Your Student Loan is About to Bite You in the Butt.
By: G M Potter
Tags: Pay Off Debt, Financial Planning, Money, Solutions, Student Loan Debt

Your Student Loan is About to Bite You in the Butt.

Photo by Mason Kimbarovsky on Unsplash

The biggest hurdle many people have right now is their current debt that prevents them from building wealth in their lives. Credit cards, car loans, personal loans, and especially student loans are all huge burdens that prevent any progress. This can cause some dismay, to say the least.

The last one, student loans, are the most difficult for many. This type of debt will probably be the second biggest burden young men and women will ever experience. The first being a home mortgage, but there is a crucial difference between the two.

A home mortgage, in many ways, is vastly easier to accept month in and month out.

When you purchase a home and accept a mortgage, you are accepting the burden of making a loan payment each and every month. The difference between a home mortgage and a student loan is that with the home mortgage, you own something tangible in exchange for this burden. You can actually put your hands on it and say, “I own this.”

What can you say you own as a result of a student loan?

Student loans offer no tangible asset that can be viewed as a trade-off to the burden you have accepted. You may have a wonderful education to remember or a solid degree to flaunt to prospective employers, but there isn’t any hard asset you can put your finger on right before you write another check to the lender each month.

If you don’t suffer from the burden of paying back a student loan, there are some realities you need to understand about those who do.

There are approximately 42.3 million student loan borrowers in this country. (Data according to Nerd Wallet)

2. The total amount borrowed is in excess of $1.54 trillion.

3. The average student loan borrower owes $ 36,406.62.

This amount, ironically, is close to the average car loan in this country except that the student loan borrower doesn’t get to enjoy a new car as a part of the bargain.

Photo by emrecan arık on Unsplash

And that’s not all. Here is a particularly nasty part of this dilemma.

For the average student loan borrower they are facing a loan balance of $36,406.62 that is accruing from interest at a rate of 4% annually (national average). If they took 10 years to pay off this loan (the normal car loan, by contrast, is 5 years), each monthly payment would be approximately $386.15. And they will need to pay this amount, each month, for the next 10 years!

It sounds awful, and it is. Wait! There is more brutal news in store for these luckless borrowers.

Currently, most government-issued (US Department of Education) student loans have been in forbearance during our chaotic year of the pandemic. This means that the student loans are, in effect, frozen. No payments are expected to be made, and no interest is accruing. But all good things come to an end.

Forbearance ends on December 31, 2020. Will it continue into the next year? No one knows.

Beginning with the new year, the government plans to unfreeze these loans and expects borrowers to start sending in monthly payments again.

This is, perhaps, the cruelest part. We are suffering not only a medical crisis but also an economic one. Many jobs have evaporated, and new ones have yet to materialize. How are these honest and hard-working young men and women going to begin paying off their student loans again?

As a former financial advisor, one of the things I prided myself on knowing how to do was to come up with solutions to unexpected obstacles. Clients would experience difficulties or unforeseen expenses, and one of the things I provided to them were solutions.

I have a solution here for all of those young men and women who are beginning to panic.

First of all, there are two kinds of student loan recipients. On the one hand, there are recipients who don’t have a problem with continuing to pay off their loans beginning on January 1st of the new year. On the other hand, there are recipients who have no idea how they will afford the extra payment ($386 per month?) each month that the government is expecting them to make.

Photo by Olav Ahrens Røtne on Unsplash

I do have a solution for this second group. You may not want to hear it, but I invite you to stay with me until the end as there is a silver lining involved.

Solution:

You need to find a way to bring in extra money. This, I understand, is not news. You may have to work extra hours at your current job or find a side-hustle to bring in extra money. Or, maybe you can find a side-hustle online. Whatever you do, the solution needs to be easy and convenient. I promise that it will be.

Here are some numbers to keep your mind clear and help you make good decisions.

You need a side-job that pays at least $12 per hour. The employer needs to offer you at least 10 hours a week. You should, therefore, receive a paycheck, after withholdings, of $175 every two weeks (approximately) at a minimum.

If you can find this, you should be bringing in approximately $380 per month to cover the student loan. This is all you will have to do to pay off the student loans that you are now suffering from. Your particular loan amounts and monthly payment may be different than the average presented here. The solution still works for you.

Here’s the silver lining that I promised.

I am going to go through this with you.

After reading this story, go to my profile. You will see an additional contribution entitled “Wealth Challenge.” In this piece, I will detail my experiences as I take on a side-hustle, what I am paid, and how much effort it requires.

The first assumption of this challenge is that I, too, have student loans that total $36,000, and I will need to start repaying these loans on January 1st.

The second assumption is that I am not going to take 10 years to pay it off. My solution enables me and you to pay off these loans in 3 to 4 years. Hopefully, by following my example, you can pay off your loan in record time and begin building the wealth you want in your life. You only have to get through this burden to free yourself.

Wish me luck. I offer no guarantees except that I am taking on this burden too.

We ride together.