Epi 68
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[00:00:00] Ashley: Welcome to the Money Mindset Podcast, where you will find the inspiration and motivation you need to manage your money better so you can stress less and live the life you want. 

[00:00:15] It's Ashley with Budgets Made Easy and the Money Mindset Podcast. Today's episode is with Ann Garcia, AKA the college financial lady who has thousands of families saved millions of dollars on college. So we are going to discuss how to pay for college and all the things that you probably didn't know. And even if your child is getting ready to go off to college in the fall, she has lots of tips and helpful advice on how to lessen the financial burden on your family. So if you are ready to get started on managing your finances better, don't forget, I do have a Free Budget Starter Kit budgetsmadeeasy.com/start. 

[00:01:02] Now, if this episode doesn't apply to you, but you know, a family that is getting ready to send their kids off to college, or maybe they're younger and they wanna start planning for college because you know, the sooner, the better place share, , with them this episode because Ugh, there's so much good information in here. And she does have a book coming out soon with even more helpful tips on how to pay for college. So let's get rid of that student loan debt. Let's not take on more than we need and take advantage of, you know, some of the programs and information that is out there to help you pay for it.

[00:01:40] So let's dive into Ann's episode. Hey, thank you so much for being with us today. 

[00:01:47] Ann: Oh, it's my pleasure to be here. 

[00:01:49] Ashley: And we are gonna talk about retirement and college savings for the kids primarily about college, but of course it affects our retirement as parents. So can you give us just a little bit of a background about yourself and why this topic is so important to you?

[00:02:07] Ann: Absolutely. So as a financial advisor, I found early in my career that a lot of our, a lot of my clients had questions about college and very few very few financial advisors were actually answering those questions. At the same time, I was meeting with more and more families who had either for their own education or for their children's education taken on so much student debt that they really weren't able to do anything to plan for retirement for themselves.

[00:02:38] And and I felt like there was a real opportunity to to, by by focusing on the first group of people, you know, the people who didn't know how to plan for college to avoid creating more of that second group of people who were those who were so drowning in student loan debt, that they really couldn't. Couldn't think of retirement or really anything other than trying to get, trying to get their student loans paid off. 

[00:03:03] Ashley: Yeah. And that's such a major problem. Like I'm seeing it myself in my coaching group with people that can't save for retirement because they have these parent student loans. So what do you think is more important saving for retirement first or saving for college?

[00:03:21] Ann: Well, so there's, so there's two groups of people. One is the parents who, who don't yet have kids in college. And and maybe either aren't dealing with their own student loans or dealing with a nominal amount of student loans. I do believe that retirement is the first priority for you know, for any of those groups. But I think that saying that, you know, you need to save for retirement, not college because you can take out loans for college not for retirement is how we got to point of a trillion plus dollars in outstanding student loan debt. So I do think it's important to do both kind of my rule of thumb for people who are trying to balance those two is, if you're not saving for retirement at all, don't save for college either. You need to get started on retirement. So emergency savings first, and then start saving for retirement. If you are contributing something to retirement, but not maxing out your retirement savings, you shouldn't contribute more than 10% of what you're saving for retirement to saving for college.

[00:04:20] So if you're saving, for example, $5,000 a year for retirement, your college savings should be no more than $500 a year. If you wanna save more for college, you need to bump up your retirement savings. First and sort of keep that balance of 10% of what you're doing to retirement, to to college. So that you're increasing both over, over time. Someone who's maxing out on retirement, has more flexibility to add more to college. Although I would say if your college savings balance is more than about 20% of your retirement savings balance, you're probably focusing too much on, on college. 

[00:04:58] Ashley: Oh, that's a good rule of thumb. I hadn't thought about it in percentages like that. I'm really happy that you mentioned that because I hadn't really thought about like what the minimums, you know, and how they relate to each other. That's great. So what about people that have own student loans, and now they've gotta deal with their kids going off to college. How can they kind of balance that?

[00:05:21] Ann: Yeah, that's always a toughie. It's the new version of the sandwich generation, right? Mm-hmm, , I'm paying my own student loans and paying for my own for my own kid to go to to go to college. And there, there are there are a couple of ways to look at that. I mean, With loans. We always look at interest rates to see how we prioritize them. And you know, and one of the, one of the challenges with student loans is that the interest rates for direct student loans, which are the, the loans that students take out are much lower than those for grad, for the direct student loan for undergraduates has much lower interest rates than the direct student loan for graduate students.

