we had
Speaker 1: money Pro Megan Landrus with us, and she's back with
Speaker 1: us again. But Megan, we didn't ask you any questions.
Speaker 1: You see, she's the first return guest, by the way
Speaker 1: to the show. We've never done this before. We're making
Speaker 1: an exception because Megan is so great and so helpful,
Speaker 1: and you know what, student loans suck so bad that
Speaker 1: people need that much help with it. There's a hashtag
Speaker 1: for student loans suck there. All right, let's proliferate that
Speaker 1: like mad. We'll do it. Megan, so real quick. Have
Speaker 1: you ever had any student loans? We've you know, we
Speaker 1: spent the entire last episode talking about student loans. Is
Speaker 1: this something that you have personal experience with? No? Actually
Speaker 1: I don't. And that's why a lot of my friends
Speaker 1: and my family don't really understand why I'm so crazy
Speaker 1: about student loans or I'm so interested in them. I
Speaker 1: went to Kennesaw State University, so born and raised in Georgia,
Speaker 1: never left went to Kinnesaw state. At the time I went,
Speaker 1: it was a very affordable option for me. I had
Speaker 1: the Hope Scholarship which helped with tuition, and I worked
Speaker 1: full time, so I did pay for my my housing
Speaker 1: up there and my expenses. So I did not graduate
Speaker 1: with student loans fortunately. But like on the last episode
Speaker 1: I mentioned, I work with a lot of folks who
Speaker 1: have student loan debt in the mix that really affects
Speaker 1: their financial plan and delays a lot of decisions or
Speaker 1: savings goals or just financial goals that they have in
Speaker 1: the mix. So I'm really passionate about helping people navigate
Speaker 1: their repayment strategy to get them on a faster track
Speaker 1: to achieving their financial independence. Yeah, that's great. I feel
Speaker 1: like you are probably like the younger female version of
Speaker 1: myself because I went to Kinnessaw State as well at
Speaker 1: the scholarship. Actually, my first two years I went to
Speaker 1: a private college out of state, and I racked up
Speaker 1: some student loan debt there and decided, based on the
Speaker 1: fact that I didn't want to accrue anymore and I
Speaker 1: wanted to graduate with a reasonable amount that I could
Speaker 1: pay off in a shorter amount of time, I said, Okay,
Speaker 1: I'm going back in state, like, why did I leave
Speaker 1: in the first place. I mean, I was glad I did.
Speaker 1: I felt like the first two years that private school
Speaker 1: were formative years for me. I learned a lot and
Speaker 1: made some important relationships. I wouldn't go back and do
Speaker 1: it over. But I'm also glad that I left and
Speaker 1: I capped the amount that I borrowed because uh, some states,
Speaker 1: like Georgia Tennessee has a free college program for community
Speaker 1: colleges for people in their state. There are a lot
Speaker 1: more state based programs happening now to um incentivize people
Speaker 1: to stay in state at colleges and whether it's community
Speaker 1: colleges or public colleges in that state. UM, I'm a
Speaker 1: big fan of that, and I think, uh, the federal
Speaker 1: government has not been able to to make anything happen
Speaker 1: when it comes to free college for all. And I
Speaker 1: don't know if that's good or bad, depends on your
Speaker 1: political meaning, but I'm super glad that a lot of
Speaker 1: states are kind of taking that under their wing. And
Speaker 1: man moving back into the state of Georgia, you megan
Speaker 1: graduated with no student loans. I graduated with not nearly
Speaker 1: as much as I could have because of that, and
Speaker 1: I gotta say I'm super thankful for that. Yeah, you
Speaker 1: mentioned Hope scholarship. Guys, that's something I was able to
Speaker 1: take advantage of as well, just barely. I almost lost
Speaker 1: it several times. But having that as an option for
Speaker 1: me was was incredible. So very lucky to have had
Speaker 1: that as an option. But you know, as a bigger question,
Speaker 1: like the fact that student loans exist, we talk about
Speaker 1: it like it's this terrible thing and it can be
Speaker 1: right the way that they're given out and there's very
Speaker 1: little information being disseminated and taught to new borrowers. However,
Speaker 1: being informed and finding a way to manage those student loans,
Speaker 1: that is a completely different story. That's a completely different
Speaker 1: task and something that involves two full episodes of talking
Speaker 1: about in order to try to unpack. So we're excited
Speaker 1: to have Megan back on this week. But before we
Speaker 1: dive into the topic, let's go ahead and talk about
Speaker 1: the beer. Let's do it, Matt. So, my buddy Jeff
Speaker 1: at my local package store, he actually just gave me
Speaker 1: this beer, which was super sweet. Yeah, So Jeff the man,
Speaker 1: he's a good friend, and we text that's how good.
Speaker 1: That's a good friends we are. That's how well. I
Speaker 1: know the beer guy at my local beer story and
Speaker 1: he's like a beer Somali. Yes, yes he is. And
Speaker 1: so he had this bottle sitting in the back storage room.
