student debt


Are we in a student debt crisis?  Grandma used to say ‘if you’re going to go to college, it’s worth making the most of it.’ The value of education cannot be quantified – some say it’s priceless. Is student debt really priceless?

But the cost of going to college can certainly be calculated, and the figures are mind-boggling: $1.5 trillion in outstanding student loans. A crisis rippled throughout the entire economy – and it’s only getting worse.

In today’s episode, you’re going to the learn common sense strategies for squelching student debt once and for all and gaining more financial freedom in your life.

Here Are The Show Highlights:

– Why the impact of student debt goes deeper than you think ([5:00])
– The ‘common sense’ strategy for escaping student debt. FAST ([5:55])
– How to create a budget you can actually stick to ([6:10])
– The ‘debt snowball’ repayment method ([7:30])
– How to slash your student loan interest rates ([8:40])
– A less than common option to consider outside your 529 plan ([16:30])



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Read Full Transcript

A hearty welcome to Grandma’s Wealth Wisdom with your hospitable hosts, Brandon and Amanda Neely. This is the only podcast for strategies to grow your wealth simply and sustainably like grandma used to. Without further ado here are your hosts.

Amanda: Hi, I'm Amanda and welcome to Grandma's Wealth Wisdom where we help you build wealth grandma would be proud of.

Brandon: And I'm Brandon, and today we've titled today's episode "Any Job Worth Doing." So you might be familiar with the rest of this common saying, so the full version is, "Any job worth doing is worth doing well." The topic of this episode is all about student debt. Something a lot of us know about. Now grandma would remind you if you're going to go to college it's worth making the most of college. Now of course, that seems like common sense, but again if you're going to pay off your student debt after college, it's worth considering as well the best ways to do so.

Amanda: Grandma would also remind us that she wasn't fortunate enough to go to college. Back in her day college was a luxury, especially for women. I looked up the stats and in 1940 only 3.8% of the female population in the U.S. had attended four years of college or more, compare that to 2017 where 34.6% of females in America had gone to college for at least 4 years. That's over eight times as many people, women today going to college as in grandma's day.

Brandon: So grandma reminds us not to take college for granted, but to consider it thoughtfully and with lots of appreciation.

Amanda: If you don't have student debt or won't have to worry about it for yourself or for your children, still listen to this episode for three reasons. First of all, the concepts we'll talk about can transfer to other financial matters, secondly, you might know people with student debt or considering it, you might just learn something that you want to share with them, and then finally you never know if you might consider going back to college or graduate school or have a member of your family who wants to do so in the future. With that said, let's dig in.

Brandon: So the student debt crisis is real. I mean I don't know if you've experienced, I know I have, the student debt crisis is real. According to multiple sources there are 45 million Americans with student debt. That's close to 15% of Americans that have student debt right now. According to a recent CNBC article,
the average debt at graduation is currently around $30000, up from $10000 in the early 1990's. The country's outstanding student loan balance is projected to swell to 2 trillion dollars, with a T, not a 2, by 2022. There's a lot of twos in there and T's. And experts say a large portion of it is unlikely to be ever repaid. So nearly a quarter of student loan borrowers are currently in a state of delinquency, or default.

Amanda: For some perspective, that's over 11 million Americans who are having trouble repaying their student loans, 11 million.

Brandon: That's a lot of people who can't even pay those loans off. We'll have a link to this article in the show notes, so check that out. So according to a graph in that same article which you can again go to the show notes and check that out, 7% of the total student debt is held by people over the age of 60. So 7% are people who are nearing retirement.

Amanda: Or in retirement.

Brandon: Or yeah, they're in retirement already. That means people who are approaching or in retirement and still making payments towards their college, that they're doing both, or maybe their kids' college. I mean the article wasn't clear about that. It could even be their return to college in their 50's when they needed to go back to college because they lost their job during the 2008 financial crisis, and they're hoping for a better job, but still not able to find one, or they have found one, but they still have all that student debt that they needed to go to college for and be able to get that job they have now.

Amanda: Yeah, that income from that "better job" is maybe only slightly more than the job they have prior to going back to college, and so it's hard to pay for those debts and justify things.

Brandon: Yeah, exactly.

Amanda: Many of us, we know this firsthand. We see that, the impact of student debt goes really deep. If not first hand, then maybe secondhand. From not being able to buy a home to putting off having children, student debt has real consequences. Not to mention that those with student debt will save a lot less for retirement, and for those defaulting on their student debt in their later years, even their social security income can be garnished to repay student loans.