[00:05:55] And both of those have lower interest rates than parent plus loans. And so. And so, so parent plus loans typically have interest rates that are so high, that those need to be a top priority for the family. I mean, often those are, you know, 8% interest rates or or higher for, for a family who's trying to do all three, you know, pay off their own student loans, save for retirement and potentially save for a for a child's college.

[00:06:21] I think they need really look hard about what their child's college pathway is going to look like. You know, because there are going to be limited dollars available to, to, to save for, for that college education. And that could mean things like looking into free community college pathways. It's really looking hard to find the colleges that are gonna offer them the most their student, the most generous scholarships. Because many, many colleges are very, very generous with with students, you know, the average tuition discount rate last year, which is the, if you take the net price of college and what people actually paid the average tuition discount rate was something like 56% last year, which means that 50, 56 cents of every dollar of listed tuition is not actually paid.

[00:07:12] So by way of saying there are, there are many, many opportunities out there for students to find low cost college, AP college educations, if they're willing to put in the time and effort to, find them. And I think if you're in that situation of paying off your own student loans and having a child going, going to college, you need to be really diligent in finding the opportunities for them to get the lowest possible cost college education.

[00:07:40] Ashley: Yeah. And I'd love to maybe get your insight on a lot of parents don't understand how the system works and I have seen it over and over where they just assume that they'll make their kid take out the loans and then they fill out the FSFA and realize. They have to take out the parent loans. Like you don't get a choice in the matter and people think that you do. So can we talk about that a little bit, that you really don't have a choice when you're taking out the student loans on who takes it out? 

[00:08:14] Ann: Right. So, so the direct student loan, which is the loan that a student can take out has an annual limit it's $5,500 for the first year, $6,500 for the second year, and then $7,500 for years, three through six which hopefully hopefully is only years, three through four. And so any amount of borrowing that you need to do above those limits is either gonna come from parent plus loans or from private student loans. And typically the parents are the co-signer on a private student loan. Being a co-signer means you're equally liable for, for that debt.

[00:08:54] So, so yeah. That, that notion that your kid is gonna take out all these loans and, you're off the hook is really not not a part of it. And it's, it's unfortunate that so many families wait until senior year when their child starts applying to college to think about how, how this all works. But You know, the, the system, the way the system works, there's, there's two kinds of financial aid there's need based aid and that type of financial aid is awarded based on your family's financial situation as reported by the FAFSA. And in some cases, the CSS profile, which is a. Financial aid application that's for private colleges.

[00:09:39] So the FAFSA is the free application for federal student aid. And, and all colleges use the FAFSA because that's what allocates federal aid dollars, which includes direct student loans, parent plus loans, PE Pell grants, work study, and whatnot. Many colleges offer their own financial aid in addition to that, and that may be allocated based on the FAFSA or based on the CSS profile.

[00:10:03] So in order to be eligible for, for scholarships on the basis of financial need, you need to do two things. One is you need to fill out the FAFSA and the other is you need to apply to colleges that will offer financial aid on the basis of need. You also need to have financial need, which is which is defined as the difference between the cost of attendance at the college that you're applying to and your expected family contribution, or it's coming to be called the student aid index. That's calculated by the FAFs or the CSS profile. So if you're going to a college that costs $50,000 a year, and your expected family contribution or student aid index is $15,000 a year, then you have financial need of $35,000. Now that only matters if you're applying to a college that says it's going to meet your financial need.

[00:10:57] So that's one way of getting scholarships for college. The other is there's this other pool of financial aid called merit aid and merit scholarships are given to students regardless of their family's financial situation. And are given just to attract good students to the colleges. That's a really valuable pool of money for the many students whose whose families based on the FAFSA would be shown as needing to pay a lot towards college, but who don't necessarily have a lot of dollars to put towards to put towards college.

[00:11:35] Ashley: So what would be your advice? And of course, this is just general advice. For somebody that it is their senior year and now the parents are like, oh, how are we gonna pay for this? Like, they didn't realize all the, you know, all the things that we're talking about today, what can they do that? You know, when they're crunched on time to kinda make the best long term financial decisions.

[00:12:01] Ann: Yeah, that's a great question. And, and honestly, that's how most families approach college. So if that's, you don't beat yourself up that that's where you are. You're normal. 

[00:12:11] Ashley: mm-hmm . Yeah. 