Speaker 1: And this is a five year old beer. It's by
Speaker 1: Westbrook Brewing Company out of South Carolina. They're just right
Speaker 1: outside of Charleston. And this is a red wine barrel
Speaker 1: aged Belgian style quad. This was aged for three years
Speaker 1: in red wine barrels. Yeah, so super cool. We'll give
Speaker 1: our thoughts. All three of us are drinking this beer,
Speaker 1: will give of our thoughts at the end of the show.
Speaker 1: And by the way, if you didn't catch last week's episode,
Speaker 1: that's where Megan showed up with a beer. So mean right,
Speaker 1: I'm glad we can return the favor and you can
Speaker 1: enjoy with our beers. Yeah, definitely, this is up my alley. Awesome.
Speaker 1: We did something different with our money pro show. And
Speaker 1: normally we have a friend of ours submit five minutes
Speaker 1: of distilled wisdom about one topic. But Matt and I
Speaker 1: decided that the topic of student loans, well, not only
Speaker 1: is it big enough that we couldn't consolidate it to
Speaker 1: five minutes, but we needed a whole show. We actually
Speaker 1: needed two whole shows with an expert. And we also
Speaker 1: wanted to answer your listener questions, and so we took
Speaker 1: those on our Facebook page. You can find that if
Speaker 1: you at a Facebook dot com and you type in
Speaker 1: how to money in the search bar, you can find
Speaker 1: our group. And that group is an awesome place to
Speaker 1: ask questions, to to solicit advice, and where everyone kind
Speaker 1: of helps each other out. And so we said, you
Speaker 1: know what, let's answer a bunch of listener questions because
Speaker 1: everyone's situation is a little different and it kind of
Speaker 1: helps us understand and answering those specific questions kind of
Speaker 1: helps us understand a little bit better the specifics of
Speaker 1: how student loans work, because there are a lot of
Speaker 1: specifics and it's hard to summarize succinctly. And today we
Speaker 1: wanted to cover the considerations and potential pitfalls of private
Speaker 1: student loans and if you should consider refinancing or not.
Speaker 1: And so let's kind of give some rule of thumbs. Megan,
Speaker 1: you've kind of want to start us off in how
Speaker 1: people should think about private loans. Well, first and foremost,
Speaker 1: with the private student loan debt, we're looking at two
Speaker 1: different entities. Private student loan debt and federal debt are
Speaker 1: very different things. We need to understand that I always,
Speaker 1: always always recommend looking outside just the interest rate when
Speaker 1: you're considering private refinancing. When you consolidate your loans from
Speaker 1: federal to private, you lose a lot of federal benefits,
Speaker 1: some of those being you lose a lot of flexibility
Speaker 1: in terms that come with the FED loans, and you
Speaker 1: lose some of the interest subsidies or discounts that come
Speaker 1: with FED loans. Also those really attractive super low interest
Speaker 1: rates that may be reeling you in, like that two
Speaker 1: percent or three percent offer. You have to have stellar
Speaker 1: credit to get approved for those. So last year the
Speaker 1: average credit score or the average FICO score to even
Speaker 1: be approved for a private refinance was seven sixty four.
Speaker 1: So if you don't have a credit score in that range,
Speaker 1: you may get declined altogether. All right, Megan, So real quick.
Speaker 1: You mentioned the interest subsidies and the discounts, so those
Speaker 1: are specific to federal loans, But what is what does
Speaker 1: that actually mean and what protections are you losing when
Speaker 1: you refinance to a private loan? Right, So, on the
Speaker 1: federal side, UH subsidies or discounts to your interests or
Speaker 1: your accumulated interest. Depending on your repayment plan, your interest
Speaker 1: is discounted or cut in half or waived for certain
Speaker 1: periods of time. That is not a benefit on the
Speaker 1: private side. On the private side, your interests continues to
Speaker 1: accumulate on the principle, and if you have unpaid interest,
Speaker 1: that unpaid interest is added to the principle and then
Speaker 1: your interest is then charged off of that new principal balance.
Speaker 1: So your balance, if you refinance into a private student loan,
Speaker 1: it's just going to grow more quickly because of that
Speaker 1: compounding effect, right right, it can, especially if you're just
Speaker 1: paying the minimum. So when it comes to interest rates,
Speaker 1: I feel like people get interested in private student loans
Speaker 1: because there are some really slick websites offering some really
Speaker 1: attractive looking interest rates. And so if you're paying seven
Speaker 1: percent on your federal student loans and you go to
Speaker 1: one of those private student loan website that offers rates
Speaker 1: into three percent range, that looks really good. But can
Speaker 1: you tell us why that might not always be the
Speaker 1: best choice for someone with a higher interest payment. Yeah,
Speaker 1: So going back to your FICO score again, it's really
Speaker 1: hard to qualify for those really low interest rates that
Speaker 1: they advertise, and that is what they advertise the lowest available,
Speaker 1: So keep that in mind. The other thing to keep
Speaker 1: in mind is the flexibility in terms if you're if
Speaker 1: you're switching from federal loans to private loans, you lose
Speaker 1: the option to have income based payments on the private side.
