We had a client who owed $200,000 in undergraduate school loans. Not for Harvard, Yale or Columbia, but a Texas university with in-state tuition. That is $50,000 a year (9 months actually) for a 19 year old. Yikes. His monthly payments, if he paid them, were $2,300. When we asked how the loans grew so large, he said, “I really enjoyed my college life.”
When we asked a friend, whose son was a senior at another Texas college, what he was going to do upon graduation, she responded, “He is going to stay an extra semester because he wants to be there for one more football season.” Yikes! Must be nice to have such permissive (and hopefully rich) parents!
Did you know that personal bankruptcy can eliminate just about every personal debt, except Federal school loans? Yet, many of our clients have said they simply stop paying their school loans, hoping they would disappear. Not only will they not disappear, they will greatly increase due to penalties, interest and fees and your credit score will take a nosedive. Good luck trying to borrow for a car or a condo.
Do not get us started on school loans, there are simple solutions. For instance:
1. No need to attend college 4 months after high school. Sure all your friends are going, but you could also work a couple of years and grow some savings. You gain real life experience and have a pumped up resume. Plus you will meet new, and better, friends when you finally get there. This “Gap Year” has long been popular in Europe.
2. Ever hear of community college? Those credits transfer to all Texas schools and cost so much less!
3. Want an absolutely FREE education? Join the Army, Navy, Air Force, Coast Guard or Marines for 3 years and they will pay for everything. While your friends are eating pizza in their freshman dorm, you will be chasing drug lords on a speed boat in the Caribbean or parachuting out of a C-130 over Italy. Don’t worry, you can buy them pizza in 3 years, because you will have the money! Plus, think of all the benefits you get from being a Vet!
If you do get school loans, make sure you pay them or contact your lender to work out a new payment schedule. Lenders will work with you, but you have to talk to them.
If you do stop paying your school loans, just know that first they go into collection, then default. Once you default, the Government is through being nice and gets really, really tough. You are hit with very high penalties and the interest keeps growing. They will eventually garnish your pay and your Federal tax refunds for years.
Final thought, be careful when obtaining school loans. Know that whatever you borrow, you will be paying back with interest for many years. (Note: Mom and Dad, this is where you come in with your adult guidance).
Need some assistance organizing your finances to pay off your school loans or credit cards or set up a family budget?
For only $149 (or $99 for students), the Austin Financial Coach at Captial Budget Strategies, LLC will teach you how to handle your money like an adult! We will determine your true Net Worth, analyze your spending, set up a Household Monthly Budget, an Emergency Fund, a Snowball Debt Repayment Plan and even give you an idea how well you are doing saving for retirement. Finally, we will review your bank accounts and introduce you to on-line banking.
Our Austin Financial Coach can meet at your office, your home or our home-office. We can meet you during the day, in the evening and even on weekends.
Spend approximately 4 hours with our Austin Money Coach and begin your journey to financial security.
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