PoP 229 | Student Loan Debt

Student loan debt

In this episode, Joe talks all about student loan debt, debt forgiveness, and how to get out of debt. Also, should you invest in a Roth IRA or pay off student loan debt?

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In This Podcast

Summary

I am not a financial advisor, accountant, or attorney, this is all my personal experience and should not be taken as financial guidance, find your own professional if you want one.

Some National Statistics

Average bachelor degree student comes out with $37 000 –> $351 per month.

Average masters degree student comes out with $58 000.

This, combined, comes to $93 000.

Subsidised Loan: the interest is only accrued after you’re done with college.

Unsubsidised Loan: interest starts accruing straight away.

Interest rates: 5-6%.

You can deduct the first $2500 dollars of interest with tax deductions.

Tips & Advice

Here’s an awesome video that gives some great quick tips about investing and making more money, all on an index card.

For information on debt forgiveness www.studentaid.ed.gov (check this link to be sure)

Book: Dave Ramsey’s The Total Money Makeover – http://amzn.to/2rUPxMZ

Book: The Bogleheads’ Guide to Investing –  http://amzn.to/2tRUT8z

Useful Links:

Meet Joe Sanok

Joe Sanok helps counselors to create thriving practices that are the envy of other counselors. He has helped counselors to grow their businesses by 50-500% and is proud of all the private practice owners that are growing their income, influence, and impact on the world. Click here to explore consulting with Joe.

 

 

 

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Podcast Transcription

Pop 229 | Student Loan Debt

[0:00] It’s hard to believe that i met jamie just around like six months ago and he has this awesome website company hot slap shot studio.
And they do custom amazing web site design that they cater exactly what you need head on over to slapshotstudio.com/joe,
to get an awesome custom website.

[0:22] Music.

[0:29] This is the practice of the practice podcast with joe santa oxygen number two hundred twenty nine.

[0:34] Music.

[0:46] Welcome to the practice of the practice podcast joe sanok your host on the show we’re showing you exactly how to start grow and scale private practice so that you can increase your impact on the world,
your influence on the world and your personal income,
but we did awesome today i’m live here in the review center to building the construction update looks like the dirt road in front of our place to start to get some.
Cement and sidewalks and break along the sidewalks it’s still a dirt road in terrible for our clients coming in here but.
We’re making do i smell a beautiful hope your world is going awesome have a whole bunch of things coming up,
if you are ready for practice well.
I shouldn’t have said that i said if you haven’t signed up on my if you are ready for practice this is some doesn’t say things and i don’t know what i’m saying.
I am i should wrote that out.
So if you’re watching a practice i have a weather series coming up in july that’s a hundred percent free and some of my favorite people on a,
i’m gonna have else and career i have alison pidgeon allison puryear jane carter we’re gonna be talking all of the essentials of growing your practice,
in a focusing in on your ideal client and creating kind of practice is full of your ideal client,
i’m gonna be doing but now it’s also about just have the basics of starting a practice never roy huggins and to talk about hip technology and security and then alison pidgeon and then kathryn and jeremy from practice sol.

[2:19] Practice that solution their websites practice sol so well that come,
they’re going to talk about how to add insurance to your practice totally free webinar as we can do this power weather series in july you go to practiceofthepractice.com/practiceessentials to sign up for that.
And i am really getting geared up for our summer magazine is coming out soon in so you can keep checking practice of the practice that count for such magazine.
And then also i just landed the opening keynote for the alabama concert association in november and so there were two thousand people come to this conference on to bigger and opening keno and also breakout session,
so if you are in alabama mississippi florida north carolina south carolina anywhere in the south.
Come hangout el gamma causing association can read more on their website about the conference and how to get signed up for.
But i’m super geeked about this keynote gonna be awesome six days,
we are talking about student loan debt and.
I’m sure some thoughts in regards to my own experiences student loan debt this actually came out of there is some of the posted in one of it,
groups i’m in about like any thoughts on student loan debt i thought i would love to do an episode about this cuz actually.
Debt and living below your means so that you have less stress so that you can have more of an impact on the world I mean actually something I’m pretty passionate about and I haven’t shared a ton on.
On this podcast but i wanted to just can’t talk lewiston loan debt some options and we look at ways to look at the numbers and hope to help you out in this area.

