Speaker 1: Welcome to out of money.
Speaker 2: I'm Joel and I am Matt.
Speaker 1: Yes he is, and today we're talking about the impending
Speaker 1: student loan cliff.
Speaker 2: That's right, buddy, we are talking about student loans, and
Speaker 2: it's there's a good reason for us to talk about
Speaker 2: this because there are changes on the horizon. Even though
Speaker 2: I personally am not affected, I am actually fortunate. Either
Speaker 2: Kate nor I were fortunate enough some would say privileged
Speaker 2: enough to not have any student loans by the time
Speaker 2: we are we know ever, but certainly when we graduated,
Speaker 2: Emily and I we both had student loans, and we're
Speaker 2: currently paying cash for her grad school, so we've paid
Speaker 2: for education over here, but it's paid a little bit
Speaker 2: of a little bit of interest on your your higher education.
Speaker 1: I will say we were lucky when when we graduated,
Speaker 1: rates words were crazy, crazy low on the student loans.
Speaker 1: So it but there's a lot of good news for
Speaker 1: people who have student loans. If you're like the erabous
Speaker 1: about what's coming this fall, yes there's a cliff coming,
Speaker 1: but that cliff has been I don't know, there's like
Speaker 1: a soft pad at the bottom of the cliff for
Speaker 1: a lot of people, given kind of all the changes
Speaker 1: that are that have occurred. We're going to discuss all
Speaker 1: that today.
Speaker 2: It's like one of those blow up mattresses the firefighters,
Speaker 2: but right there's a jumper where they're like, as long
Speaker 2: as you land within the circle exactly, we think that
Speaker 2: there is a maybe a soft landing ahead for you.
Speaker 1: But Matt, before we get to that, I just wanted
Speaker 1: to mention really quickly that one of my tenants, they
Speaker 1: reached out for the email and they said, Hey, we're
Speaker 1: thinking about changing the way we pay you every month.
Speaker 1: Is that okay? And I was like, well, we can
Speaker 1: pay you in pennies. What's you thinking? That would be
Speaker 1: messed up?
Speaker 2: Pay you in greasy pennies? Coded and motor oil I did.
Speaker 2: It was a story we talked about like three yeah,
Speaker 2: two three years ago.
Speaker 1: I made a bet one time with a friend and
Speaker 1: he about whether or not one one player was going
Speaker 1: to make the All Star Game. I won the bet
Speaker 1: and he paid me in pennies. You're so man, but
Speaker 1: what you get right? But so no, my tenant was like, Hey,
Speaker 1: I think I'm gonna pay with this this thing called
Speaker 1: the built master Card. And I was like, I'm so.
Speaker 2: Proud of them I know about the built card.
Speaker 1: Ye talk about that all the time. I was like,
Speaker 1: this is going to add one small extra hassle every
Speaker 1: week or every month right when I collect rent, because
Speaker 1: now I have to actually like take a picture of
Speaker 1: the check and deposit it. But still not really that
Speaker 1: big of a deal. And the tenant now gets the rewards.
Speaker 1: And I've never I haven't been on the receiving.
Speaker 2: End yet someone using it. Sure can't you enroll in
Speaker 2: within the belt program the platform and then it gets
Speaker 2: sent directly to you? Is that?
Speaker 1: Is that not correct? Oh? As a landlord? Yeah, dude,
Speaker 1: I should have thought of that, and I don't. I
Speaker 1: haven't even thought of that now, So I don't know.
Speaker 1: I haven't.
Speaker 2: Like obviously we've talked about all the show and I
Speaker 2: know something about it, But like, do you actually get
Speaker 2: rewards too, like as as the receiver, No.
Speaker 1: I don't think so that's just the pay. But it's
Speaker 1: just a good reminder too, you have boom. You don't
Speaker 1: need to keep your iPhone after all, you don't need that.
Speaker 1: Nicer Cameron, No, that pictures of the checks the pixel
Speaker 1: camera was just fine, but it's important mentioned to to
Speaker 1: people out there who are renting. This is the built
Speaker 1: Master card. It's the only card out there that rewards
Speaker 1: you for paying your rent with a credit card. And
Speaker 1: so obviously, as Matt and I always say, be responsible
Speaker 1: with your credit card. If you can't pay the balance
Speaker 1: off on time and in full every month, it's not
Speaker 1: for you skip it, but it's mortgage can yeah, and
Speaker 1: mortgage payers they don't get the same perk, but but
Speaker 1: renters do. So the built Master Parts School, We've got
Speaker 1: a review. We'll link to that in the show notes.
Speaker 1: But I was like, I was just so proud of
Speaker 1: my tenant earning rewards on that payment, like.
Speaker 2: A proud parent. Do you have like a sense of
Speaker 2: like a paternal sort of feeling towards your tenants in
Speaker 2: a certain way.
Speaker 1: Not really, I mean there's sometimes I can, Like I
Speaker 1: told him, I was like, oh, dude, because I want
Speaker 1: some congrats.
Speaker 2: But I want them to do well and when they're
Speaker 2: making the right financial decisions, because like you get to
Speaker 2: know them and their finances a little bit in the
Speaker 2: screening process. I'm rooting for them, but I try not
Speaker 2: to bring it up as a topic. You know, I
Speaker 2: don't bring it up. But when they, for instance, are
Speaker 2: paying on time, and when you know that maybe they
Speaker 2: had an issue with that, or or maybe they had
Speaker 2: a bunch of debts in the passing. Granted, I don't
Speaker 2: know how caught up they might be now like at
Speaker 2: the time I knew where they were when it came
Speaker 2: to screening. But even still, the ability to not only
Speaker 2: sometime paying on time, but even paying slightly early, it all,
Speaker 2: it just it bodes well, right Like it makes me
Speaker 2: think that, Okay, I think they're doing a good job
Speaker 2: over there, makes me feel feel good about what it
Speaker 2: is that they're up to. But cool man.
Speaker 1: Yeah.
Speaker 2: Again, We'll make sure to link to that built card
Speaker 2: review if you are looking, if you are interested in
Speaker 2: getting one of those, we'll link to that there in
Speaker 2: the show notes. Let's introduced the beer that we're going
Speaker 2: to enjoy during this episode. Buddy, This is an IPA
Speaker 2: and I know that because on the can here from
Speaker 2: Japan it says beer I PA.
Speaker 1: It's literally the only thing you can read.
Speaker 2: And there's a bunch of Japanese on there, and actually
Speaker 2: I looked it up, and so we know the actual
Speaker 2: name of the brewery of the brewery now, but I'm
Speaker 2: not going to try to say it it's a total
Speaker 2: mouthful except for people what they want to hear. So
Speaker 2: waku wako that's I'll say that part. But you sound
Speaker 2: like Fozzy from the Muppets right now. Waka waka waku
Speaker 2: waku tezukori farm kawakita.
Speaker 1: I guess this is a very good I think I'll
Speaker 1: give you an A plus one.
Speaker 2: That's again from Julia. We're looking forward to uh enjoy
Speaker 2: do I just maybe did you ever watch the wedding
Speaker 2: singer back in the day?
Speaker 1: Julia? Julia?
Speaker 2: Gulia, Uh, Juli. We're not making fun of your name,
Speaker 2: unless I guess your last name was Gulia, which I
Speaker 2: don't think it is. But we will let everyone know
Speaker 2: our thoughts on this beer at the end of the episode.
Speaker 1: For sure. I always fun to have something a little,
Speaker 1: a little out there from the other side of the world.
Speaker 1: So literally, you would have to go to Japan in
Speaker 1: order to try this beer, which is here. We are
Speaker 1: in a shortlist of places to visit. By the way,
Speaker 1: for real, I want to catch a baseball game in Japan?
Speaker 1: Is that going to be our next the next couple's trip?