Brandon: Yeah, I've heard so many horror stories on this front, and frustrations where people want to actually buy a home at certain stages in their life and they can't because their student debt was way more than a home would be actually.

Amanda: For the down payment on a house at least.

Brandon: Yeah, at least that part. Sometimes it is the size of a home. But there is hope. There are a bunch of strategies for getting out or avoiding student debt. Again, there is hope. Let's start with getting out of it in the first place.

Amanda: Yeah, so if you have lots of student debt now, there are quite a bit of common sense ways to get out of student debt fast. We're going to go through them really quickly and they're going to talk about some ones you probably might not have heard of before.

Brandon: So the first way is create a budget and stick to it. Yeah, it's pretty simple, but create a budget and then stick to it, and then throw extra money at your loans from that budget that you created.

Amanda: Yeah, and as you're creating that budget, you might strategize ways to live on the cheap, especially reduce your housing costs. Maybe you might even be able to reduce your lifestyle to less than 40% of your income, you could make that your goal. Then you've got the other 605 to take care of taxes, to take care of saving and to put toward your repayments on the student loans. So live on the cheap.

Brandon: Third is refinance for a lower rate or a consolidated amount. So you want to be able to, once you've gone in, make sure you're looking at the interest rates, and refinance for a lower rate if you can.

Amanda: Yeah, or if you got a whole bunch of little loans, consolidate them into one loan and maybe at a lower interest rate but with one payment, rather than a whole bunch of them too. And then another idea is to work in a field that offers loan forgiveness. There are both federal and state to programs that will forgive your student loans if you work in a particular field, see if those are available for what you're doing.

Brandon: Consider the idea of a debt avalanche or debt snowball repayment method, this is a common way of thinking where people are doing this debt snowball and, Amanda, can you explain that a little bit?

Amanda: Yeah, debt snowball is where you pay off your smallest debt first and then you can put the payment that you're making toward that toward the next smallest and it snowballs that way. A debt avalanches where you take care of your highest interest debt first and then when you are done paying that one, you put what you were paying toward the next highest interest one and avalanche your debt that way. Common ways that people go after paying off debt. Another option for getting out of student debt would be to earn more, increase your income, do a side hustle like so many people do you now. Ask for a raise at your current job, but put whatever money you're making toward your debt, rather than increasing your lifestyle along with the increase in your income.

Brandon: So work for Uber or Lyft or something like that.

Amanda: Maybe. There are other ways to have a side hustle.

Brandon: Yeah, totally. So any time you get extra money throw it in to that debt. When family wants to give you gifts for your birthday or Christmas, ask for cash and tell them what you're going to do with it.

Amanda: And then use it for what you told them you are going to do.

Brandon: Exactly.

Amanda: Of course. And then another common thing, you can automate your payments for your student loans, put them on auto pay and oftentimes student loan companies will give you an interest rate reduction by putting it on the auto pay like that.
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Amanda: Now for some less than common ways.

Brandon: You could move to Maine. Actually the state of Maine created a tax incentive for those still paying off student loans. If you don't want to move to Maine though, you can consider, or if you don't want to move to Maine though, we've got another option for you. But maybe moving to Maine would be a good thing, who knows, I've never lived there.

Amanda: So here's the less common way to go after that debt, and we're using this way with some of our clients, we've also used it ourselves. Here's how it goes. You pay the minimum on your student loans and then you save all the extra that you would pay toward those loans into a savings vehicle that gets you more interest than your student loan interest rate. And of course with that growth and that savings, you want as much of that growth guaranteed as possible. And then when your student loan balance is a same as your savings balance, you use the savings to pay off the entire loan balance, and then you can pay back to your savings with the amount that you were paying toward your loans, and you can use that savings to buy a car, to do a down payment on a home, retire, whatever the next goal is, you'll have that savings working for.

Brandon: Yeah, this is a strategy we used that really helped us get out of student debt faster. So here's how this practically works. Let's say you have over $100,000 in student debt and you pay over $700 a month. It would take you 40 years to pay off the loan. If you saved an additional $750 a month and it grew at a higher interest rate than the loans, you could pay off your student debt in about 7 years.

Amanda: Yeah, and takes that 40 years down to 7 years, that's considerable. Like we said, we used this strategy ourselves, we had a lot less debt when we started this strategy and we were actually able to pay off our loans 2,5 years, super-fast that way.

Brandon: So the biggest word of warning is to be very careful what saving strategy you use. Remember, you want something with guarantees. And if you'd like to learn what'd we recommend, schedule a call with us at

Amanda: Now let's turn to how to avoid student debt if you or your children or your significant other or whoever is going to go to college or graduate school or something like that in the future.