[3:55] In two thousand four right after my wife and i got back from our honeymoon we went out to boulder colorado instead of the talk was so ch in i just graduated from grad school.
My wife is gonna be going back to school.
And we were shopping for one of the first times as a married couple and we haven’t lived together before we got married.
So we’re walking through this grocery store and we go down them the man is i’ll or the condiment aisle,
anywhere if there’s a hole i’ll full of manny’s wouldn’t that be weird all white manny’s metaphoric the different types of manny study the wild anyway,
some good is coming in and we were standing in front of me and is we have our list for trying to be on a budget and she really wants home inns manny’s.
And i really want the generic mayonnaise and for me that like thirty cent difference that symbolizes a lot.

[4:53] And for her getting that quality manny’s symbolized a lot because,
when she came into the marriage she brought a bunch of credit card debt she brought some card that like most people do it not absurd i mean she wasn’t a spender.
But i had all the savings i live below my means i didn’t go to my friends as much as i wanted to,
i didn’t spend a lot on alcohol in college he tried to bootstrap my way through college as much as i could only took out,
get my head to and so i had was probably fifty grand in student loan debt total from under grad and grad school.

[5:30] And so i had a righteousness as often in early marriage we have and so do like we need to buckle down and have generic mayonnaise and she said.
If we can’t enjoy the fruits of our labor what’s the point if i can’t even have helmsman is that i think is delicious but what’s the point.
So we get in this fight wasn’t nigga all out drag punching yelling screaming fight like we never really fight that way we are very civil when we have disagreements.
But she’s a fine get the generic so she got the generic we got the generic.
And we went home and we are staying in this a frame.
How’s the fishing the before tiny houses were cool and it was so small that i can touch one wall she could touch the other night could put my hand on her shoulder.
And because my cat michigan gets tons of snow it was like the roof for all the way from the top all the way down to the ground the snow just can’t come off of it.
Our shower was so small into the shower sideways like i hit my head on the wall if i stood up all the way.
The second floor with a queen size bed and it touched both walls and,
the window would shut it has swollen opens in the winter we had to sleep in our winter sleeping bags with hats on.
So is the life we have welcome to marriage we’ve got probably eighteen inches of counter space.
And i’m putting the groceries away and christina decided she’s not going to eat manny’s anymore she’s gonna switch to mustard.

[7:02] So for the next couple weeks i eat this disgusting generic manny’s,
and i tell her after being a third of your mind.
Let’s just get home its this is disgusting and we all have these money triggers we all have.
These ridiculous stories where we’re triggered in one way or the other where we say I want the fruits of my labor I have a right to enjoy this or we need to boot strap we need to tighten the Buckle we need to not spend money.

[7:33] And both sides are our rights in a number of ways.
But as we looking student loans and washers you my experience and not an account and am not an attorney about a financial advisor said do whatever you decide to do this in my own personal experience but i want to walk for some national statistics,
and walk through some of the numbers in regards to student loans.
On line looking at some options when you delay paying them off what that means and then share with you what my personal experience and can it best practices have that.
So as the number on national websites that can track these numbers.
And the average person coming out.
And it breaks down average monthly around three hundred fifty one dollars per month know if you add a master’s degree in top of that the typical ma so a counseling master’s degree at a public university.
That’s going to run you about $58,000 in student loan debt that’s the average MMA student loan debt.
So we put this together the average person going to a typical public university is gonna come out with ninety three thousand dollars in student loan debt.
No there’s subsidized and un subsidized loans so subsidized means that.
The insurer the interest during the time when you’re in college is occurring and so it’s only after you’re done with college but that starts to accrue and un subsidized means a search occurring right away.