[00:12:12] Ann: But I would say there's, there's a couple of pieces to it, you know, first and foremost, think long and hard about why you want your student to go to college. And I don't mean that as. Do you really want to, or do you not want to, because if it's senior year and your kids applying to college, they're gonna go to, you know, , it's a priority for them and for you that they, that they go to college. So when I say, think about why you wanna go to college. I mean, think about it from the perspective of where do you see your student 10 years from now? What's the life that you, that you want them to have? What are the experiences you want them to have in college? What are the things that make them successful or unsuccessful in an academic or social environment? So think really hard about those things. Make sure those are sort of front and center as you're looking at college, because so often we tend to think the best thing for my kid is that they get into Stanford or Harvard mm-hmm or, you know, the best college that they can get into is the best is the best choice for them. And really the best fit college is is gonna be the best choice for them. And that means an academic fit, a social fit and a financial fit. 

[00:13:20] Ashley: Yes. I'm so glad that you mentioned that.

[00:13:24] Ann: The, the next thing to do is. Take a good hard look at your budget. So most, most families pay for college through a combination of savings spending from their income and borrowing. And so, you know, when you look at the dollars available to you, what is, what does that mean? You know, how much can you afford to pay each year? And does that mean that you're looking at a four year traditional four year college path or maybe a three year or a two year of, of college path where maybe you're combining AP or IB credits that the students earned in high school or a running start program, you know, where you attend a community college for part of your high school career or going to a community college for two years before you transfer to to a four year college. So look at those numbers, think about your student and have a conversation with your student about what it is that you're trying to accomplish in college. And, and, and it's really important that, that be a goals based conversation as opposed to a constraints based conversation.

[00:14:34] So what I mean by that is if you look at your budget, and your budget says we can really do two years of college. Then your conversation is son or daughter, or whoever we really want you to get a college degree. We think that's so important for you given who you are and the life goals that you have and the career paths that you gravitate towards. Our budget shows that we can, we can afford a couple, we can afford a two year away college experience. And so we wanna plan for how we make that happen. How we get you enough credits before you get to that college so that you can do that. Or, or child we have saved enough to pay for you to go to college in state. We have enough for for a public school education for you. There may be options that you can find. that costs the same. If you're interested in private schools and we're very supportive of you, of you doing that. And what we have available for you is the equivalent of our in-state public school budget. 

[00:15:44] So that's a goals based conversation. A constraints based conversation is we can only pay for two years of college. So what are you gonna do about it? Or we can only pay for you to go to a, a public school. And so, so you're stuck with, you know, with the choices here, here in our, in our state. So once you've had those conversations, then the next step is to do your homework and find the schools, or find the pathways that work for your for your family. So for a student who has accumulated a lot of AP or IB credits, that means researching colleges to find out whether they're gonna give them credit for them, for those classes so that they could graduate in three years, or if it's you know, our budget is in-state public colleges, but that's not what you want, you know, do what my son did. My, my, my son really didn't wanna stay in state. And he found that there was that there was another school where he was eligible for a scholarship that would make his cost basically the same as our instate public school. And so that's what he's doing now. And he couldn't, couldn't be happier for having made made that decision.

[00:16:59] There are a lot of tools out there to help families research college. I always suggest, you know, your starting point should be looking at your in-state public schools to see number one, what do they cost? And number two, what scholarships do they offer? Most states would like to retain the best and brightest students in their state. And, and so, and so they typically have merit scholarships that a lot of students will be, will be eligible for as as, as graduating seniors, the best part about in-state public colleges and their scholarships is they're typically awarded automatically to all students who have GPAs and sometimes test scores above a certain threshold.

[00:17:42] So no additional application is, is required. And then look too, at what pathways your your state provides to shorten your your college years, you know, how do they, how do they handle your P I B credit? So for example, I'm in Oregon and our public universities give automatic sophomore standing to any high school student who graduates with a full IB diploma. Wow. So if you do the IB program, you're automatically a sophomore and you're automatically on a three year track through through college. You know, look to at what options your college has for sorry, your, your state and your, and your high school have for for things like dual enrollment programs, where students you know, finish their high school career at the local community college and accrue enough credits to transfer and finish in two years or alternatively to either attend a community college for two years and then transfer over or even many colleges offer what's called dual enrollment programs, where you go to the four year college, you can live on campus, just.

[00:18:48] The four year enrolled students, but your first two years, you're taking classes at a local at a local community college. So you have that four year college experience without the four year, the four year college cost. So that should be your starting point, you know, understand what programs your state offers. And then from there you can go on and, and be researching. You know, what, what private schools are out there that might be a fit for your student again, academically, socially, and financially. There are some great tools like college data and college navigator that have that have really good information about what types of scholarships, what amounts of scholarships, what financial aid forms and, and so on and so forth that the different colleges use.