Speaker 1: Maybe maybe next year. That's so, that's an expensive flight.
Speaker 1: They got a great coffee culture over there too, do they? Yeah,
Speaker 1: Oh my god, you don't know about this. No, oh,
Speaker 1: you got a good coffee culture. There's a YouTube rabbit
Speaker 1: hole you can go down there.
Speaker 2: Yes, yes, Okay, dude, like I don't spend enough on
Speaker 2: uh coffee coffee paraperialia us.
Speaker 1: All right, well let's get to the topic and hand Matt,
Speaker 1: we're talking about the impending student Luan Cliff, and it
Speaker 1: made me think, Yeah, I'm guessing there's some how to
Speaker 1: money listeners out there, myself included, who have had a
Speaker 1: health issue that maybe they chose to ignore for a
Speaker 1: little while, maybe there was like a mole on their back,
Speaker 1: and they're like, eh, I'll get a checked out at
Speaker 1: some point in the future. And you know you should
Speaker 1: go see a dermatologist. Right, So it's the ABC's right.
Speaker 1: You look for what is it, asymmetry, the border and
Speaker 1: the color. I still know that I remember from dude.
Speaker 2: It was all those days of sitting in the dermatologist's
Speaker 2: office as a teenager with all my zits. All right, well,
Speaker 2: now I'm reading the skin cancer. Now I could run
Speaker 2: my skin issues by you before I go see a pro.
Speaker 2: ABC's asymmetry border and color. If you got some irregular
Speaker 2: irregularities there, buddy, you might want to go and get
Speaker 2: that thing looked at it. Right Well, no, I'm fine
Speaker 2: right now, at least as far as I know. I mean,
Speaker 2: have you had Emily look you over. We have, It's
Speaker 2: the end of the summer. You just spent a lot
Speaker 2: of time outside.
Speaker 1: I'll ask her tonight. I got your back, okay. Well,
Speaker 1: And the truth is, some of those little things could
Speaker 1: be like, not a big deal. It could be completely
Speaker 1: it could be not a problem. You might be overanalyzing, overthinking.
Speaker 1: You're like, it's regular old mole, literally just a mole.
Speaker 1: Get not a big deal. Sure, but you could be
Speaker 1: risking something though by doing nothing. And the longer we
Speaker 1: kick the can down the road, the bigger the problem
Speaker 1: can become. It can negatively affect your health and then
Speaker 1: your finances because now you're paying for, you know, a
Speaker 1: bigger procedure to get that resolved, and a skin issue
Speaker 1: that could have maybe been resolved with a quick in
Speaker 1: office visit. Now it's like you got to see the
Speaker 1: surgeon or something like that. And you know, we might
Speaker 1: have given this episode an intense title, but the truth is,
Speaker 1: tens of millions of folks feel like there's this impending
Speaker 1: cliff coming in October when payments resume, like they're walking
Speaker 1: the plank or something like that. To take it back
Speaker 1: to kind of the I just finished reading Treasure Island,
Speaker 1: so I guess I have Pirates on the mind. That's a
Speaker 1: good one. It's just revisiting some of the classics, is
Speaker 1: what I'm doing. But we're going to talk about that
Speaker 1: and the impending reality, basically what to do about it
Speaker 1: so that you can have a plan and so that
Speaker 1: you can rest easier, maybe maybe see that giant patting
Speaker 1: at the bottom of that cliff and sure not feel
Speaker 1: as daunted by what's coming.
Speaker 2: Yeah, you might still lose your lunch as your folly,
Speaker 2: but the actual impact isn't going to be what you
Speaker 2: thought it would be. But the biggest problem, man, is that, honestly,
Speaker 2: like a lot of folks, they just didn't use the
Speaker 2: payment pause as the financial catalyst that it could have been. Instead,
Speaker 2: we kick the can down the road. Instead of getting
Speaker 2: that mole checked out, you just keep waiting and boom,
Speaker 2: all of a sudden, Yeah you got to go under
Speaker 2: the knife. It's something that we've just a lot of
Speaker 2: folks have avoided is paying any attention to their student loss,
Speaker 2: and not only just on borrowers' behalf, Like not only
Speaker 2: on you know that is this something that they did,
Speaker 2: but the government did as well. This is something that
Speaker 2: kept getting prolonged, which only cemented the out of sight,
Speaker 2: out of mind sort of mindset that I think a
Speaker 2: lot of folks took towards their student loans.
Speaker 1: People started to think, oh, sure, payments are going to resume,
Speaker 1: because like by the fifth kick the can, you're like
Speaker 1: maybe again, And especially when we were talking about forgiveness
Speaker 1: and all that kind of stuff, and I think people
Speaker 1: just assumed understandably, so, hey, guess what these student loans,
Speaker 1: somebody else is gonna take care of them.
Speaker 2: Yeah, but it's honestly, it's something that we have been
Speaker 2: recommending for folks to do, you know, like not having
Speaker 2: to make any payments for three and a half years.
Speaker 2: It could have been massively helpful, and honestly it was
Speaker 2: for some We've heard from a ton of how to
Speaker 2: money listeners who made hay while the sun was shining
Speaker 2: right they saved up a massive nest egg to pay
Speaker 2: off a big chunk all at once, or even to
Speaker 2: eliminate those loans altogether. But that wasn't the case for everyone,
Speaker 2: as you might imagine. A recent survey found that one
Speaker 2: in three borrowers spent money instead of saving it because
Speaker 2: they thought that they wouldn't have to actually pay their
Speaker 2: loans back, because all.
Speaker 1: The messaging was telling them that it's going to be true.
Speaker 2: Yeah, those forgiveness attempts by the government, they actually hurt
Speaker 2: people financially because they ended up counting their chickens before
Speaker 2: they hash.
Speaker 1: Right.
Speaker 2: It makes me think one of our favorite quotes from
Speaker 2: Morgan Housel, which is save like a pessimist and invests
Speaker 2: like an optimist. And so we're looking at the saving
Speaker 2: like a pessimist side of that quote, and folks did
Speaker 2: the exact opposite. They spent like optimists. They spent like
Speaker 2: this was going to continue. It just only reinforces like
Speaker 2: recency bias, where you're only looking at the past, like
Speaker 2: just the recent period of time, and you're thinking that
Speaker 2: things are going to continue like they have been. There's
Speaker 2: another another paper from the University of Chicago, and they
Speaker 2: found that borrowers whose payments were paused, and this is
Speaker 2: regardless of their income, they took on more credit card.
Speaker 2: They took on more mortgage and auto loan debt than
Speaker 2: borrowers whose payments weren't on hiatus. It's clear that there
Speaker 2: are a lot of folks who did the exact opposite
Speaker 2: thing that they should have done, and there's it's almost
Speaker 2: like there's a reckoning. But the good news is that
Speaker 2: there are some things, like you said, that are going
Speaker 2: to help lessen the fall as we approached that cliff.
Speaker 1: Yeah, and so we'll get to that. That's that's really
Speaker 1: we're going to talk about here in just a bit.
Speaker 1: That the Save Plan is what it's known as, and
Speaker 1: there's a whole lot of stuff to talk about on
Speaker 1: that and how it's going to change your life if
Speaker 1: you're a student loan borrow Really it's going to change
Speaker 1: your finances in a big way. But at that same
Speaker 1: paper you just referenced, the one from the University of Chicago,
Speaker 1: it said that American households live in hand to mouth fashion.
Speaker 1: Is what they said. They just spend whatever comes in, which,
Speaker 1: in my experience and from what we see, isn't terribly
Speaker 1: far from the truth. Right, three quarters of the people
Speaker 1: in the survey you just mentioned said they were confident
Speaker 1: that debt relief was coming. They believed it was coming,
Speaker 1: and so they spent like it was bound to happen.