[9:09] So the average rate right now for that is five to six percent for under grad in for grad schools around seven percent for your loans for college.
Now a couple of things right now is you can deduct the first twenty five hundred dollars of interest every year when you file your taxes.
And so an individual if you’re making less than eighty thousand dollars per year you can do that and if you’re a couple it’s if,
you’re making less than a hundred sixty thousand dollars per year for filing jointly again accounts makes you speak your town if you’re interested in getting us deductions.
But only look at those sorts of things in my brain goes to well is it better to pay off student loan debt.
Or is there a different way that may be we could spend that money so for example usually with extra money you want to be saving your taxes by putting into a roth ira because the market often get somewhere between eight and eleven percent.
For the market if you just do a general index finding there’s great websites like bobble heads and will put in the channels boggle heads straight down at your sympathy and there’s a boggle heads.

[10:18] Hi
Can walk you through that there’s also a you tube video that will put in the show notes about can the basics of investing all i’m just a three by five card see on right that don’t you tube video on the three by five card.
Awesome really quick advice and some investing tips that aren’t super advanced and really teach you some basics of investing.

[10:42] And so i was reading what number financial advisor saying regarding should i pass student loan debts to see you at that seven percent,
that’s cool should you pay that off that’s like getting seven percent back because you’re not paying that every year.
Or should you put marketing potentially get it to eleven percent and get that on right off on your taxes and all that comes with that.
And a lot of the financial advisors were like dead in the middle like in some situations they say do it and other ones were say no put into a roth another one say nope just pay off that debt.
And for me i think that part of it’s the psychology of having that debt hanging over your head.

[11:22] What i’ve seen is when people say that they’re gonna put money into a roth ira every year for ten year.

[11:30] More times than not they don’t follow through on that every month in the same way they pay off debt or at least make the monthly payments every single month.
As i tend to lean towards like let’s do can’t pay things down let’s work on that debt more than jumping right into roth ira or other ways to reduce your tax liability like in hs a or.
You for in case things like that.
Sure let’s run some of the numbers in regards to what we take if we took that ninety three thousand dollars and look at what we take to pay it off.
Based on five percent interest and so if it higher interest at seven percent then we can look and see what that would be you can just run the numbers of type in debt payoff calculating can get at least a general idea of how long it will take.
So if my to do that in three years and thirty six months that monthly payment would be two thousand eight hundred and seventy seven dollars per month.
Over the last three years and you end up paying seven thousand five hundred eighty dollars interest now see you extended that to be four years of forty eight months b two thousand two hundred eleven dollar so,
you just be about six hundred dollars less expensive but you would an extra year to it but you pay ten thousand one hundred eighteen dollars in interest.

[12:49] Well it’s sixteen to five years.
Your pain goes down eighteen hundred and twelve dollars so that thousand dollars less than if you didn’t three years but you end up paying twelve thousand six hundred ninety five dollars interest.

[13:01] So the first year you paying just under three thousand you know if you’re doing that three year one if you doing for years and do not have a twenty two hundred k five years eighteen hundred,
yeah let’s jump up to a lot of people do ten years you’re gonna pay one thousand eighteen dollars per month.
But thousand dollars per month be going to pay twenty six thousand dollars in interest now let’s talk a little bit.
About how some of these kind of different ways that you can think about is the student loan forgiveness programs if you get student aid.
Add dot gov that’s one where they can outline things typically so the basics you have to work for a five a one c three.
And you have to usually make a hundred and twenty payments on time and a row so ten years and a row doing that.

[13:53] Say that you have a three hundred dollar payment per month for that ten years.
You pay thirty six thousand dollars towards that student loans and then they would forgive the rest and sophie look at if you were to do that ten year plan without that.
If you wanted to pay off you’d pay about one thousand eighteen dollars per month so if we take that amount and i know this is a ton of math.
But that would be a hundred and twenty two thousand one hundred sixty dollars that the government would just write off for you would just take away from you.
But you would have worked a non profit for ten years and so when we look at your career you’re probably making average more than fifty grand a year at most non profit.
It’s over ten years and we take fifty thousand dollars per year times ten years.
That’s five hundred thousand dollars than we subtract that thirty six thousand dollars you paid during that student loan forgiveness programs that brings it down to four hundred and sixty four thousand two hundred thousand dollars.
And then the amount that’s written off as a hundred twenty two thousand one hundred and sixty dollars mean that over those ten years.
You paid five hundred and eighty six thousand or you got paid five hundred eighty six thousand one hundred and sixty dollars so that for me i think through.