Speaker 1: That is not an option. You pay what they tell
Speaker 1: you to pay. If you lose your job, They're not
Speaker 1: very flexible on if you can't afford the payments anymore,
Speaker 1: and that's going to continue to affect your credit and
Speaker 1: balloon your balance. You can't reverse once you've gone private,
Speaker 1: you can't go back to federal. So if you if
Speaker 1: you consolidate, do a a private refinance and you decide,
Speaker 1: oh crap, I really like the federal system. I want
Speaker 1: to hop back on an income based payment, you can't
Speaker 1: reverse what you did. So that's something you need to
Speaker 1: keep in mind as well. All right, Megan, I feel
Speaker 1: like that brings up the question of who do private
Speaker 1: student loans actually make sense for? And so when does
Speaker 1: it make sense for someone currently repaying their loans on
Speaker 1: a federal student loan repayment plan? When does it make
Speaker 1: sense for them to actually potentially refy. So I think
Speaker 1: it makes sense when you have a very low balance.
Speaker 1: And I keep talking about these balanced rules of them,
Speaker 1: but my opinion is your balance should be very low
Speaker 1: compared to your income, usually manageable. Yes, do you even
Speaker 1: consider a refinance because of all of those benefits that
Speaker 1: you're losing, But there is value in finding a vehicle
Speaker 1: that has a lower interest rate if you're starting to
Speaker 1: tackle your debt faster. So, for example, if your federal
Speaker 1: student loans are at a six point eight percent interest
Speaker 1: rate and you're down to a balance of let's say
Speaker 1: eight thousand, and you think you can manageably start to
Speaker 1: really tackle and pay down that balance to get it
Speaker 1: out of the mix sooner rather than later. If you
Speaker 1: have stellar credit and you can you can test this.
Speaker 1: You can softly apply with some of the refinance companies
Speaker 1: out there see if you do qualify for a really
Speaker 1: low interest rate, If you qualify for a two or
Speaker 1: three percent interest rate, that's when it could make sense
Speaker 1: when you have a very low balance, you're willing to
Speaker 1: walk away from the flexibility of those federal loans and
Speaker 1: you get approved for that lower interest rate. That I
Speaker 1: think that's when it can make sense. Cool, and you
Speaker 1: mentioned softly apply, Like, what exactly does that mean? So
Speaker 1: you can softly apply through I mean, there's a lot
Speaker 1: of private refinancing brokers out there that will shop the
Speaker 1: rate out for you. Credible is one, there's a few
Speaker 1: others out there. But basically, you type in your basic information,
Speaker 1: how much your your student loan balance is, what your
Speaker 1: annual income is, and your basic information, and they do
Speaker 1: a soft check on your credit, but it will tell
Speaker 1: you whether or not you're going to be approved one
Speaker 1: and if so, what you could expect your interest rate
Speaker 1: to look like. So that can be kind of a
Speaker 1: either a deterrent or something that drives you to actually
Speaker 1: execute that into refinancing. Yeah, and so if you're able
Speaker 1: to get into an interest rate that is sufficiently lower
Speaker 1: than the one that you currently have, it could make sense.
Speaker 1: Like Megan said, if you have a super low balance,
Speaker 1: if you're barely moving the needle, if you're going from
Speaker 1: six and a half percent to six percent, it probably
Speaker 1: isn't worth first off, the hassle, but then second off
Speaker 1: the fact that you are losing some of those if
Speaker 1: you do run to a hardship not to have those
Speaker 1: benefits of being in a federal student loan. I mean
Speaker 1: that just stinks, and so you don't want to refi
Speaker 1: out of that if you're barely moving the needle when
Speaker 1: it comes to interest rates. So I think that's like
Speaker 1: a really good rule of thumb. And then so we're
Speaker 1: talking about interest rates, I want to talk to about
Speaker 1: time frames or terms, and so we're talking about refinancing
Speaker 1: down to, you know, a rate that's significantly lower. Do
Speaker 1: you at all recommend for folks to consider the length
Speaker 1: of time that they would be able to actually pay
Speaker 1: down that debt if they're going to refinance to a
Speaker 1: private loan. Do you want your clients to be out
Speaker 1: of debt within a year? Uh, two years, three years? Like,
Speaker 1: is there a period of time that, yeah, that you
Speaker 1: want to see folks out of it completely? Yeah? So
Speaker 1: I think it comes back down to the goals in
Speaker 1: your plan. If you have if you if you've got
Speaker 1: to prove for a super low interest rate, let's say
Speaker 1: you've got three point five uh, and you're able to
Speaker 1: refinance your student loans into that three point five interest rate?