[00:19:32] And then every college is required to have a tool called a net price calculator. And what a net price calculator does. It allows you to enter all of your family's financial information and sometimes some other information. And it will tell you what students like yours got as financial aid packages the previous year. So those can be really helpful for a family in in identifying the colleges that make sense to apply to. So for example, my daughter goes to a private college and and we really felt like for a lot of reasons, she was a very good fit for a private for a private college, both academically and, and socially.

[00:20:11] And so when she became interested in colleges, we always did their net price calculators and there were a lot of colleges that we just ruled out immediately because we had a budget for college and there was no way that those were gonna meet, meet our budget. And it was, you know, it was unfortunate, but there, there are so, so many good colleges out there that offer good financial aid packages that really the only way that you go wrong, wrong in you know, in, in, in college selection, when money is an important part of it is by saying it's really important that my child go to ex college. 

[00:20:51] Ashley: Yes. I'm so glad because that's mentioned that. Yeah. 

[00:20:54] Ann: Because then you're stuck with whatever that college offers and you know, not all colleges will meet financial need, not all colleges offer merit awards. And if you need one or the other type of financial aid, you know, if you're an excellent student whose family doesn't wanna pay $80,000 a year for college, but who maybe lives on the west coast and has a high income relative to the US, even if it doesn't make you feel wealthy, mm-hmm you are not going to get financial aid from Harvard or Stanford or any of those places because they don't offer merit aid and that's what you're gonna be eligible for. 

[00:21:38] On the other hand, there are tons and tons of great colleges that do offer merit merit awards. And so your top student is gonna be better served by going to those. And there is so much research out there showing that it doesn't matter what college you go to. 

[00:21:54] Ashley: mm-hmm it really doesn't like it, it really doesnt.

[00:21:57] Ann: It really, really doesn't. And in fact, there was a there was a great study that was done a few years ago. It's the Purdue Gallup survey and they, what they did was they interviewed thousands of college graduates to find out, you know, who was happy with their college experience was engaged in their career, felt a sense of personal wellbeing and all these other indicators and had graduated on time. All these other indicators of having had a really good college experience. And what they found was that. it had nothing to do with what type of college you went to public or private, highly selective, less selective. It really had to do with what kinds of experiences you had as a student and they, they were things like having professors who you felt cared about you having. A mentor. As you went through the college years, working on a project that took a semester or longer to complete engaging in extracurricular activities. All of those things were shown to have had a much higher impact both in terms of on time graduation and long term success as defined by a sense of personal wellbeing and career engagement then did what college you, you went to. 

[00:23:15] Ashley: Yes. And I can't remember the book. I think it was called Happiness Advantage and it may even be based on the same study or a similar study, but it was basically the same concept and how like so many kids are so depressed when they go to an Ivy league school, like Harvard, because they're, they're no longer like the best in their class because they're, they're all the best there. Right. 

[00:23:36] Ann: They're all the best. And you're still a bell curve. 

[00:23:39] Ashley: Right. And so then you're just average, you go from being like the best to average, and it really messes up with your happiness in that mental aspect of it.

[00:23:47] So, yeah, don't Dar out just, you know, a cheaper school just because you want the, a name school, right. Because it really doesn't. Yeah. It really doesn't matter. Maybe it matters to like upper corporate. What is it? Sea level suite people maybe. But unless that's your goal, like the rest of us, it doesn't matter like it's just a box to check that you have a degree. It doesn't matter where it came from. Right. So. 

[00:24:14] Ann: Yeah. And I mean, my son's a great example of, of how important it is to feel successful as, as a student. So he was not a great high school student and largely because he's a good test taker, but also a normal boy.

[00:24:27] Ashley: mm-hmm. 

[00:24:28] Ann: Which is to say he tested into high level classes. And then really wasn't interested in doing all the homework. You know, he played soccer, he had a girlfriend, he had a job, he was interested in sort of the full range of things. And as a result, he did not have a very good GPA and he really struggled in high school. And I mean, the number of evenings that he was, you know, crying over his homework and saying, I'm the dumbest person I know all my friends are smarter than me and blah, blah. You know, all that. It was, it was really quite, quite horrible. 

[00:25:02] Ashley: Oh, no. 

