Kitchen Table Finance

S3E32 – Helping Your Kids Understand Student Loans

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In this episode, we tackle the complex world of student loans and how to help your kids make informed decisions about their educational financing. From the intricacies of different loan types to the pressing issue of loan forgiveness, join us as we break down what every parent and student should know. Cole Williams, our newest associate advisor joins Nick to lend his unique perspective.

https://youtu.be/zBYZcoSJ2D4

Introduction
  • Newsworthy Topic:
    • Student loans have been a hot topic due to discussions around loan forgiveness.
    • The Supreme Court’s involvement has added a layer of complexity.
    • Relevance to Financial Planning:
      • Many parents juggle retirement planning with their children’s education expenses.
      • Student loans are a significant part of financial planning for families.
        • Types of Student Loans
        • Subsidized Loans: Interest payments are covered while the student is in school if certain criteria are met (GPA, credits).
        • Unsubsidized Loans: Interest accrues while the student is in school, making them less favorable.
        • Parent PLUS Loans: Parents are the primary party responsible for repayment—not just co-signers.
        • Private Loans: Options like SOFI, often used for graduate school, but come with different terms and interest rates.
          • Student Loan Strategy
          • Debt-to-Income Ratio: Aim for student loan debt to be less than or equal to the average starting salary of the chosen career field.
          • Long-Term Implications:
            • Consider future income and career stability when taking out loans.
            • Be cautious of accumulating too much debt, as it may not be sustainable over a long period.
              • Loan Forgiveness and Repayment Plans
              • Income-Driven Repayment Plans: Payments based on income, with potential for forgiveness after 20-25 years of consistent payments.
              • Public Service Loan Forgiveness (PSLF): Forgiveness after 10 years (120 qualifying payments) for those working in public service or non-profits.
              • SAVE Plan: A newer plan in the news, based on paying 5% of income, with remaining debt forgiven after 10 years if under specified repayment thresholds.
                • The Reality of Loan Forgiveness
                • Uncertainty: Legal and political factors can affect eligibility and timelines for loan forgiveness programs.
                • Commitment: Importance of a solid plan for consistent payments and understanding the long-term commitment.
                  • Practical Advice for Parents and Students
                  • Early Planning: Discuss financial implications before committing to loans.
                    • Aim to keep debt manageable relative to expected income.
                    • Avoid Bankruptcy Misconceptions: Student loans are generally not dischargeable through bankruptcy.
                    • Refinancing Options: Refinancing can offer better rates but comes with different terms and conditions.
                      • Conclusion

                      Understanding student loans is crucial for both parents and students. With the right information and planning, you can make informed decisions that won’t burden you financially in the long run. Stay tuned for more insights and expert advice on managing your finances.

                      Contact Us!

                      Are you looking for solid retirement planning advice? Reach out to Dave and Nick, hosts of the Kitchen Table Finance Podcast and certified financial advisors. They specialize in navigating unique benefit plans and can help you capitalize on all opportunities available through your investments. Find out if you’re getting everything you could be with your financial plan.

                      [email protected] or call 517-321-4832

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                      Kitchen Table FinanceBy David Shotwell CFP(r) and Nick Nauta CFP(r)
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