Speaker 1: Are there other areas in your financial plan that need
Speaker 1: beefing up? Do you have other higher interest debt that
Speaker 1: maybe you can start to prioritize and accelerate. Now with
Speaker 1: that extra money that you have in your cash flow,
Speaker 1: are there extra savings goals or investing goals that maybe
Speaker 1: you should prioritize because you're only being charged three point
Speaker 1: five now, so maybe we can beat that in the market,
Speaker 1: or maybe we can finally get that emergency savings account
Speaker 1: up and going. So it comes down to the goals
Speaker 1: of priorities there so not not necessarily a term I'd
Speaker 1: recommend it. It just needs to fit within the plan. Yeah,
Speaker 1: I love that, But it's also kind of what makes
Speaker 1: it so tough, right as an individual with personal you know,
Speaker 1: financial goals, like what it is that you're trying to
Speaker 1: achieve because there is no clear answer, Like it's not
Speaker 1: like you can say, Okay, if it's gonna be less
Speaker 1: than twelve months and I'll be able to knock this out,
Speaker 1: sure let's go for it. But like you said, in
Speaker 1: some instances, you might want to actually stretch that out
Speaker 1: because there's other opportunities, there's other things that you want
Speaker 1: to achieve from a financial standpoint. Having your student loans,
Speaker 1: they're keeping you from that and you know, like as
Speaker 1: sort of a blanket statement may not be the way
Speaker 1: to approach paying off your student loans, right. I feel
Speaker 1: like there is no blanket statement. It really just comes
Speaker 1: down to your priorities, what's keeping you up at night
Speaker 1: financially speaking, and where you're trying to get ahead in
Speaker 1: your financial situation. Yeah. I think the biggest thing though,
Speaker 1: when it comes to private student loans that we just
Speaker 1: have to reiterate is that private student loans are not
Speaker 1: nearly as forgiving as federal loans, And like Megan said,
Speaker 1: you can't go back, you know, once you've actually pulled
Speaker 1: the trigger and you've done the refinance, and so you're
Speaker 1: gonna want to make sure that before you actually refinance
Speaker 1: into a of a student loan that the terms are
Speaker 1: much much more favorable and that you feel like you
Speaker 1: have the financial breathing room to take on an increase payment,
Speaker 1: that you can afford that in your budget, and that
Speaker 1: you will be able to for the life of that
Speaker 1: private student loan, however long of a term you take on,
Speaker 1: because you're gonna miss out on some of those benefits
Speaker 1: of having a federal student loan if times get tough
Speaker 1: and you don't have enough money to meet that obligation,
Speaker 1: so make sure you consider that before you do a
Speaker 1: private student loan refinance. They can be good, like Megan said,
Speaker 1: if you can get one of those sweet three percent rates,
Speaker 1: if you've got a great, great credit score, but if
Speaker 1: you don't, if you aren't one of those people, be very,
Speaker 1: very careful before you make that decision. So the rest
Speaker 1: of this episode, we're planning to get to a lot
Speaker 1: of listener questions that are posted in our Facebook group.
Speaker 1: We're gonna cover some of the companies to refinance your
Speaker 1: student loans with, as well as a lot of other
Speaker 1: questions right after the break. All right, Matt, Megan, we're back.
Speaker 1: Let's get right into this. Let's talk about the best
Speaker 1: lenders where you should consider going if you are one
Speaker 1: of those people, Megan that you mentioned would be a
Speaker 1: good candidate for refinancing your student loan into a private
Speaker 1: student loan. Where should people actually start If they feel
Speaker 1: like they've got a small enough balance they can significantly
Speaker 1: lower their interest rate and they want to attack it quickly,
Speaker 1: Like where should they go? So, yeah, I'm a big
Speaker 1: fan of looking at brokers for refinancing. Credible is a
Speaker 1: really big one you can take a look at, and
Speaker 1: what a broker means is it compares a lot of
Speaker 1: different companies for you based on a soft inquiry. So
Speaker 1: FI is another good option that you can take into account,
Speaker 1: but definitely one that you can compare a lot of
Speaker 1: different offers all in the same place. And can you
Speaker 1: compare the different fees as well when it comes to
Speaker 1: refinancing those you should, yes, And there are still companies
Speaker 1: out there that don't have fees associated with refinancing, so
Speaker 1: I said, I would suggest finding those companies. There are
Speaker 1: actually a lot of companies that offer cash rewards for
Speaker 1: choosing their company to refinance with. Sometimes it's you know,
Speaker 1: two hundred dollars, three hundred dollars, and you have the
Speaker 1: option of taking that as cash or applying that to
Speaker 1: your student loan balance. I would recommend applying that to
Speaker 1: your student loan balance. So yes, definitely, I think it's important,
Speaker 1: just like we talked about Matt on our Buying a
Speaker 1: Home episode that people compare multiple apples to apples quotes
Speaker 1: the same thing here. It doesn't hurt to look at
Speaker 1: multiple lenders and kind of compare what they're offering you
Speaker 1: based on not just the interest rate, but the fees
Speaker 1: involved as well. And the great thing is that with
Speaker 1: a site like sofi or credible, and we'll link to
Speaker 1: those in the show notes, those are going to be
Speaker 1: comparing many, many different lenders and that's just helpful, right
Speaker 1: because you can see it all in one place. It's
Speaker 1: like going to the Kayak of student loan refinancing. Yeah, exactly.
