Student Loan forgiveness

So if you pay attention to the news you know the President of the U.S. has issued an executive order to forgive up to 10K of student loan debt for U.S. tax payers who make less than 125K annually. This blog isn’t overtly political so we aren’t going down that rabbit hole here. I do however devote a portion of my blog to finance. I am a finance professional, and the finance posts I make on this blog are my opinion only, they are not financial advice.

So that out of the way, let’s say this off the bat. Reducing individual debt is the quickest way to wealth. When you aren’t sending your money to other people, you get to keep it and accumulate wealth. So that’s a net positive. There are however several issues with the loan forgiveness as announced. The first one is, the President does not have the ability to forgive debt, only congress can do that.

What that means is this will inevitably be challenged in court. A republican somewhere will file a lawsuit and if it goes to the supreme court, which it may it would likely be overturned. The other thing announced was another freeze on payments until the end of the year. Meaning you do not have to make your federal student loan payments until 2023. This has been in effect since covid lockdowns and its likely this will be extended again.

The fastest way to wealth, is being debt free

To be clear the President DOES have the authority to do this via executive order. There are all sorts of views on this issue. Some will say “why should they get a hand out and I don’t?” others will say “education is a right and it should all be free”.  The biggest issue I see here is the notion of loaning teenagers thousands of dollars in the first place. Who benefits from that exactly? An 18-year-old takes out loans to go to school, to obtain a job to pay off the loan?

I don’t want to be flippant here, education is fantastic you should pursue it. But doesn’t it seem dubious in the first place that the institutions giving the loans decides to forgive them later? Why give them in the first place? Some of these college kids are staring down hundreds of thousands of dollars in student loans. They were railroaded into the education industry and now sit on a pile of debt. Sure they will have a degree at the back end but how bitter must it be to go to work every day?

I worked full time and went to college, I cashed flowed both of my degrees. My kids each got 30K set aside for them to go to college, everything else they have to cover on their own. They chose state schools and are making it. I got the 30K for each by working, inheriting etc. and I am happy to do it. If they take a loan I expect them to pay it back. However, I would caution them both before ever taking a loan at such a young age.

Student loan forgiveness is a net positive if you are one of the lucky ones who qualify. Don’t be fooled here, this is political. The problem is all the people out there who don’t get it will be pissed off, and then there is the uncomfortable situation of “where does the debt go”? it just doesn’t evaporate, someone will have to pay it. Guess who? All of us, yes, you get to help pay off someone else’s debt.

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The Student Loan Lie – A cautionary tale for my female readers

There is an illusion that a college degree translates into higher income. It CAN result in that, be very clear here it can. The narrative has been for years, IT WILL. That’s a huge difference and many people have been lured into the notion that if they get a college degree they will make more money than if they didn’t have one. That isn’t always true, contractors, sales, creators can all make serious money no college required.

So how is this specific to females? More women have gone to college in the last 20 years than at any point in modern history. It’s a great thing, but the issue is they have been promised more than a college degree can deliver. I have been a hiring manager in my career and I can tell you that a degree got you the interview, it never got you the job. This is part of the student loan lie, you borrow X (thousands) and you get a degree that provides income. Again, it MIGHT provide income, and even then there is no guarantee that the income provided will be enough to sustain you.

A female might want to have a child and stay home with that child for a time. That loan will still need to be paid, who will pay it? A college degree can help you obtain a very well-paying job. However, college has become very expensive. All those professors make a lot of money, the admin for colleges? Hundreds of thousands a year, presidents of colleges? Some of them make millions. They have endowments in the tens of millions, properties that need to be maintained, ancillary staff that has to be paid.

Even Goddesses can’t escape student loans.

All of that is being covered by your ability to borrow money and give it to them. You are being leveraged to cover someone else’s costs. Sure you get a degree out of it but you get a hefty bill that has a lot of interest on it. The kicker? Well you can’t bankrupt a federal student loan. You can’t get out of this, and the system pushes you toward borrowing more. You see, your future payments have already been calculated.