[15:07] Is that worth it to do a student loan forgiveness so what i just did with those numbers is i looked at what would you pay for those ten years.
That’s where we got the number the up about thirty six thousand dollars transfers to long that.
How much would they write off if there is interest about hundred twenty two thousand dollars so that’s sort of like income that you’re getting this free money if they’ve written off you don’t have to repay and then you would of been paid probably.
Emotion ever fifty grand a year unless you really move up in management or you’re in a really competitive market then you know your housing me change address cost living.
Some minty get five hundred eighty six thousand one hundred and sixty dollars so that’s the amount you would have made working at a non profit.

[15:50] Then we would take that and we would also add in the amount that the road off from your student loan forgiveness is it worth it is really the question is it worth.
Doing a student loan forgiveness program.
What are alternative Soma take that $586,160 and I’m going to divide that by 10 years so it’s a 10-year program.
Seven just under on fifty eight thousand dollars per year and they divide that by.
Forty eight weeks of your to take a month off every year cost me to bring and so the one thousand two hundred and twenty one dollars and seventeen cents per week.
To match that you have to bring in nose divide that by see you have a private practice and you’re gonna charge let’s say.
Let’s say eighty dollars a session and then let’s add some for rent in regards to your take away cs us to buy that eighty dollars a session.

[16:44] Then that means you have to work about fifteen sessions per week.
To make that equivalent versus working forty hours a week or more maybe i call at a non profit to get the student loan forgiveness.
So we want to think about is if you wanna going to private practice in charge eighty dollars a session.
And yeah for ten years later income is gonna probably go up your probably gonna see more people.
Just to have the exact amount of money as you would for forgiveness you basically for all your expenses need to see twenty people weeks and you want to work twenty hours a week at a private practice and pay off the student loan debt over those ten years.
Or do you wanna sing on forgiveness program the cu side okay that soon on forgive us doesn’t make sense to me then what should i do i mean joe what should i do.

[17:35] Let me share what worked for us and has some things i learned through this process so there’s this guy dave ramsey,
who is she has an approach to money that my wife and i pretty much followed we will then a few things but for the most part we follow islam at all i can his basics.
And i’ll share with you how i would just a few things based on what my experience was his holy of these baby steps.
And his thing is for seven thousand dollars in your family home so if an emergency happens you have a thousand bucks to fix the car then refill that thousand dollars.
But put everything else towards the debt and so then the rationale behind the is we’re paying seven percent interest on the student loan debt.
Why do you need five or ten thousand dollars in savings how would you take a loan out for seven percent interest just to feel security will no probably not.
This basic premise is that you can only have a thousand dollars in your bank while you have any sort of that.
And then his principle is that you start with the smallest of first you pay the minimum on all your dad and so for student loan debt is three hundred dollars you say you have credit card debt that’s thirty five dollars you have.
Car loan debts two hundred dollars that you pay you get caught up and all that and then you start by aggressively paying off.
Your smallest debt know in some situations like that doesn’t seem to make much sense of humor credit card debt that’s eighteen percent interest and you have a car loan debt that four percent interest for why would i do that.

[19:09] And his idea is that you can have the small wins you wanna just start like stockpiling money and paying it.
As much as you can and so we can look at the inch at the w what we did look and we can look at the percentages as much.
We did pay off our credit card debt first because that debt was such a higher interest and then we moved on to the other that.

[19:31] In that was smaller that’s when the ideas you give them an on and then you aggressively go after the smaller when he called that the debt snowball.
Once you’ve paid off that once a year minimum for smallest one was fifty bucks a month and then you pay off that five hundred dollar debt.
Then you take that fifty dollars you are paying and you put that on to the next day at.
And so i say you have a thousand dollar debts now you’re paying extra from the first one and then you keep putting money on that.
Then when that was paid off see and was a hundred dollars month and that person was fifty plasma hundred fifty dollars you add that on to the next one,
so your cost per month is not going up it’s just you’re taking or down your taking that money in your putting it into that next.