Speaker 1: So there were multiple questions from Bridget and Frank asking
Speaker 1: about paying their loans off early and is it worth
Speaker 1: it to REFI for the lower rate, and I think, Megan,
Speaker 1: you would say right that if they feel pretty confident
Speaker 1: that they can pay off their student loans quickly and
Speaker 1: they can find a lower rate in the refi world,
Speaker 1: like they are perfect candidates for a private student loan refinance, right, definitely, yes, So,
Speaker 1: and again you can usually choose the terms. You can
Speaker 1: choose one year, two year, five years, seven, whatever really fits,
Speaker 1: and you can pick the term that fits best with
Speaker 1: what you can commit to on a monthly basis. But
Speaker 1: you can always accelerate those payments and I would definitely
Speaker 1: suggest doing that as well. And Megan Daniel was asking
Speaker 1: should he pay attention to REFI offers in the mail
Speaker 1: I mean, could that Could that hurt? No? I don't
Speaker 1: think it get hurt. I think if you're getting those
Speaker 1: offers in the mail that means your credit score is
Speaker 1: within the range of maybe considering a lower interest rate refinance.
Speaker 1: So definitely don't ignore them. Maybe consider it and do
Speaker 1: a soft inquiry and see where it takes you. Yea Jell.
Speaker 1: I feel like that's something you're really good at. Is
Speaker 1: kind of keeping your mind open to like the different
Speaker 1: deals that are out there, regardless of where they're coming from.
Speaker 1: You know what I'm saying. Yes, sometimes I get those
Speaker 1: mailers and I try to refinance the student loan I
Speaker 1: don't even have because the deal is so good. I'm
Speaker 1: just like, please let me get this low interest rate.
Speaker 1: But they're like, you're a weirdo. You don't even have
Speaker 1: to and loan, and then I feel weird at the
Speaker 1: end of the phone call, so I know I'm odd alright.
Speaker 1: So Carrie had a question for you, Megan. She says,
Speaker 1: what are the benefits and risks of taking out a
Speaker 1: personal loan to get better terms on an existing student loan?
Speaker 1: So a personal loan is very comparable to a private
Speaker 1: student loan. There's not a lot of differences between the two.
Speaker 1: It's still a private debt, it's still based on your credit.
Speaker 1: Personal loans, from what I've seen, can have higher interest
Speaker 1: rates than what I've seen on branded student loan private
Speaker 1: refinancing rates. So again that's where you go in and
Speaker 1: you shop it around. You figure out what the best
Speaker 1: avenue is for you, what the lowest interest rate is
Speaker 1: that you can acquire. Yeah, that's what I've seen to
Speaker 1: like personal loan, if you could somehow find a lower rate,
Speaker 1: I mean, go for it. But typically, like you said,
Speaker 1: personal loans carry a higher interest rate than private student loans.
Speaker 1: And so looking at a site that looks at a
Speaker 1: bunch of different lenders like Credible or so far, you're
Speaker 1: going to find better rates typically then you would find
Speaker 1: on a personal loan, even a Sweet Mailer for a
Speaker 1: really low rate personal loan, you're just gonna get a
Speaker 1: better rate on a an actual private student loan. Typically. Cool.
Speaker 1: And we've got another question here from Julie, and she
Speaker 1: asked one question that I've been asking myself is how
Speaker 1: to balance investing into my future when I'm still paying
Speaker 1: off my student loans. I think I'm pretty set on
Speaker 1: opening a roth ira a with my tax refund and
Speaker 1: the money I've saved up for it. But additional insight
Speaker 1: is never a bad thing. So also, maybe how seriously
Speaker 1: to take student loans? I love that how the money
Speaker 1: is all about balance and mindful budgeting. And while I
Speaker 1: feel I'm living my best life while making significant lifestyle
Speaker 1: changes to pay off my student loans in three years,
Speaker 1: there's always the potential that I'm tipping the scale either way.
Speaker 1: How can you best keep yourself in check? It's a
Speaker 1: very loaded question. I know I've said this before. I
Speaker 1: think it comes back to your financial priorities, and maybe
Speaker 1: that hones in on the overall goal here is to
Speaker 1: really put together and list out what you're trying to
Speaker 1: achieve in your finances. So talking about debt in the mix,
Speaker 1: going back to our interest rate conversation earlier, if you've
Speaker 1: got a lower interest rate on those student loans, they,
Speaker 1: in my book, start to fall down by the lower
Speaker 1: priority list in the financial hierarchy. Higher interests at in
Speaker 1: the mix that you need to tackle. I would focus
Speaker 1: on accelerating those payments first. But if you're already talking
Speaker 1: about starting and opening a roth Ira, I think you're
Speaker 1: you're on the move towards planning for your financial future.