Brandon: Now this is super personal for me since I have a niece who is 19 and just started her first semester of college. Now, I've been talking with her a lot and helping the best ways I can with avoiding some of those major pitfalls. I mean it's been super fun and nerve wracking at the same time to see her struggle, not only with dealing with student debt and going to college, those fees that come up, but also with adulting. She has to learn how to create a budget, all those other things that she's not used to doing.

Amanda: Yeah, all at the same time. So again, we're going to share some common ways that you might consider to avoid student loans and then we'll share some not so common ways as well.

Brandon: So one way is to take your time through college. So you want to be able to possibly work through college as well, and so then you're maybe taking a semester off working during that semester to be able to pay off the college as you go. It might seem like you're not going as fast, but could consider the idea of the tortoise and the hare. That tortoise at the end got there faster, even though he was going slower.

Amanda: Yeah. Next idea is to go to a less expensive school. A lot of people nowadays are going to community college for the first two years so that they can save a bunch of money and then they'll go to a more expensive for your school for the last two years. You could also go to a public school versus a private school, or someone, even private schools that have different rates of tuition, look, see as you're considering where to go which one is less expensive. Potentially, maybe.

Brandon: Third is budget. Again going back to that B word, budget. Reduce expenses by living at home or living off campus, and maybe even making your own food, rating PB&J for lunch, and maybe even buy used textbooks. That would save you a ton of money.

Amanda: Yeah, and as you're budgeting, avoid using credit cards. Now I have to tell you, I had a credit card, my first when I was 18, I got it to build my credit score and I used it only to pay for a flight home on holidays or in the summer, that kind of thing, and my parents would give me the money to pay for that flight afterwards. That maybe would be a good way to use a credit card to build your credit score, to pay for some of those big things, but in general for everyday living expenses, a great way to stay out of student debt is to avoid credit cards because you want to go to credit card debt on top of the student debt at the same time.

Brandon: Another key way is actually finish college. I mean if you don't actually get the degree, the chances of getting the higher paying job decrease substantially. So make sure if you start, you finish.

Amanda: Absolutely. Now these last two can be contradictory. Actually, they are contradictory and we're going to share them and then we're going to share how to make them actually both work in your favor, rather than work against each other. The first one is to save money for college as early as possible, start saving early. Our 6 month old got his college/entrepreneur fund in case he doesn't want to go to college he could use it to, you know, start a business or something. He got that fund started when he was 3 months old, so save for college as early as possible, but then also try to get as many scholarships and grants as possible.

Brandon: Now the reason these are contradictory is that having money saved for college might actually jeopardize your ability to receive scholarships and grants, Isn't that weird?

Amanda: Yeah, so for example if you have a bunch of money saved in a 529 plan, you have to report that on your FASFA and then the college might give you less financial aid. They know you have the money to pay for college, and so they factor that in when they're awarding scholarships and grants. But there's more we could say about 529 plans besides that one.

Brandon: With a 529 plan, you're most likely invested in stocks, and if your stocks take a huge plunge...

Amanda: Or a small plunge.

Brandon: Or a small plunge like this past October here and 2018, that's going to affect your plan and your plan for college. So you'll lose the money that you needed to pay for that tuition bill.

Amanda: Yeah, if it happens right before or during college, you're pretty much out of luck, you don't have time to wait for it to recover. And then on top of that, 529 plans must be used for college. If you use them for something else, you can be struck with a severe penalty and have to pay taxes on top of that.

Brandon: So maybe you want to consider other options besides the 529 plans. If so, again, we'd love to help you. To get started go to and click "schedule a meeting".

Amanda: We covered a lot today in terms of strategies to get out of order to avoid student debt, and there are a lot of things to consider, and some will work for you and some won't. Grandma's point is to be thoughtful about it. Any job worth doing is worth doing right, even if you have 6 figures of student debt from multiple master's degrees, medical or law school or simply from not knowing what you were getting into, there are ways to squelch that debt and gain financial freedom in your life. We've done it, we're helping people do it right now. All you have to do to get started is to go to and click "request a meeting".

Brandon: So the next episode is called Don't Count Your Chickens. We're going to be uncovering some of the biggest lies in the financial sector. The truth is we've all been lied to. Find out how in episode 12.

Amanda: Until next time, keep building your wealth simply and sustainably for your own future and the future of our grandchildren's generation.

The topics presented in this podcast are for general information only and not for the purposes of providing legal, accounting or investment advice. On such matters place consult a professional who knows your specific situation.

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