[20:17] The one thing my wife and i did is whenever we passed that we take whatever that monthly amount was that we are paying we do some sort of celebration usually buy something of significance.
So everyone at this lakers that its french and make dutch oven kind of thing.
I really want to one of those and i knew we could afford it were still paying off debt so we payed off and remember what it was we paid off but music at three hundred dollar light heavies like dutch oven cast thing.
We bought that as one of our like bonuses cuz we had just paid off that.

[20:50] So then just keep paying it off and then after you pay off all of your debt all your student everything but the house his recommendation has been say about three to six months of living expenses as just a bigger cobalt up emergency.

[21:05] So that’s the rams approach has a podcast he has you know all sorts of resources out of you can check out.

[21:12] I would kinda just some of those steps when you have a private practice so i would say yes step one hundred thousand dollars in your personal account great i would say in your business account.
In general you probably wanna have three months of expenses for your office saved up so if your rent is five hundred dollars a month and your.
Internet and all those other things maybe extra hundred you make sure you have around two thousand dollars just sitting in that account.
But you never touch because if you have a down months you don’t wanna be freaking out and panicking get home i’m gonna make rent,
how many do this to me i never want to become a backed into a corner of my business where i make decisions based i need money,
vs making decisions bet based on this is what i think is best for business this is what i think is best for clients this is what i think is best for my life at home.

[22:02] So it’s a thousand dollars plus three months of your basic expenses for practice then i would say moving into that debt snowball in your personal life.
And the way you pay yourself of your practices the question i get quite a bit that the way i do it is i look at each month.
And i’d take off all looks so gross is the amount that comes and before you have expenses then you take expenses off of that.
And then that finance called the net and that of the net i pay myself every month check for sixty percent of what.
You know that is so if i have a big month like i had thirty thousand dollar month a couple of months ago.
In nc ahead ten thousand dollars in expenses than i would pay myself sixty percent of that twenty thousand dollars that’s left over as my monthly check to myself.

[22:53] Set a twelve thousand dollar check for the month so for you if you have a thousand dollar month and that’s your not.
Pay yourself six hundred bucks and getting in the habit of paying yourself reinforces that feeling of growth that feeling of were successful where were making out of the park.

[23:10] Then you have that’s that can predictable money coming into your house from your business from your plc are lc.

[23:18] So then i would say after you paid off that debt than saving that three to six months of living expenses.
Four for your family makes sense be on that thousand dollars.

[23:30] So that me and has done number of things in our family you know by being debt free except for our house and we have a fifteen yr mortgage with.
Our house is just bought a second house where air being being the first one it allowed us to take risks that are based as much and.
I mean i just have the sum of money coming in and then we can see what is a smart investment of this money how do we strategically use this money to reduce the tax burden to increase our retirement funding.
To make decisions for our kids education is that base and we don’t have any money because we live in a very different way right after grad school.
And that’s kinda wanted to end this podcast i was talking about the lifestyle we live from two thousand four we got married and still lives today but in a little bit different way.
Because people here all you write yourself a twelve branch check you must like have an amazing life and all these and i do not know i like my life i think it’s cool but we don’t put that money in to things usually.
Sow.
When we first got married i had from when i graduated high school the year after high school i travel to europe for six weeks and saved up money to call my graduation money put into a cd that i couldn’t touch until.
January my freshman year of college when you want to buy a plane ticket to europe.

[24:53] And that travel to Europe working in Haiti going there 3 times I’m doing some work in Nepal and Thailand and see how other people live in the world compared to what’s just our basic necessities here in the states.
Timmy has profoundly impacted me to want to live on significantly less than what we bring in so we first got married at first year i worked at an agency.