Speaker 1: And if saving is a really good goal of yours,
Speaker 1: and you feel like you have your student loan situation
Speaker 1: handled in the most efficient strategy based on all of
Speaker 1: the comments we've had prior, then I think you're moving
Speaker 1: in the right direction. So, in summary, I think you
Speaker 1: can keep yourself in check by monitoring your progress in
Speaker 1: all areas of your financial picture, your debt situation, you're
Speaker 1: saving situation, your cash flow situation. If you feel like
Speaker 1: all of those things are in good order, great. If
Speaker 1: you've feel like there are certain areas that need more
Speaker 1: attention than others, then that's where you start to redirect
Speaker 1: your attention. Yeah. I think if Julie's question instead of
Speaker 1: the wrath, if she inserted lifestyle inflation, then we're having
Speaker 1: a completely different response to this, right, I think we're saying, no, Julie,
Speaker 1: calm down and pay your student loans off first. But
Speaker 1: hopefully the interest rate on her student loan is is
Speaker 1: low enough that it's not that big of a deal
Speaker 1: for her to instead decide to invest a little bit
Speaker 1: more as opposed to prioritizing a quicker paydown of her
Speaker 1: student loans. And as long as she's prioritizing something really
Speaker 1: good for her financial future as opposed to just more
Speaker 1: consumer spending today. Like, I mean, I think that's totally
Speaker 1: cool and mad. Props to Julie, right, I think round
Speaker 1: of applause. That's good stuff. I love that question. And
Speaker 1: Daniel in our Facebook group had a similar question. You said,
Speaker 1: I'm trying to figure out the right amount of money
Speaker 1: to set aside monthly for my four oh one K
Speaker 1: retirement plan versus using that money towards my monthly student
Speaker 1: loan payment, Like, is there another rule of thumb for
Speaker 1: how we can kind of figure that out? Yeah, so
Speaker 1: I think, especially with your employer sponsored plan four oh
Speaker 1: one k RATH four oh one K, if you have
Speaker 1: a match, absolutely go for that match before accelerating any
Speaker 1: debt payment. Hands down, Again, that's a percent return on
Speaker 1: your money right there. So as long as you're getting
Speaker 1: the match, I would say, redirect those payments towards any
Speaker 1: higher interest debt um And then yeah, if if your
Speaker 1: if your student loan payment is again lower than your
Speaker 1: annual income and your prioritizing paying that off quicker and
Speaker 1: all of your other higher interest debt is out of
Speaker 1: the mix. Um. I think yes, start accelerating that payment
Speaker 1: if that fits within your overall plan. If your emergency
Speaker 1: savings needs attention, though, maybe consider contributing or doing a
Speaker 1: hybrid approach towards that. That way, you're tackling two goals
Speaker 1: at once. Yeah, so quick props to Julie and Daniel
Speaker 1: for asking the right questions. They're not asking, you know,
Speaker 1: should I pay down my student loans or should I
Speaker 1: go to Tahiti? Uh, They're talking about should I pay
Speaker 1: down my student loans, which is effectively paying themselves back
Speaker 1: by not having to pay interest, or should I save
Speaker 1: and put this money in the actual market in Tahiti.
Speaker 1: It's a good goal to have after you pay the
Speaker 1: student loans off. Yeah, that's how you celebrate. So after
Speaker 1: the break, we're gonna get to a few more listener questions.
Speaker 1: All right, we got a few more awesome student loan
Speaker 1: questions that we need to get to from our Facebook group.
Speaker 1: Bridget and Steve ask something super similar, So we're going
Speaker 1: to combine them. Sorry, guys, you guys get them together
Speaker 1: in the same question. So the question essentially was what
Speaker 1: order should we pay off our student loans? Is there
Speaker 1: a benefit to paying off the smaller balances. First, how
Speaker 1: do you make sure extra payments are going towards the
Speaker 1: principal balance? So, yeah, Megan, what do you think of that? Yeah,
Speaker 1: so two separate questions. First question, is there a benefit
Speaker 1: to paying off the smaller balances? First? In my opinion,
Speaker 1: the only benefit to doing the I think that's called
Speaker 1: the snowball approach, where you tackle the smaller balance first
Speaker 1: and then roll your accelerated payments into the next smallest balance.
Speaker 1: That strategy is going to have you you paying a
Speaker 1: little more interest over time, but psychologically it's going to
Speaker 1: give you those quick wins and it's gonna continue to
Speaker 1: motivate you to trudge forward. And the next question was
Speaker 1: how do you make sure extra payments are going towards
Speaker 1: principal balance? So there is a way you can do
Speaker 1: that through your service or you have to intentionally make
Speaker 1: a separate payment. And I believe it gives you the
Speaker 1: option to designate where you want it to go, if
Speaker 1: you want it to go towards principle or towards unpaid interest.
Speaker 1: So that's gonna be key there. If you're wanting to
Speaker 1: make sure extra payments go towards something specific. And then
Speaker 1: we've got another question here, this one from Jonah and
Speaker 1: he asked, does paying off student loans in full affect
Speaker 1: your credit score in the same way that closing a
Speaker 1: credit card account of the same age does. For example,
Speaker 1: he said, my loans are small and the oldest thing
Speaker 1: all my credit history by far, and I'm concerned that
Speaker 1: paying them off in a lump sum the summer will
Speaker 1: make getting my first mortgage towards the end of the
Speaker 1: year harder and not worth the tiny amount of interest.