Speaker 1: And now fifty eight percent of folks say they're unprepared
Speaker 1: for student loan payments to resume. And we again, we
Speaker 1: totally understand why people feel this way. It kind of
Speaker 1: felt like the wol was pulled over your eyes. You
Speaker 1: were told something that didn't end up being true. The
Speaker 1: confidence with which student loan forgiveness was proposed and almost implemented,
Speaker 1: it led a lot of people to believe that they
Speaker 1: weren't going to be on the hook for the remainder
Speaker 1: of their loans, or that a big chunk was going
Speaker 1: to be forgiven, which was going to give you more
Speaker 1: breathing room. They planned based on the confident assertions and
Speaker 1: promises of elected officials, and then they were let down.
Speaker 1: And this isn't the first time politicians let somebody down,
Speaker 1: but it almost feels like it's even more of an
Speaker 1: injustice because it caused people to believe something that wasn't
Speaker 1: true for so long that they're in a worse position
Speaker 1: now than they would have been had that promise never
Speaker 1: even been made in the first place.
Speaker 2: Yeah, Yeah, it made it worse. And the fact is,
Speaker 2: if you would have been listening to the show, you
Speaker 2: would have heard us in telling you about this basically
Speaker 2: like heads up, and you might not have liked what
Speaker 2: we said over the past, you know, three plus years
Speaker 2: about preparing for student loans to resume and the unlikeliness
Speaker 2: of forgiveness to actually become reality. But we did end
Speaker 2: up being right in this case. And it's a I've
Speaker 2: told you some moments why I'm not going to say it.
Speaker 2: I'm not going to say it, but we do want
Speaker 2: encourage folks to listen to the show. We don't want
Speaker 2: to dwell on the past, but it is important to
Speaker 2: mention that that political promises are a dime a dozen.
Speaker 2: And if money from the Feds comes your way, sure
Speaker 2: that's great and we're going to talk about it. But
Speaker 2: banking on the government to come through in the clutch,
Speaker 2: it's a poor financial strategy. And of course folks didn't.
Speaker 2: They did the exact opposite of banking that money. They
Speaker 2: just they spent it. Yeah, exactly. They took those promises
Speaker 2: as fact when they weren't facked yet. And it makes
Speaker 2: me think of Matt. Let's say, your kid's gonna be
Speaker 2: less disappointed if you don't get them a pony for
Speaker 2: their birthday, if you didn't promise it in the first place.
Speaker 2: But if you told them you're getting a pony for
Speaker 2: your birthday and then you end up pulling the rug
Speaker 2: out from under them, how disappointing is that, Like it's
Speaker 2: even more their hopes and dreams to that actually happened, right,
Speaker 2: and so because why you always set the barlow right,
Speaker 2: Daddy loves you, but probably not get anything, and then
Speaker 2: you get something and then their thrilled boom.
Speaker 1: Yeah, parenting hack exactly. If you want to save money
Speaker 1: as a parent, that's the way to do it. But
Speaker 1: that's you know, we try to stay away from politics
Speaker 1: on the show, but we're very much in campaign season
Speaker 1: right now, and so some of these promises that you're hearing,
Speaker 1: they can sound so nice from people on both sides
Speaker 1: of the aisle, by the way, but keep a healthy
Speaker 1: degree of skepticism when you're hearing those things. Hopefully not
Speaker 1: a disbelief and positive change, But know that many of
Speaker 1: the campaign speeches we hear are even if they're well intentioned,
Speaker 1: they're unlikely to result in sweeping change. Even people that
Speaker 1: I may be a politician that I gravitate towards, or
Speaker 1: that I like or that I respect. I have to
Speaker 1: keep take everything they say with a grain of salt,
Speaker 1: because I know that there's a decent chance a lot
Speaker 1: of things they want to do they can't actually.
Speaker 2: Get done and not actually going to be able to implement.
Speaker 2: They might have the right ideas, but what's the reality
Speaker 2: of that actually coming to fruition. But so let's also
Speaker 2: talk about just like the larger impacts, like the macro
Speaker 2: impacts of student loans resuming. And first of all, this
Speaker 2: could help calm inflation even more than we've seen it
Speaker 2: come down over the past few months. I know it's
Speaker 2: not quite the silver lining that you're looking for if
Speaker 2: you have a four hundred and fifty dollars payment that
Speaker 2: is exiting your spending account every single.
Speaker 1: Month, cold comfort something, shut up, Matt.
Speaker 2: But the financial constraints that student loans will create, oddly enough,
Speaker 2: it could be good for the economy as a whole.
Speaker 2: It's like the exact opposite of Semischek's which were a
Speaker 2: big reason obviously, I mean, why we were in this
Speaker 2: current inflation situation again, though we have seen it subside
Speaker 2: a little bit but this will also cost taxpayers a
Speaker 2: pretty penny. As we've been saying, this is actually more
Speaker 2: generous than the actual the straight up forgiveness that the
Speaker 2: administration Biden administration was going for. In the New York Times,
Speaker 2: they recently confirmed that and over the next decade, this
Speaker 2: could be a trillion dollar wealth transfer program. Yeah, it's
Speaker 2: a lot of money.
Speaker 1: It could be like what in the first ten years,
Speaker 1: something like four hundred and fifty billion, But over twenty plus,
Speaker 1: I mean, yeah, we can get to that trillion dollar market.
Speaker 1: So this is going to cost more, in our likelihood
Speaker 1: than that straight up forgiveness amount that people were so
Speaker 1: excited about. Well, this could be this can make a
Speaker 1: bigger impact, but it's also going to have a bigger
Speaker 1: impact on people, you know what, the federal government are.
Speaker 2: Folks aren't as excited about it though, because it's not
Speaker 2: the sexy sure, Like people aren't patient, right, and so
Speaker 2: the basically saying that, like, over the course of time,
Speaker 2: this will be better for you, people don't want that.
Speaker 2: They want the they want the whatever the sexy option is.
Speaker 1: Forgiveness sounds so much better, But the truth is this
Speaker 1: is kind of like forgiveness under another name, because it's
Speaker 1: just gonna dramatic lower the amount that people have to
Speaker 1: pay towards their student loans, a good portion of people,
Speaker 1: and so for a large swath of people without standing
Speaker 1: student loan debt, it's going to have a bigger impact. Yes,
Speaker 1: a bigger impact than that blanket ten or twenty K
Speaker 1: worth of loan forgiveness that you were hoping for. And
Speaker 1: so that is how big this Save Plan is. It's
Speaker 1: going to cost a lot of money, but it's going
Speaker 1: to have a big impact. And so the biggest cost
Speaker 1: center of the Save Plan is those lower payments that
Speaker 1: it's going to create for most people, for tens of
Speaker 1: millions of people really. So we're going to talk about
Speaker 1: the SAVE plan next, how it works, how much you
Speaker 1: might save, and some of those gory details for how
Speaker 1: impactful it can be for you. We'll get to that
Speaker 1: right after this.
Speaker 2: All right, we're back from the break talking about the Specifically,
Speaker 2: we're going to talk about the SAVE Plan. What does
Speaker 2: it stand for? Again, Saving Americans valuable valuable education. Yeah,
Speaker 2: like that again, it's the acronym. It's political, doesn't really
Speaker 2: matter what it stands for. It's the Safe Plan. It's
Speaker 2: just it's branding, right, and branding gets used by companies
Speaker 2: all over the place, but it also gets used by
Speaker 2: the federal government and politicians. Stud you got to sell
Speaker 2: these ideas. A quick note, I wanted to mention, we're
Speaker 2: talking about federal loans here. By the way, this does
Speaker 2: not go towards private loans. Those are very different. Those
Speaker 2: don't come with the same opportunities and these federal benefits
Speaker 2: plus the forgiveness opportunities that we're going to describe here.