[00:25:02] Ann: And, and now he's in college and he's got a he's, he just finished junior year of college. He's a four oh student in business. He's tutoring statistics, which I'm always debating whether I should go back and reach out to his high school math teacher who said that that he was never gonna amount to anything because he was so lazy. 

[00:25:24] Ashley: oh, I can't stand when I hear stories like that with teachers saying things like what?

[00:25:29] Ann: Yeah. 

[00:25:29] Ashley: Why would just, would you say that to a kid? I just don't understand. 

[00:25:33] Ann: Yeah. And, and just this week he started an internship in corporate finance at a fortune 100 company. 

[00:25:39] Ashley: Wow. That's awesome. 

[00:25:41] Ann: I mean, he's knocking it out of the park. And the funny thing is that, you know, freshman year about halfway through his freshman year, he was living in the academic residential community for business students. And so all of his friends were taking all the same classes as, as he was. And he said to me, at one point, I think I must have gone to the hardest high school of anyone. I , it's like all my friends are in the honors program based on their high school grades and I'm not, and all of them think college is really hard and I think it's really easy and I'm getting better grades than any of them are.

[00:26:16] Ashley: That's awesome. So it boosted its confidence. 

[00:26:18] Ann: So, so good news, bad news but, but I think it really speaks to the notion that feeling successful. is a really important part of being successful. You know, there needs to be a balance between between challenges and, and results. 

[00:26:36] Ashley: Yes, that's a very good point. Now switching gears here, before we wrap up, because I did wanna touch on a subject that we were talking about before we started recording. And that is that a lot of parents don't know that they took out parent loans. So can you talk a little bit about that? Like how do they know that they, yeah, well, how did it, how does that happen and what can they do about it now if they find out that they actually did take out some loans. 

[00:27:03] Ann: Yeah. So so one of the things that happens is when, when students are accepted to a college, they get a financial aid package and these, the award letters for financial aid packages, they've gotten better in the last few years because there've been a bunch of rules that have been put into place about how things have to be stated and, and, and whatnot. But a financial aid award can include grants and scholarships, which are the free money that you, that you get. But they can also include what's called self-help aid.

[00:27:34] And self-help aid is basically your money given to you in a different format. And that is primarily work, study and student loans. When a student just accepts their aid package, they're given all of the pieces in the aid package and an aid package can include both direct student loans and parent plus loans as part of it. So, so if you think back to, you know what I was saying a couple of minutes ago, let's say college costs $50,000 and your expected family contribution is $15,000. Colleges can either choose to meet your need or not, but if they choose to meet your need, they can use any of the pieces of the, of, of aid that are available to meet it.

[00:28:16] So, so they can give you grants and scholarships from their own money or from a Pell grant, they can give you work study and they can give you student or parent plus loans. And so, so a family who, who. Sees that a college has met their need, needs to look at how the college did it, you know, did it come from grants and scholarships, which is great because that means you don't ever have to pay that money back. That's just free money to you. Or did they include loans in, in that package? And, and what happens is oftentimes families don't read through the fine print of the loan of, of the aid award to see that parent plus loans and direct student loans were, were part of that package. They accept, they accept the offer, and then the way that loans work is they are dispersed directly to the school. So you don't even see your loan. It's not like somebody writes you a check and then you send the money onto the school. That goes directly to the school. You never see it until suddenly you get a loan statement saying, oh, by the way, now that you're done with college, your loans are going into repayment.

[00:29:24] And here's your balance, your interest rate, and here are your payment plan options. And year after year, I see parents who were not aware that parent plus loans were part of that financial aid package and they accepted the aid package. And here we are four years later and they borrowed $10,000 every year.

[00:29:46] Ashley: And what can they, is there anything that they can do at that point? You know, what, if they can't even make the payments or it's gonna affect their retirement and, you know, can social security be garnished for the student loans? 

[00:30:01] Ann: So, unfortunately there's very little that you can do to get student loans discharged, even in a situation like that, where you didn't even know that you that you took them out on the plus side, there are a lot of, a lot of options to deal with student loans. So, so first and foremost You have a variety of standard payment plan options. You know, you can do the 10 year plan or the 25 year plan. And so those at least have, have low, low payments available to them. The other option that that parents can do is income based repayment. So any federal student loan is eligible for income based repayment.

[00:30:37] The way that income based repayment works is you pay a set percentage of your income. Every month. You know, that amount is calculated annually. Based on you providing an income certification to the loan servicer, then they calculate based on which payment plan you're in, what your monthly payment should be.

