has learned as well. Coming up again, that launch will not
up again, that launch will not
happen today will try to get
on Friday morning.
Last week President Biden
announced his plan to forgive $10,000 in federal student loan
$10,000 in federal student loan
debt to most borrowers while
also extending the repayment
freeze. Here to talk more about
that is local financial
professional mass Stevenson
from Allied wealth. A good and
how you do. It’s always good to
talk with you.
>> Doing great on ice for
having me again.
>> So you know, whether you
whether you’re in favor of this or not in favor of this
or not in favor of this
decision, it’s it’s happened.
And for those who maybe we’ll
see some of this student loan
burden lifted off their plate,
how to maximize this
opportunity. Matt, that’s what we want to ask you about
we want to ask you about
>> absolutely. So there are a
lot of changes on the horizon
on first off for Americans with an annual income of 125,000 or
an annual income of 125,000 or
less, you have that $10,000 in
federal student loans forgiven.
In addition to that, though,
there are many folks out there with the Pell Grant. Those are
with the Pell Grant. Those are
typically given to lower-income
students, though, have $20,000
of debt canceled loan payments
were set to resume for millions
of borrowers after August 31st. But with this new plan,
But with this new plan,
President Biden has extended
the repayment freeze through
December 31st. While the freeze is still in place, those in
is still in place, those in
the repayments phase of their
student loans are not required
to make the regular payments
and their balance will not
accrue interest during that time. One is estimated
that time. One is estimated
this plan is going to cancel
approximately 321 billion dollars Houston alone. But that
dollars Houston alone. But that
and that’s a staggering number.
>> That so let me ask you Does
this present an opportunity for
an oh, everything’s more
expensive. So maybe there’s not
a lot of savings is just moving shifting money from one part of
shifting money from one part of
the budget to the other.
But presumably the you know,
this is going to change
people’s monthly cash flow.
>> It could. And, you know,
there’s going to be a lot of potential changes on that front
potential changes on that front
as well. Looking at what the
Education Department is saying,
they’re going to tweak the
maximum payment of 5% of a borrower’s discretionary
borrower’s discretionary
income. That’s down from the
current 10%. Maximum. So that
applies to any borrowers using
an income-driven repayment plan. But to lower those
plan. But to lower those
payments even the standards for
what qualifies as discretionary
income are going to change as
well. So we talk about discretionary income. That’s
discretionary income. That’s
what’s left over after taxes
and essential costs of paid
such as food, water, shelter,
clothing, transportation with
that new income limit. Those
earning less than the $15
maximum or minimum wage are not
going to be required to make
that monthly payment towards
their loans. As long as the bar
is making those monthly
payments and paid monthly
interest will be waived.
So it’s also propose that the student loan balances will be
student loan balances will be
forgiven after 10 years, rather
than 20 years so long as the
borrower held $12,000 or less in those student loans at their
in those student loans at their
monthly payment A lot more
room, so to speak in these
repayment plans.
>> Interesting. So what I’m
gathering from. What you’re
saying is this is not just a
one-time thing worse. Okay. These are these are changes
These are these are changes
that are going to stay with how
these student loans are paid
back in the future.
>> That’s absolutely right on. And with that being said, we
And with that being said, we
need to make sure that we’ve
got a strategy for how to pay
off. Not only the student loan
balances, but the remaining that President Biden has
that President Biden has
signaled that this will be the
final extension. So that means
the bar should prepare to
resume those payments in the
beginning of next year. So it’s
important to plan ahead. Make sure you don’t fall behind
Make sure you don’t fall behind
when those repayment again,
there are a few things people
can do here. So while the freezes in place, if you’re
freezes in place, if you’re
able keep making those student
loan payments, if you get that
have been and how you can
prepare your budget see won’t
be caught off guard when those
payments resume. It’s likely
there’s going to be some more changes between now and the end
changes between now and the end
of the year. So make sure that
your contact information is up
today with your loan servicer
like an update. You more as information
comes out. But as always, when
paying off dad, you have to
have a plan in place to tackle
it officially. That’s exactly what we do with our clients
what we do with our clients
and how it well, we do a lot
of work through the Dave Ramsey
program over the years. Dave is
one of the premier sources on
creating a plan to pay off those debts and build your
those debts and build your
savings. We always recommend
saving at least 15% of your
household income into
retirement. When you’re able to consider taking advantage of
consider taking advantage of
your company match if you’ve
got 1, 3, or 4, one K, if
you’re able to say more than
that, consider some other tools like a Roth vehicles, alight a
like a Roth vehicles, alight a
bill tax, free income in
retirement.
And for a lot of our clients
that are nearing or in
retirement, it’s important to understand the effects this
understand the effects this
bill will hang around
321 billion dollars on. That’s
potentially going to be a
future tax hike at some point. And so when we need to lean on
And so when we need to lean on
these dollars, the most in
retirement is when I will may
prove to be too much of a
partner in the retirement plan. So planning now to make your
So planning now to make your
nest egg is tax efficient as
possible is essential.
>> We do get kind of get that
feeling from time to say, hey,
we’re going to pay now or pay
later, we’re going to make us
pay one way or another. Hey,
Matt, before you go, one thing I find interesting is it’s like
I find interesting is it’s like
every time we go through a
crisis like this, we learn
something. You know, we went
through a housing crisis.
It’s like, OK, stop with the
adjustable rate mortgages.
And we come through this and it’s like, is it time for some
it’s like, is it time for some
of us to say, well, maybe we
don’t all need college, are
that much of it until we’re
ready? Or until we know what
we’re studying, are they and
what do you think we’ve learned through this?
through this?
>> Yeah, there’s always going
to be changes on the one, but
it’s always important to have
your plan plays. Understand
what you’re getting into it ahead of time. Using along can
ahead of time. Using along can
prove usable there to
understand what that loan might
look like, whether it’s a
mortgage weather in student loans, such as what we’re
loans, such as what we’re
talking about understand what a
repayment plan would look like
before you get into it. So