Speaker 2: So if you have federal loans, we would encourage you
Speaker 2: to think long and hard before you even consider refinancing
Speaker 2: with a private lender. It did make more sense for
Speaker 2: a bigger chunk of folks years ago, but it makes
Speaker 2: very little sense for almost anyone these days. That's particularly
Speaker 2: true given the generosity of the safe plan, which is
Speaker 2: what we're going to dive into now.
Speaker 1: Yeah, be federal or private loans, they definitely restrict some
Speaker 1: of those some access to two awesome things like these
Speaker 1: repayment plans. You might get a lower interest rate, but
Speaker 1: the almost nobody should can mate it now, yeah, right,
Speaker 1: and you might not as much these days, right with
Speaker 1: like where rates are going seven or eight years ago
Speaker 1: it made sense for some people, not so much anymore.
Speaker 1: And one other thing to mention too, Matt before we
Speaker 1: get into all the details of the SAVED plan. There's
Speaker 1: a lot to cover. But just like we're start with
Speaker 1: all our some caveats, I mean, just like with the
Speaker 1: forgiveness attempts, legal challenges are going to try to prevent
Speaker 1: SAVE from coming to fruition. They don't want some people
Speaker 1: don't want to see this plan come to come to
Speaker 1: the light of day, come to the rescue of student
Speaker 1: loan borrowers. But we would say from where we're sitting,
Speaker 1: not legal experts or anything like that, but there's less
Speaker 1: credibility to those attempts. We knew from the very get
Speaker 1: go there was a distinct, meaningful challenge to the student
Speaker 1: loan forgiveness attempt and that that could easily be overturned.
Speaker 1: But it's unlikely to happen in the same way to
Speaker 1: this repayment plan because similar repayment plans currently exist in
Speaker 1: the Department of Education. Clearly, from what we've read, has
Speaker 1: the oversight to be able to make changes to those
Speaker 1: repayment plans and make them a little more generous. And
Speaker 1: so those challenges.
Speaker 2: Which is what's happened. As opposed to the blanket forgiven rights.
Speaker 2: They're modifying the terms of repayment, which has stood in
Speaker 2: the past.
Speaker 1: Yeah. Yeah, so the challenges they're unlikely to be successful,
Speaker 1: but it's still possible that save might not ever see
Speaker 1: the light of day. And so it's a good idea
Speaker 1: to be preparing for full payments to resume, which means
Speaker 1: you'll maybe have saved more than you needed to write.
Speaker 1: But that's that's a better downside than the alternative, which
Speaker 1: is not not being prepared, not having enough on hand. Sure.
Speaker 1: And then i'd also say too that the safe plan
Speaker 1: it doesn't fully go into effect until next summer, and
Speaker 1: so when the payment restart happens, you won't have these
Speaker 1: newer lower payments quite yet.
Speaker 2: But which, like you've already mentioned, like the campaign promises
Speaker 2: but doesn't. Isn't the timing uncanny? Like I can already
Speaker 2: hear the campaign slogans ahead of the presidential election in
Speaker 2: November of next year talking about student loans and just
Speaker 2: the different from both sides of the island.
Speaker 1: It's like, don't you love that newer, new lower payment
Speaker 1: and don't you want to vote for me? Sure? Correct?
Speaker 1: There's a lot of politics a wash in this too, but.
Speaker 2: It's simultaneously like, yeah, we live in crazy times and
Speaker 2: you never know, like what actually might happen to this.
Speaker 2: So there is like a small sliver of a chance
Speaker 2: that something does happen, that it's challenged legally, that it
Speaker 2: gets white from the books, but it does not seem
Speaker 2: nearly as likely as the forgiveness attempt, which literally folks
Speaker 2: were saying, oh, yeah, yeah, you can't do that.
Speaker 1: Right, Okay, since since the signup form is live now, Matt,
Speaker 1: since people can actually go to the Department of Education
Speaker 1: website and they can you know, I guess the signup
Speaker 1: form was live for student loan forgiveness and a lot
Speaker 1: of people signed up for it even you know, before
Speaker 1: it was struck down. But the signup form is live.
Speaker 1: So let's talk about what SAVE is planning to do
Speaker 1: and what the likely changes are going to be for people.
Speaker 2: Some of the changes, because we've talked about how student
Speaker 2: loans resuming, how it might impact the economy, the macro
Speaker 2: environment as a whole. So now we're going to kind
Speaker 2: of dive into the micro for for a second. Here,
Speaker 2: we're going to dive into the personal because it's not
Speaker 2: going to be easy to reincorporate those payments after so
Speaker 2: much time off from having to make them. Some borrowers
Speaker 2: have even said that, like it feels like a this
Speaker 2: is I think from a Wall Street Journal article, but
Speaker 2: it feels like a distant memory after all this time,
Speaker 2: like they don't hardly even remember making payments.
Speaker 1: Probably do I have student loans, I don't even remember anymore.
Speaker 2: I think it's true that the payment restart, it's gonna
Speaker 2: be a rude awakening, but it also it's going to
Speaker 2: feel less like this year Cliff that it would have
Speaker 2: been had the safe Plan not been implemented. This will
Speaker 2: change the ball game for student loan borrowers, making it
Speaker 2: less onerous than it would have been otherwise. Some estimates
Speaker 2: have figured that when the payment resumes, though, it'll feel
Speaker 2: like a five percent pay cut, which I don't know.
Speaker 2: It depends on how you look at all. One hand,
Speaker 2: I think I want to earn five percent more, yeah,
Speaker 2: But on the other hand, it's just like, okay, five percent,
Speaker 2: that's you know, that doesn't seem like a massive upheaval
Speaker 2: to the way that you have been spending your money.
Speaker 2: When it comes to your week to week, month to
Speaker 2: month expenses, but so much of it depends on your
Speaker 2: income and specifically the amount of student loan debt that
Speaker 2: you're in.
Speaker 1: Surprise, you don't think five percent is a big deal.
Speaker 1: I think for most ordinary Americans, five percent of their
Speaker 1: budget is a massive deal.
Speaker 2: I guess when you think about the different changes like
Speaker 2: tax practs for instance, Like you see a change to
Speaker 2: a tax bracket and you're like, oh, cram okay, and
Speaker 2: I've got to pay three percent more in tax. It's
Speaker 2: not like the end of the do I want that
Speaker 2: three percent back? Absolutely, like one hundred percent. I wouldn't
Speaker 2: want to have to pay an additional five percent. But
Speaker 2: being able to save five percent, and we're going to
Speaker 2: dive into that here in a second, is what a
Speaker 2: lot of folks have basically sure felt is if they
Speaker 2: have been thinking about it through the lens of what
Speaker 2: terms were previously in effect, things look a lot rosier
Speaker 2: than these two. Yeah.
Speaker 1: I think a lot of student loan borrowers are going
Speaker 1: to find that that it is a big deal to
Speaker 1: that extra five percent. And then so a lot of
Speaker 1: people said it's going to be more impactful than a
Speaker 1: year of crazy inflation was for a lot of people's
Speaker 1: personal finances. But yeah, because of that out of sight,
Speaker 1: out of mind factor, now it's coming back into their
Speaker 1: lives unexpectedly, even though it shouldn't have been unexpected, it
Speaker 1: feels like it is unexpected for a lot of people.