[25:18] Thirty thousand dollars that first year we paid off ten thousand dollars of student loan debt.
We paid ten thousand dollars in college education we just paid for my wife’s colleges we went and we lived off of ten thousand dollars.

[25:31] We had a really creative ways have dates really creative ways to have fun really creative ways to keep our food budget and food budget for a long time was a hundred twenty bucks a month.
And it we got creative now that’s a lot harder with kids like who kids get expensive quickly.
But that mindset of having to purchase an order to feel fulfilled has been something that we have pushed back.
With a very intentionally.
And in the living like poor college students for a number of years after grad school with something that we had as a guiding principle them it was saying no to.
Certain types of friendships that were based i’m going out to eat going to drink.
You we like those people but we are more apt to go for a hike together and then get go get a coffee that we really enjoyed the cost us ten bucks instead of a hundred dollar tuning out.
So our entertainment budget so that was going out to eat all that for the longest time was fifty two hundred dollars a month depending on the freezer at.

[26:35] Is the fest forward overtime you we took steps to not have it be as intense as we paid off more debt but really until.
It’s a two thousand nine we moved back to home town of traverse city moved into our in laws my in laws christina as parents basement lived there for six months while we figure out what we’re gonna do here.
Save some money doing that and.

[26:59] In that principle even after we bought our house of not feeling like i always had to have the nicest but to save up we cash flow doing our basement renovation it was like sixty grand.
But we’d pay for one thing at a time which is super annoying you just want to freaking done you don’t to leave in a construction zone but.

[27:18] For me at that thing is that made a lot of sense so that we never were feeling like we are backed into a corner financially.

[27:27] There was a moment about a year ago when i had timed are we use a credit card for points but then just paid off each month.
And i had thai and some of the construction costs correctly and it looks like we were gonna have enough money to pay this credit card like that to me was like the worst thing in the world.
And that’s when i said what with something i’ve wanted to do and i launched piano and practice.
And i was driving into work i had this idea of what if i got people to come to traverse city we go wine tasting and we do this awesome event together.
And i have the id on the way to work some e-mail to my list for an application for people to have first access to it in about thirty people apply for it then i e-mailed each of those people to talk to them on the phone and then.
I think we had ten people that came and it was like five hundred bucks each and so that help cover the cost of the cabinets that we have done.
And system and when you are like backed into a corner it’s like yeah some good ideas but you don’t always have those ideas you can always have think through in the same way so.
When it comes to loans my bottom line in advice from my own experience not as a financial advisor is aggressively pay off debt.
You can look into debt forgiveness but i would say the more that you can be.

[28:50] Putting as much on that student loan and the other day it frees you up in a way where if you live that way for five years.
It will genuinely shape you to be the kind of person that doesn’t mind hustling doesn’t have a sense of entitlement and is ready to rock out private practice and growing scale away that nobody else can that has that kind of debt hanging over their head.
Thanks so much for letting me in two years and into your brain you all rock,
i think summer selection studio for being a sponsor this month again slapshotstudio.com/joe if you need a beautiful custom website they are who i highly recommend and to jamie j here in traverse city.
At the end of july,
those tickets are sold on school i think you probably have just a couple of days left before you can no longer get tickets for two thousand seventeen slow down school.
If you want does it slowdownschool.com it’s twenty nine hundred dollars that includes all of your food all of your lodging all the consulting,
oh week-long sprint towards growing amazing private practice again that slowdown school that can really hang on the beaches.
Tanya campfire and going wine tasting would love to have you come slow dance school that come and if you are able to come in you already practice amped up and ready,
and you’re just i’m not quite that point i dream of someday being at that point but i need the tools.
Make use of that weapon our series its over practice and the practice that come ford slash practice essentials hundred percent free it’s amazing content are giving you.

[30:23] And i would absolutely love to have you on that weapon are seasickness practice of the practice that come ford slash when are essentials years rock things to me in years and chilling have that we,
this podcast is designed right after thirty two information in regard to the subject matter covered his game with the understanding that you that,
post the publisher or gas surrendering legal accounting or clinical information if you wanna professional you should find one.

[30:55] Music.

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