Speaker 1: I'd say, all right, I'll tackle Jonas question so because
Speaker 1: it's more of a credit question than even a student
Speaker 1: loan question. And the answer is, if you pay off
Speaker 1: a student loan and that is one of the only
Speaker 1: pieces of credit that you have in your credit mix,
Speaker 1: there is a chance there's a good chance that it
Speaker 1: could ding your credit score a little bit. Let's say
Speaker 1: you have just a lot of other pieces of recurring
Speaker 1: credit though that that show up on your credit score,
Speaker 1: then it's not gonna affect you nearly as much. But
Speaker 1: if that student loan is one of the only things
Speaker 1: that you have as credit in your name, it's gonna
Speaker 1: be a little bit of a bigger drop to your
Speaker 1: credit score when you do pay that off. I mean,
Speaker 1: obviously it's a day that you want to celebrate, well,
Speaker 1: who yes, um student loan debt free, and you don't
Speaker 1: want to delay that just because of that credit score drop.
Speaker 1: But you do want to be careful because, yeah, when
Speaker 1: you're applying for a mortgage, that tiny credit score drop,
Speaker 1: like Matt and I talked about on in a recent episode,
Speaker 1: you can have big ramifications on the interest rate that
Speaker 1: you end up getting on a mortgage loan, and you
Speaker 1: just don't want to compromise that. So my tip to
Speaker 1: you is to make sure that your credit is solid.
Speaker 1: If you are in the seven sixty or above range,
Speaker 1: you want to make sure that you're not on that
Speaker 1: borderline because any sort of small move like paying off
Speaker 1: that student loan could mean an eight to ten point
Speaker 1: twelve point drop. And so if you're at seven sixty, well,
Speaker 1: that dropped down to seven forty eight could make a
Speaker 1: big difference on the interest rate that you get. But
Speaker 1: if you're at like seven eighty or above, you're totally fine,
Speaker 1: Like it's not going to impact you enough to change
Speaker 1: a potential interest rate. But really, when it comes down
Speaker 1: to it, paying off your student loan will affect every
Speaker 1: single person differently based on their specific credit mix, So
Speaker 1: just just make sure you have other pieces of credit
Speaker 1: available that are factored in EDUL. That I mean Jona's question.
Speaker 1: That's a tough one because, like you said, it affects
Speaker 1: everyone's credit differently. But just keep in mind that the
Speaker 1: length of your credit history, that only makes that fiftent
Speaker 1: of your credit score. So he's talking about getting a
Speaker 1: mortgage later in the year, several months is more than
Speaker 1: enough time for it to rebound in twenty points, no problem,
Speaker 1: and real quick. We wanted to mention some points that
Speaker 1: in a Stagia posting in the Facebook group. These were
Speaker 1: all just awesome ways to think about college in general,
Speaker 1: and we just love where her head is ats when
Speaker 1: it comes to college. And so the first thing she
Speaker 1: said was don't go to college just because everyone else
Speaker 1: is doing it. And I love that because that's exactly
Speaker 1: what I did. And I was so clueless when I
Speaker 1: was in high school. But seriously, one of the main
Speaker 1: reasons I started applying for colleges was because my friends were.
Speaker 1: It was something that I didn't really have the next
Speaker 1: step on the horizon as far as what I was
Speaker 1: gonna do, and folks were like, oh, yeah, I'm starting
Speaker 1: to apply to go to college, and I thought, oh cool,
Speaker 1: I guess I should do that as well. Not exactly,
Speaker 1: I was clueless, man, And so if we have listeners
Speaker 1: out there who are in high school, do not be
Speaker 1: like Mats, because yeah, I was completely clueless. Luckily I
Speaker 1: ended up not working out tons of money for student loans.
Speaker 1: I had scholarship got lucky enough to score that. So yeah,
Speaker 1: be sure to consider some alternatives to you know, private schools,
Speaker 1: schools that would require you to take out student loans.
Speaker 1: Anastasia specifically mentioned trade schools, and I think that those
Speaker 1: are especially in today's economy where a lot of the
Speaker 1: jobs that are unfilled are specifically skilled trades people. That's
Speaker 1: a great thing to consider, especially if you're good with
Speaker 1: your hands. If going to college doesn't register on your radar,
Speaker 1: don't just go because everyone else is doing it right,
Speaker 1: and consider an alternative path because that can actually be
Speaker 1: more lucrative for you. You can take out much less debt,
Speaker 1: it's a much less risky proposition if it's something you're
Speaker 1: interested in and you naturally gravitate towards. And she also
Speaker 1: mentioned to think about what your state or city offers
Speaker 1: in regards to free college, and she specifically mentioned Tennessee.