Speaker 1: But let's talk about specifically the Save Plan how much
Speaker 1: it's going to help people save. The administration, the Biden
Speaker 1: administration estimates that a typical graduate of a four year
Speaker 1: public university is going to save like two thousand dollars
Speaker 1: a year or forty thousand dollars over twenty years, which
Speaker 1: is why that headline number we mentioned. It could cost
Speaker 1: a trillion dollars over a couple of decades, and some
Speaker 1: people are going to say more than others. But that
Speaker 1: smaller monthly payment amount well, is going to mean less
Speaker 1: constraint for most borrowers than before. So people who aren't
Speaker 1: making much, they're going to see their payment reduced to
Speaker 1: nothing at all, especially if you're not making much and
Speaker 1: you've got a couple of kiddos, because they take into
Speaker 1: accounts your family size at the same time. But then
Speaker 1: in addition to that, something else, another perk of the
Speaker 1: Safe Plan is that the balance that you owe, it's
Speaker 1: not going to balloon. It's not going to go up
Speaker 1: because capitalized interest is gone. It's being removed from the equation.
Speaker 1: And so as long as you make your required monthly
Speaker 1: payment amount, even if what's required is just a tiny amount,
Speaker 1: now your balance won't crow. So let's say the federal
Speaker 1: government says, hey, you're your your loan payment. Before under
Speaker 1: the Repay program, which was the predecessor to Save, was
Speaker 1: two hundred twenty dollars, and now under the Save plan
Speaker 1: it's forty nine dollars. As long as you make that payment,
Speaker 1: you you're not going to see your balance grow, whereas
Speaker 1: before people were seeing their balances grow even when they
Speaker 1: made their payments in full and on time exactly.
Speaker 2: And because of the cap which I'm about to get
Speaker 2: into is in place too.
Speaker 1: That keeps the.
Speaker 2: To say, like, you've got the cap, but your actual
Speaker 2: amount owed was beyond what that cap is. That additional
Speaker 2: interest oftentimes got added on to the principle, and so
Speaker 2: even at the were you to make the payments on time,
Speaker 2: at the end of that term, you were tax on
Speaker 2: that forgiven amount, which ballooned. So in effect, that's how
Speaker 2: those balances got to be so large, But like I
Speaker 2: hinted at, there is an actual cap to the amount
Speaker 2: that you're gonna have to pay every single month. And
Speaker 2: if you're wondering how much you'll you're going to owe
Speaker 2: each and every month under the new plan, the new
Speaker 2: Safe plan will link to a helpful calculator, But the
Speaker 2: monthly payments are going to be capped at five percent
Speaker 2: of borrowers discretionary fund.
Speaker 1: Which begs the question, what's discretionary funds? Matt, Yeah, so well,
Speaker 1: first of all, this is cut in half from the
Speaker 1: current repayment plans, right, so prior to this it was
Speaker 1: ten percent of your discretionary income. Basically, the SAVE program
Speaker 1: it increases the income exemption from one hundred and fifty
Speaker 1: percent to two hundred and twenty five percent of the
Speaker 1: federal poverty line. So in this way, it's doubly generous,
Speaker 1: like you are benefiting from multiple angles, from multiple facets
Speaker 1: of the SAVE program. The easiest way to figure out
Speaker 1: what your discretionary income, though, is to take your total
Speaker 1: income minus thirty two thousand, eight hundred dollars that's essentially
Speaker 1: the minimum, that's the floor, and then just multiply that
Speaker 1: by zero point zero five in order to get that
Speaker 1: five percent, Individuals earning less than that they're going to
Speaker 1: pay they got a grand total payment of zero dollars
Speaker 1: a month, and then families of four with an agi
Speaker 1: of less than sixty seven, five hundred dollars, they're also
Speaker 1: going to have a zero dollar monthly payment as well. Yeah,
Speaker 1: so your family size matters, your income matter. But then
Speaker 1: once that's factored in, it's a greatly reduced amount because
Speaker 1: of the new more generous way that discretionary income is considered.
Speaker 2: Right, Yeah, so it's not even, yes, it's more than
Speaker 2: even just doubly. I just covered three different ways. Yeah,
Speaker 2: that this is my last point that this is more
Speaker 2: attractive to borrowers than the previous plan.
Speaker 1: Yeah. And on top of that, so there's even more
Speaker 1: room for generosity under the new Save plan. While the
Speaker 1: blanket forgiveness plan was struck down, like we've said so
Speaker 1: many times this on this show, even on this particular episode,
Speaker 1: the Save plan still offers a path to full forgiveness
Speaker 1: for some people. Loans with an original balance of twelve
Speaker 1: thousand dollars or less, they can be canceled with just
Speaker 1: ten years of on time payments. And I believe if
Speaker 1: your original loan balance was like thirteen thousand, then you
Speaker 1: can you can have forgiveness in eleven years. It's like
Speaker 1: a grand every additional thousand dollars you borrow it tax
Speaker 1: on an additional year to how long it's going to
Speaker 1: take to receive forgiveness. Kind of convoluted, I know, but
Speaker 1: this in particular is going to help Matt a lot
Speaker 1: of community college grads out. Some estimates say that eighty
Speaker 1: five percent of community college graduates are going to be
Speaker 1: able to have their loans forgiven under this new save plan,
Speaker 1: and that's far more generous than the current soon to
Speaker 1: be irrelevant income based or payment methods.
Speaker 2: Yeah, that's right, and hopefully listeners out there to how
Speaker 2: the money are more ready than the typical student loan
Speaker 2: borrower for payments to begin again. But just in case
Speaker 2: you aren't, it's important to note as well that folks
Speaker 2: who aren't able to make payments, they're not going to
Speaker 2: be considered delinquent. They're not gonna be placed into default
Speaker 2: until next fall again, when the plan actually goes into effect.
Speaker 2: And so what does this mean as to what you
Speaker 2: should be doing in the meantime. This does not mean
Speaker 2: that you shouldn't start paying if you can, but it
Speaker 2: is important to note that you're not going to be
Speaker 2: penalized if you can't in the meantime.
Speaker 1: Right exactly. And so I think that's like a it's
Speaker 1: a grace period ethical tightrope that we're kind of walking
Speaker 1: here where it's just like it's not like a license
Speaker 1: to just do whatever it is that you want to do.
Speaker 2: You still should, but this is yeah, like you said,
Speaker 2: it's a great period.
Speaker 1: There's a period.
Speaker 2: Here where you do have a little bit of time
Speaker 2: to get your stuff together.
Speaker 1: And since these new lower payments they're not gonna you know,
Speaker 1: they're not gonna start happening until summer of next year,
Speaker 1: until July. I think this is the way to kind
Speaker 1: of help people who are stuck with higher payment than
Speaker 1: they can afford right now, to say, hey, guess what
Speaker 1: if you can't actually afford to make those payments, it's okay,
Speaker 1: Like we're not going to ting your credit. You know,
Speaker 1: you're not going to get in trouble necessarily for not
Speaker 1: making those payments. And then hopefully once July rolls around,
Speaker 1: you see a massive production to the payment that you owe,
Speaker 1: and by then hopefully you don't have any problem making
Speaker 1: those payments on time and infull every single month in perpetuity.
Speaker 1: That's right.
Speaker 2: That's why we're talking about this now to give you
Speaker 2: plenty of heads up. But that being said, you might
Speaker 2: be wondering, how is it that I can apply for
Speaker 2: this sweet new save program that you guys are talking about.
Speaker 1: It'll hold out on me, let me know how do
Speaker 1: I get the good stuff?
Speaker 2: If you are already in the repay plan, there's actually
Speaker 2: no need for you to do anything. You will be
Speaker 2: automatically enrolled in the Save plan once it launches. By
Speaker 2: the way, this feels like a lot of alphabet soup,
Speaker 2: I know it is. There's the original pay plan pay
Speaker 2: as you are, and then then with the revised pay
Speaker 2: as you are in repay. Now there's the safe plan,
Speaker 2: and so it is a little bit confusing.
Speaker 1: IBr What's that? Is that a disease?
Speaker 2: Right? Should I get that checked out by my dermatologist?