Any loan officer looks at your future payment probability and determines “we will receive approx. 500 a month for 20 years from Mary” that money is added to the MILLIONS of other people who have student loans and these institutions plan their future capital projects on your payments… It’s very sinister but don’t take my word for it. There is an excellent documentary you can find here. They did a deep dive on this issue and I would say for any of my readers who are in college or want to go it is required watching. Spend the 5 bucks, please!

I am not affiliated with Ramsey solutions and this is not a sponsored post. I believe strongly that the student loan crisis is out of control and the government can never be relied upon to do a good job. Especially for my female readers be very careful about your college choices, if you can cash flow it then go that route. Do not close yourself off to other careers that are traditionally male dominant but provide good incomes. Plumbers, Contractors, Electricians these are not exclusive to men, anyone can do them.

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Leif Erikson

How to be a better man – Learn a trade

This is a quick post today. Not because the wisdom is lesser but the information is fairly straight forward. For the last 50 years’ western society has created a narrative that to be successful professionally you must engage in the most expensive route to get there. That means college, and for millions that means student loan debt. A space once dominated by men, now more women are in college than ever before, and racking up massive debt as a result.

We now have more female doctors, pilots, engineers on and on and that’s great. For men? Trades are still wide open. Less and less people go into trades now than in the past. Females? Even less they have been marketed for the need for education for their success. Of course a woman can put an addition on a house just as well as a man can with equal training and experience but you don’t see high school guidance counselors telling them that do you?

As a man, learn a trade. Sure a lot of it is blue collar work but all these in debt college educated professionals are going to be busy working 60 hours a week to pay back their 100K of student loans. They don’t have time to rake the leaves, repair a deck, install cabinets. You’ll make a boat load of cash, have minimal expense to enter the profession and should you desire in the future you can go to college then, and pay cash for it.

Being a better man means looking at life in the short, mid and long term. College is a great option and I would never tell anyone not to go. I went and have made a great living as a result but there are other paths out there. Always gather as much info as you can, never rely on one source of info for your decision making. Last, but not least…. Look around, who is in demand? Plumbers or Doctors? Lots of doctors out there, have you ever met or seen a plumber?

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Important financial tip for my younger readers (in the U.S.)

Politics in the U.S. is more vitriolic than ever, funny how getting rid of Trump didn’t change much did it? I know it was all him it wasn’t anyone else… lol. To the point, our government is still working or trying to work it is the government after all. Sarcasm aside, there is something on the radar that maybe very impactful in a positive way. It pertains to the horrific government policies on student loans. They are finally doing something to remedy this problem and it’s a very good proposal.

There is something floating around congress right now called the “Secure Act 2.0”  You can find a decent summary here Without going into great detail on the legislation, what it does is beef up retirement options for all Americans. Specific to the topic there is one provision that can help younger workers with student loan debt.

“5. Student Loan Payments and Employer Matching

The Secure Act 2.0 permits an employer to make matching contributions under a 401(k) plan, 403(b) plan or SIMPLE IRA with respect to “qualified student loan payments.” The provision is intended to assist employees who may not be able to save for retirement because they are overwhelmed with student debt, and missing out on available matching contributions.”

Many people with student load debt are unable to save for retirement while they are paying off these debts eliminating the single biggest multiplier of compounding interest over time. What this provision allows is for companies to provide a % match of your loan payments to their retirement plan allowing for some retirement savings. This is huge because it allows you to forgo the 401K contribution but still get the match. You’re going to pay your student loans anyway so while not perfect it way better then what we have now.

How much do I owe again?

If you have student loan debt you should be contacting your federal representatives and telling them, you want the secure act to pass. This will enable you to now and in the future select workplaces that offer this benefit, and they will, they will have to to be competitive. One of the biggest factors in accumulating wealth is dollar cost averaging or simply put, the accumulation of principal + interest reinvested over time. IF you are spending all your money on debt you lose out on this critical aspect of investing, you lose time.

This is a great addition to the retirement 401K,403B portfolio of offerings and should really help some of our younger workers see some light at the end of the student loan tunnel. Watch for this, if it is passed you should be asking your employer if they will be adopting this benefit and extending it to you. This is an example of good governance and a good law. This should help millions of young workers, its welcome news.

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