Speaker 1: They've got a great program, Georgia. We've all all three
Speaker 1: of us here have taken part in the Hope Scholarship.
Speaker 1: Almost half of the states in the country in the
Speaker 1: US now have either some sort of incentivized or scholarship
Speaker 1: provided higher education for those who qualify. So there's a
Speaker 1: lot of great options out there. Very soon, we're gonna
Speaker 1: do an episode on just different ways to think about
Speaker 1: higher education, Ways to reduce that aust and essentially just
Speaker 1: get smart for less money. All right, Matt, that was
Speaker 1: good stuff. I feel like student loans big topic, but
Speaker 1: you know what, we're able to kind of boil it
Speaker 1: down into something digestible and answer some listener questions. So
Speaker 1: that was super fun. Let's get back to the beer
Speaker 1: real quick. Westbrook can Can so it's got this awesome
Speaker 1: picture of a lady doing a can can dance on
Speaker 1: the front of the bottom it. Yeah. Right, this is
Speaker 1: a five year old beer that my friend Jeff at
Speaker 1: my favorite package store just gave me because he's a sweetheart.
Speaker 1: So what do you guys think of this beer? My
Speaker 1: word would be powerful. I really liked this one. I
Speaker 1: like that how to Kick had like a can can
Speaker 1: like kick how the can can kick. There we go.
Speaker 1: I'm a huge fan of this beer as well. Like
Speaker 1: my first sip, I almost wanted to go back and
Speaker 1: have us go back to the beer at the very beginning.
Speaker 1: Just that red wine barrel mixed with that quad There's
Speaker 1: just so many flavors going on, Like you taste that
Speaker 1: would it almost tastes kind of like bourbon barrel ish,
Speaker 1: Like there was like a sweetness to it. This was
Speaker 1: a fantastic beer and I would totally agree with Megan
Speaker 1: pretty powerful because I think it's so. I'm glad we
Speaker 1: split this one three ways. Matt. In a while back,
Speaker 1: we talked about the how the age of a beer,
Speaker 1: how long it ages in the barrel, can affect the
Speaker 1: flavors that are imparted. And this one was aged for
Speaker 1: three years, which is way more than the standard amount
Speaker 1: of time that you put something in a barrel, like
Speaker 1: ventures into Scotch territory. Almost yeah, exactly, And so I
Speaker 1: feel like the red wine flavors came through big time.
Speaker 1: I feel like that the late the time that it
Speaker 1: was aged and then on top of that, the fact
Speaker 1: that it's just been hanging out in the bottle for
Speaker 1: for a bunch of time too. This was delicious. It
Speaker 1: was like a rare treat and we're just grassiest to
Speaker 1: my friend Jeff for for handing us this beer. It
Speaker 1: was so good. Thanks Jeff. We appreciate it. All. Right,
Speaker 1: let's get to our final thoughts. If you are considering
Speaker 1: refinancing your student loans to a private loan, you want
Speaker 1: to make sure that your balance is significantly lower than
Speaker 1: your annual salary, and you want to make sure that
Speaker 1: you can easily handle those monthly payments. Yeah, because if
Speaker 1: you can't handle those monthly payments, well, you know what,
Speaker 1: you've just lost a lot of flexibility when it comes
Speaker 1: to forbearance and deferment. Private student loans just don't have
Speaker 1: the same protections that federal ones do. And lastly, you
Speaker 1: can't go back once you refinance into a private student loan,
Speaker 1: you can't go back to the federal system. And last point,
Speaker 1: join our Facebook group because it's so much fun. I
Speaker 1: love that we got to tackle some listener questions on
Speaker 1: this episode on last episode. We don't get to do
Speaker 1: it every show, but it's super fun to get to
Speaker 1: do so, and if you have questions, our Facebook group
Speaker 1: is a great place to post them and kind of
Speaker 1: get that hive mind working to generate answers for you.
Speaker 1: Just some awesome people in there. So yeah, just go
Speaker 1: to Facebook dot com and type in how to Money
Speaker 1: in the search bar. That's right, friends, So I think
Speaker 1: that's gonna be it for this episode, Megan. I hope
Speaker 1: you've enjoyed recording with us. It's been a ton of
Speaker 1: fun and hopefully we'll have you back on soon. Yeah.
Speaker 1: Thanks for having me, guys, you got it, and we
Speaker 1: will have links to those student loan refinancing companies on
Speaker 1: our show notes at how to money dot com. And
Speaker 1: you know what, I want to thank everyone who's left
Speaker 1: us or review recently. We have gotten a ton of reviews,
Speaker 1: and we know we read every single one of us,
Speaker 1: so we really appreciate the feedback. We really appreciate you
Speaker 1: sharing with others who might be looking for a new
Speaker 1: podcast to listen to you. So, you know what, We're
Speaker 1: not even going to ask you to leave a review
Speaker 1: this time. Just thank you big thanks. So until next time, Joel,
Speaker 1: Best Friends Out, Best Friends Out? Oh No, I've made
Speaker 1: a great mistake.