Speaker 2: Maybe you should if you want to save your life
Speaker 2: and save some money. We will link to where it
Speaker 2: is that you can apply for this, though, if you
Speaker 2: are not enrolled in repay. But say it's not going
Speaker 2: to be officially launched until nextra life it is still
Speaker 2: a good idea to get the ball rolling now, to
Speaker 2: start thinking ahead. How it is the new plan is
Speaker 2: going to impact your payments.
Speaker 1: Yeah, that lower payment doesn't come around till extra life,
Speaker 1: but I think some of the things that we've mentioned
Speaker 1: do come about a little bit earlier. So enrolling in
Speaker 1: this plan, making sure that you're on the saved path
Speaker 1: before October hits is wise.
Speaker 2: Yeah. So we've kind of detailed some of the details,
Speaker 2: some of the specifics of the Safe Plan and what
Speaker 2: it entails. But we will next talk about how it
Speaker 2: is that you should that folks out there should be
Speaker 2: approaching student loans. Maybe we've got some younger listeners or
Speaker 2: even and some parents out there who have high school
Speaker 2: seniors or juniors and colleges in your future. How should
Speaker 2: you approach student loans? What's the healthy approach? Will get
Speaker 2: to that right after.
Speaker 1: This, Matt, Let's keep talking student loans, and when the
Speaker 1: facts on the ground change, you and I were not
Speaker 1: afraid to change our opinion. And the truth is that
Speaker 1: this Safe Plan, it does a lot to change how
Speaker 1: we feel about student loans and how we feel about
Speaker 1: people taking on student loan debt. It does revise kind
Speaker 1: of the mindset people should have when they're going into
Speaker 1: taking on student loans. Taking out student loans. It makes
Speaker 1: me think similarly of kind of the changes that were
Speaker 1: made to five twenty nine plans recently that allow you
Speaker 1: to convert unused money not spend for college to retirement
Speaker 1: money inside of a row for your kid. And so
Speaker 1: now with that added flexibility, guess what we like five
Speaker 1: twenty nine plans a whole lot more than we did before.
Speaker 2: Sure, But that being said, I don't think the changes
Speaker 2: that have taken place with these with the safe Land
Speaker 2: it's not as drastic as the five twenty nine plan.
Speaker 1: It's drastic for people who currently have to have it,
Speaker 1: but it doesn't necessarily change for future borrowing all that
Speaker 1: much about how we think about yeah, how people take
Speaker 1: it onto them exactly.
Speaker 2: Yeah, and we'll kind of, I guess, maybe explain how
Speaker 2: it is that we're thinking about it.
Speaker 1: But clearly four hundred billion dollars slashing around that's going
Speaker 1: to change, right, incentives for borrowers and for the colleges alike.
Speaker 1: And so what we've said all along is that what
Speaker 1: SAVE is doing and kind of the the attempt at
Speaker 1: forgiveness it doesn't do anything to address the root of
Speaker 1: the problem, which is that college costs a whole lot
Speaker 1: more than it should and when But here's the thing.
Speaker 1: When borrowing gets cheaper and repayment becomes even easier, it
Speaker 1: incentivizes universities to charge more, knowing that the federal government
Speaker 1: is going to be footing a lot of the now
Speaker 1: higher bill and they're less price sensitive than most people
Speaker 1: are than individuals and families are. So how should you approach,
Speaker 1: you know, student debt given the new landscape. We've got
Speaker 1: a few thoughts on how this might change things at
Speaker 1: least a little bit, that's right.
Speaker 2: Yeah, So, as far as folks who have not yet
Speaker 2: taken on student loans, our advice. You know what we've
Speaker 2: always said about how much to borrow, it still stands.
Speaker 2: Don't borrow more than you're likely to make in that
Speaker 2: first year after you graduate. Ideally you'd borrow even less
Speaker 2: than that. The smaller you're student loan balance upon graduation,
Speaker 2: the better. But let's say, for instance, you're planning on
Speaker 2: becoming a social worker. Well, the average starting wage is
Speaker 2: something like forty six thousand dollars, and in that case,
Speaker 2: forty six thousand dollars, because what that's your absolute ceiling,
Speaker 2: that is the most that you should borrow. We do
Speaker 2: not want you to count on like the best case,
Speaker 2: best possible case scenario happening and saying well, I'll be
Speaker 2: able to offset, you know, my higher tuition costs because
Speaker 2: I want to go to this private school, assuming that
Speaker 2: everything is going to line up. Unless you know, like
Speaker 2: if you've got some sort of guaranteed job, then okay,
Speaker 2: maybe like that's something you consider, But bottom line, it's
Speaker 2: like a pretty rare situation, very rare. Yeah, the rule
Speaker 2: of thumb still stands. Do not borrow more than you're
Speaker 2: going to make that first.
Speaker 1: Year after you graduate. Yeah, even though student loans are
Speaker 1: kind of like a blank check in some ways and
Speaker 1: you could borrow more, it's just not wise. You're putting
Speaker 1: yourself in an unnecessary financial hardship upon graduation. And so yeah,
Speaker 1: that's a really good rule of thumb. And I think
Speaker 1: that rule of thumb stays in place. It stays the
Speaker 1: same even with these changes made to how you have
Speaker 1: to repay back student loans. But Matt, it does kind
Speaker 1: of make me think of something we talked about on
Speaker 1: the Friday flight last week. The new eighty four month
Speaker 1: car loans from Tesla. And just because you can borrow
Speaker 1: for seven years, it doesn't mean you should. Right, just
Speaker 1: because someone will give you a loan for that length
Speaker 1: of time doesn't mean that it's smart on your part
Speaker 1: to actually take them up on that offer. And so, yeah,
Speaker 1: if taking out a longer loan means you would get
Speaker 1: a bigger portion of that payment subsidized by someone else,
Speaker 1: especially like the federal government, you would, you know, take
Speaker 1: that into consideration. So that is worth thinking through. It's
Speaker 1: definitely true that it's about to become less risky than
Speaker 1: ever to borrow money for a higher education, So that
Speaker 1: is one thing to think through. But either way, it's
Speaker 1: a good idea to keep borrowing and check for your
Speaker 1: mental sanity and for your financial solvency too.
Speaker 2: Yeah, yeah, it's it's a I feel like this is
Speaker 2: an instance where you don't want to let the tail
Speaker 2: wag the dog, because if you go into at the
Speaker 2: wrong mindset, you could say, oh, why not borrow even more?
Speaker 2: Because the more I borrow, the more the government is
Speaker 2: going to subsidize, Like like an equivalent example. It makes
Speaker 2: me think of as like credit card rewards and you're thinking, Oh,
Speaker 2: the more I spend on my credit card, the more
Speaker 2: points I get. If only I could just spend more
Speaker 2: and more money, Well, you're not. You're not looking at
Speaker 2: your entire financial situation, and obviously, as an individual, that's
Speaker 2: what we need to do. We're not only looking at
Speaker 2: one small sliver of truth here and how Yeah, in reality,
Speaker 2: the government could subsidize a high or a very large
Speaker 2: portion of your college education cost, but that is not
Speaker 2: how we want folks to be thinking about it.
Speaker 1: Or even with a seventy five hundred dollars federal tax
Speaker 1: credit to buy an electric vehicle. Well, is your current
Speaker 1: vehicle working just fine?
Speaker 2: Yah?
Speaker 1: Do you need a new car?
Speaker 2: Like, what's the big picture coolizing it? Yeah, the very
Speaker 2: small incentive or benefit that's.
Speaker 1: There, and maybe five years from now, maybe that's when
Speaker 1: it's time to upgrade. But don't let the Yeah, don't
Speaker 1: let like you said, the tail wag the dog, like, oh,
Speaker 1: go some bite a v now because slightly discounted, Well,
Speaker 1: that'd be short.
Speaker 2: Sighted exactly, Yeah, maybe not. We would also encourage folks
Speaker 2: to shop around when you are looking at specific schools,
Speaker 2: because where it is that you go to school, it
Speaker 2: matters a lot. So, for instance, we were reading a
Speaker 2: journalism degree at Miszoo. It's going to get you into
Speaker 2: twenty thousand dollars a student loan debt, and it's also
Speaker 2: going to deliver you a starting salary of about fifty
Speaker 2: thousand dollars. And this is specifically for a master's degree. Well,
Speaker 2: if you went to Northwestern instead, you'd be graduating with
Speaker 2: much more student loan debt. We're talking about fifty five
Speaker 2: thousand over twenty thousand dollars, and your salary is actually
Speaker 2: going to be closer to forty one thousand dollars. It's
Speaker 2: actually a little bit less than graduating from Miszoo. So
Speaker 2: it's a good idea. I mentioned this example because we
Speaker 2: want folks to shop colleges like basically like you would
Speaker 2: shop for mortgage rates. And a great resource is the
Speaker 2: US Department of Education's College Scorecard. You can enter in
Speaker 2: specific colleges and they've got the average tuition costs as
Speaker 2: well as average starting salary costs. Once you were to graduate,
Speaker 2: you can compare degrees. There's a lot. I feel like
Speaker 2: there's a lot that the government isn't great up, but
Speaker 2: they're really good at collecting data, requiring colleges in particular
Speaker 2: to submit that data, and they have that it's there
Speaker 2: on hand for you to use as a resource, So
Speaker 2: be sure to check that out as well well. Linked
Speaker 2: to that in the show notes well what if you
Speaker 2: don't already know about it?
Speaker 1: When we talk to people who are trying to buy
Speaker 1: a home at one of the fatal flaws that people
Speaker 1: often experience is I fell in love with the home
Speaker 1: and I just have to have it right. And I
Speaker 1: think the same fatal flaw is true when it comes
Speaker 1: to choosing a college. It's like, I'm in love with it.
Speaker 1: I went on campus. This has to be the place I.
Speaker 2: Go, even more so than the home, right Because with
Speaker 2: a college, it's like, but I've watched that football team
Speaker 2: my entire life, where mom and dad went there. It's something.
Speaker 2: It's man, it's so ingrained. We're brainwashed to a certain
Speaker 2: extent when it comes.
Speaker 1: To high d and when you're not running the numbers
Speaker 1: before you fall in love, when you're not making a
Speaker 1: decision based on value comparing a few apples against each other,
Speaker 1: you're liable to make a poor decision. You're liable to
Speaker 1: sign up for a whole lot more student loan debth
Speaker 1: than you need to and you know you're like you
Speaker 1: were mentioning there too, your income might not be as
Speaker 1: high either going to that school, which that's I don't know.
Speaker 1: I think that you have to take those things into
Speaker 1: consideration before you make a choice of where to go
Speaker 1: to college. And I know that sounds like Debbie Downer,
Speaker 1: like don't go do something you love or don't go
Speaker 1: to the place you love.
Speaker 2: Stop being such a realist. I think it is like
Speaker 2: a value based proposition.
Speaker 1: It is. So there's a bunch of cool, cool colleges
Speaker 1: out there, just like there's a bunch of great houses,
Speaker 1: and falling in love with the one is likely going
Speaker 1: to put a lot of people into financial difficulty because
Speaker 1: they didn't think long and hard enough before they made
Speaker 1: that decision.
Speaker 2: Yeah, and here's the thing. I mean, there is a
Speaker 2: chance that you are the outlier, right like that you actually,
Speaker 2: well that's just the average. I'm going to make make
Speaker 2: way more than that. Well, yeah, there's a chance that's
Speaker 2: going to be the case. But there's a reason that
Speaker 2: these numbers exist. There's a reason that this is the
Speaker 2: average because this is what most people do. And so
Speaker 2: I don't know I don't want people to think too highly.
Speaker 2: We want folks to be realistic in what it is
Speaker 2: that they're likely going to incur, the amount of debt
Speaker 2: that they're going to be burdened with, but also realistic
Speaker 2: when it comes to how much that they're likely going
Speaker 2: to make once they do graduate.
Speaker 1: Yeah, all right, And so I think we basically said
Speaker 1: that one of the things that this new repayment plan
Speaker 1: that Saved does is it limits the risk for a
Speaker 1: lot of borrowers. And so there are a lot of
Speaker 1: people if you do take on too much in student
Speaker 1: loan debt, let's say, and you don't earn quite the
Speaker 1: income you expected, well, the SAVE plan is here to
Speaker 1: kind of be like that trampoline underneath you to ensure
Speaker 1: that you're not as screwed as you would have been otherwise. Right,
Speaker 1: And I think of this matt as enhanced downside protection.
Speaker 1: Maybe that's what we'll call it. If the decree didn't
Speaker 1: pan out like you wanted, your student loan payment isn't
Speaker 1: going to eat you alive in the same way that
Speaker 1: it would have when you're trying to get your career
Speaker 1: off the ground. So I would say, think about these
Speaker 1: rule changes less as a license to borrow bigger sums
Speaker 1: to take on a bigger chunk of student loan debt
Speaker 1: and throwing caution to the win in that regard, and
Speaker 1: more as kind of like a nice insurance policy, right,
Speaker 1: some meaningful protection if you lose your job or your
Speaker 1: earnings aren't growing as fast as you'd hoped.
Speaker 2: Yeah, it basically keeps like the worst case scenario from happening. Yeah,
Speaker 2: and we don't want you to count on it though, right, Like,
Speaker 2: this isn't like it's not a goal to be able
Speaker 2: to pay nothing on your student loan.
Speaker 1: It's like that's the worst case scenario. It's like, because
Speaker 1: then your income's not awesome. We want you to grow
Speaker 1: your incomes.
Speaker 2: And it's like it makes me think of like income tax. Oh,
Speaker 2: here's a trick. Here's a way that you can avoid
Speaker 2: paying any income tax, don't earn anything. I feel like
Speaker 2: it could be like the Eddie Murphy meme where it's
Speaker 2: it's like I want to pay zero dollars in federal
Speaker 2: income tax, earn no money. It's the same thing with
Speaker 2: the student loans.
Speaker 1: Your job and live in a tent.
Speaker 2: Want to not have to make a student loan payment
Speaker 2: every month earn less than thirty two five hundred dollars. Smart,
Speaker 2: but that is not the goal. We want folks obviously
Speaker 2: to be doing much better than that.
Speaker 1: Yeah, Okay, I think something else of this does Matt
Speaker 1: another kind of tweak, another change to the way we
Speaker 1: can think about student loans moving forward. Is it paying
Speaker 1: off student loan debt is becoming less advantageous. And I
Speaker 1: think because of the new repayment rules and that kind
Speaker 1: of additional downside protection, there's just no need to rush
Speaker 1: to pay off your loans. To start throwing you know,
Speaker 1: oh I got a bonus at work, Let me hurl
Speaker 1: it all towards the student loan and pay that off
Speaker 1: as quickly as possible. It's kind of like throwing extra
Speaker 1: money towards the principle on your two point seventy five
Speaker 1: percent mortgage. Right. It's like, there are better things you
Speaker 1: could do with your money. It's not that that's like
Speaker 1: some sort of financial evil or malpractice or anything like that,
Speaker 1: but it just doesn't make the most financial sense to
Speaker 1: start paying off that principle when there's other things you
Speaker 1: can be doing. And there's just a lot of Similarly,
Speaker 1: with student loans, there's a lot of other financial priorities
Speaker 1: that take precedence given the change to these repayment programs,
Speaker 1: and so for most folks, it makes sense to pay
Speaker 1: as agreed to stick dollars towards the other money goals
Speaker 1: that you've got, like saving for retirement and paying off
Speaker 1: other debts that that might be worse and then that
Speaker 1: might not come with and that don't come with some
Speaker 1: sort of insurance policy essentially from the federal government. So
Speaker 1: I would say for a lot of people, yeah, pay
Speaker 1: the amount you're supposed to pay, but paying more an
Speaker 1: attempt to accelerate the payoff of that debt just doesn't
Speaker 1: make as much sense it used to either.
Speaker 2: Yeah, certainly, if you're into the numbers, go ahead and
Speaker 2: crunch them and see how much you actually are going
Speaker 2: to be paying an interest. But the bottom line is
Speaker 2: we've just detailed all the different ways that the SAVE
Speaker 2: program plan is making your payments less painful. It's a
Speaker 2: lower rate, there's a floor as to how much you
Speaker 2: need to earn in order before you're making payments at all.
Speaker 2: There are just multiple ways that SAVE has made it
Speaker 2: less attractive to aggressively attack your student loans. And it's
Speaker 2: also important to note too, that different employers, different companies
Speaker 2: are offering to help pay your student loans off. Part
Speaker 2: of why it's becoming more popular is a provision that
Speaker 2: allows companies to offer up to five thousand, two hundred
Speaker 2: and fifty dollars in loan repayment as a tax free
Speaker 2: benefit through twenty twenty five. So it's worth looking to
Speaker 2: see if that's a benefit that's offered where you currently work.
Speaker 2: It could even influence where you decide to apply for
Speaker 2: a job in the future. The story we were that
Speaker 2: we came across highlight how Navidia that is microchips or
Speaker 2: whatever computers.
Speaker 1: But they're making all those AI chips now they're so
Speaker 1: hot right now, their stock was so hot.
Speaker 2: But they're paying something in the range of three hundred
Speaker 2: and fifty dollars a month towards their employees student loans.
Speaker 2: That is a lot of money. That is a seriously
Speaker 2: awesome benefit and could have this and some of these
Speaker 2: different planes do have caps as well as like as
Speaker 2: far as like the lifetime amount that they're willing to
Speaker 2: pay towards your student loans, but seriously check that out.
Speaker 2: I think that could certainly end up swaying, which company
Speaker 2: you decide to go with.
Speaker 1: Yeah, yeah, And the truth is, Matt, student loans remain
Speaker 1: this kind of oddball products, right, Like we're asking teenagers
Speaker 1: to make really big decisions that are going to affect
Speaker 1: them for decades to come. This is where parents come into,
Speaker 1: Like parents have to help their kids not just say like, yeah,
Speaker 1: go to the college of your dreams, but like think
Speaker 1: through the numbers and the burden that that child is
Speaker 1: going to endure for years to come if they make
Speaker 1: a bad decision. And so it's you know, because the
Speaker 1: federal government is a lender. On top of that, there's
Speaker 1: no due diligence being done on whether or not the
Speaker 1: barrower is going to be able to addictally repay those loans.
Speaker 1: Whereas when you buy a house, guess what they're looking
Speaker 1: at every single piece of your financial life. That'll get
Speaker 1: at your credit score, they'll get your debt to income ratio. Hey,
Speaker 1: what are the assets that you own? What sources of
Speaker 1: income do you have? They want to know everything about you.
Speaker 1: But when you take out student loans, none of those
Speaker 1: questions that you get asked. And so it's all.
Speaker 2: About potential, that's right.
Speaker 1: Yeah, it's like seriously, you're going to be a superstar,
Speaker 1: and so that's why we think you should, you know,
Speaker 1: take out one hundred kN and student loans and this
Speaker 1: is likely going to be continue to be a hot
Speaker 1: button issue, right we'll continue to do our best to
Speaker 1: address it in a level headed manner. And by the way,
Speaker 1: if you're still unsettled about student loan payments resuming, we'll
Speaker 1: link to an article that we just wrote on the
Speaker 1: site that hopefully can help you think about and start
Speaker 1: to incorporate those payments back into your life. But I
Speaker 1: also hope for a lot of people out there and
Speaker 1: at this savee plan does help limit reduce the burden
Speaker 1: of that student loan payment resuming again. And by the way,
Speaker 1: if you have a question about some of the nuance
Speaker 1: of this safe plan, oh feel free to holler at
Speaker 1: us because Great Plug love to take it on an
Speaker 1: upcoming ask Htam episode. We know there's like a lot
Speaker 1: of murky stuff that we went through and hopefully there's
Speaker 1: a lot of We spoke about it clearly, but I
Speaker 1: don't know, it's sure, it's a little.
Speaker 2: Confusing sometimes I don't say very clearly. But there's a
Speaker 2: lot of details in specifics too that we didn't cover,
Speaker 2: so if you have a specific situation scenario, we would
Speaker 2: love to hear it for sure. All right, man, let's
Speaker 2: get back to the beer. You and I enjoyed the
Speaker 2: IPA from the Japanese breery. It's your turn to say
Speaker 2: it now.
Speaker 1: Waku wakuo tza coori farm kawakita.
Speaker 2: Eh oh, pretty good. You already heard me say it,
Speaker 2: So you're right. I would love to live in a
Speaker 2: world where you're fluent in Japanese and I'm the guy
Speaker 2: that's Asian and people expect me to be able to
Speaker 2: speak in my new hobby, learn that guy. It's the
Speaker 2: it's the white Norwegian guy. He's the one that can
Speaker 2: speak it. But yeah, this was an ipa. What your
Speaker 2: thoughts on this beer?
Speaker 1: It was more multy definitely not like New England style ipa,
Speaker 1: super juicy, top bomb any of that kind of stuff.
Speaker 1: So really like an IPA from fifteen twenty years ago,
Speaker 1: but also not overly bitter, not West Coast style ipa either, like.
Speaker 2: Truly the first versions of American IPAs that showed up
Speaker 2: on the scene exactly because I feel like so American
Speaker 2: IPA one point zero was old school multi this like.
Speaker 1: An anchor steam Ipa style.
Speaker 2: I don't know if that was two point zero were
Speaker 2: the West coast ones, that's what like tiny the residue beers,
Speaker 2: some of those flavors came on the scene. And then
Speaker 2: three point zero the third generation, or in my mind,
Speaker 2: are the New England New England hazes.
Speaker 1: The folks out of you know, Maine and Thistle Brothers, Trillium,
Speaker 1: Boston Burial, even all the way down to North Carolina.
Speaker 2: I mean a lot of folks on the East Coast,
Speaker 2: a lot of folks everywhere are making the New England
Speaker 2: haze style now. But this, Yeah, you definitely like roll
Speaker 2: back the clock. It's like you're sitting down on the
Speaker 2: time machine and the DeLorean punched in two thousand and
Speaker 2: five to two thousand and eight. I want to drink
Speaker 2: an ipa from that period, from that period of time.
Speaker 1: Yeah, so super fun, especially since it's again this exotic beer.
Speaker 1: Always fune to try something new.
Speaker 2: It's up privilege to be able to just drink something
Speaker 2: that you can only get overseas.
Speaker 1: Yeah, and that's thanks to Julia. So thank you, super
Speaker 1: fun Julia for sending this one our way. We really
Speaker 1: appreciate it. That's right, and matth that's going to do it.
Speaker 1: For this episode. We'll have, of course links in the
Speaker 1: show notes up on our website. Let's run out to
Speaker 1: money dot com, to that calculator, to some of the
Speaker 1: other resources we mentioned.
Speaker 2: College scorecard, the article about student loans in order to
Speaker 2: dive into the details. You can find all of that
Speaker 2: up at how toomoney dot com. And that's gonna be it, buddy.
Speaker 2: So until next time, best Friends Out, Best Friends Out.