[00:30:56] Those are usually pretty reasonable, you know, pretty reasonable payment amounts at the end of 25 years of income based payments. The balance of the loan is forgive. Currently temporarily that is tax free. That forgiveness is tax free to you in the normal world that that forgiven loan balance is treated as taxable income in the year that it's that it's forgiven. So there would be, you know, at some point in the future, a, a penalty for that. There are a couple of options for parents. So I always say, you know, parents who are gonna take out loans for college need to look really closely at their situation to decide who takes them out because either parents could either parent could take out the loan.

[00:31:41] So parent plus loans are eligible for public service loan forgiveness. If they're consolidated into a direct consolidation loan. So, if either parent works in the public or nonprofit sector that's and plans to continue working for 10 years after their student graduates, that's the parent who should take out the loan. Because they can do that income based repayment for 10 years. And then the loan balance is forgiven and it's not taxable to them. The other option is an older parent. So One of the, one of the protections in the federal student loan program is that federal student loans are what's called non-recourse loans. Which means if you can't pay them off, they can't go after anyone else to get the, to get the loan paid off. So, so an older parent, for example, could take out student loans in their student's name, get on an income based payment program. Def, you know, go through periodic deferments and then whatever balance is left when they pass away is, is basically forgiven. So I had a student that I worked with whose father was, you know, was 70 when she was going to college and his only income was social security.

[00:32:57] And so the family took out all this, all the student loans in his name. And then with the plan that once she graduates he'll do a consolidation loan, get into an income based repayment plan, put, you know, you have options to defer your loans for when you go through a consolidation, so he'll just defer them. And eventually, you know, he'll start making income based payments. Those are gonna be pretty small, you know, probably in his case, somewhere between 75 and $150 a month. And, and when he passes away that that all goes away. 

[00:33:31] Ashley: So whenever they pass away, the student that the money was for, they're not responsible for the student. 

[00:33:41] Ann: Correct. It's a non-recourse loan. So only the original named borrower is responsible for the loan. Nobody else is not even, even if you have assets in your estate, they are not used to settle that loan. 

[00:33:51] Ashley: Now, even with the income base, and you said maybe 75 or 150 you know, of course depends on your income. But social security is not that much. I know, like my grandma lives with me. She doesn't, she doesn't even make enough from social security to live on her own. So what if they don't have the, even the 75 or 150? Like, can it be garnished or what happens then? 

[00:34:12] Ann: Well, that's why, that's why those income based programs are, are, are such a good option for people with, with limited means. Because you can be in an income based repayment program and your payment could be $0 a month. 

[00:34:26] Ashley: Oh, okay. Gotcha. That makes sense. 

[00:34:28] Ann: And it's still, and it's still a qualifying payment, so yeah. So for someone who, for whom social security is their only, you know, is, is, is their only source of income. They will probably end up with a $0 monthly payment. Now the downside of this is why it's not a, you know, it's sort of a, you know a worst case, you know, a worst case strategy is of, as you, as you make these payments, or so, so loan has principle and interest and interest accrue on the loan in a normal loan, like your mortgage every month, you're paying some principle and some. When you're in an income based payment program, it is entirely possible that your payment isn't even covering the interest cost.

[00:35:19] Ashley: Mm-hmm. Yep.

[00:35:20] Ann: And when that happens, that interest gets that interest accrues on the loan at the point of loan forgiveness that is added to the balance. And that is the total amount that you have forgiven. So, so let's say. Hypothetically we're gonna use easy math numbers.

[00:35:40] Ashley: Yeah. 

[00:35:41] Ann: Let's say you borrowed $20,000 and your interest rate is 10%. That means that every year, those loans are accruing $2,000 of interest. If your monthly payment is zero, then every year. then every year, $2,000 worth of interest accrues on the loan. Now, if you are 85 years old and taking out this loan, you don't need to worry. And, and you're on a, you know, 25 year payment plan, the likelihood that you will ever have to worry about that interest is pretty low. 

[00:36:15] Ashley: Mm-hmm right. 

[00:36:16] Ann: Because most of us don't live to 110. You could be that person though. And, and so, and, and so so that's the, you know, that's the, the huge downside of income based repayment is that if you are on that loan forgiveness path, you could potentially have a very large balance forgiven. 

[00:36:35] Ashley: That you then have to pay taxes on mostly, but you then have to pay taxes on. Oh, that sounds, yeah, it's terrible. If it's too much like. 

[00:36:42] Ann: Yeah. And it's really, it's one of those really terrible things that I feel like this gets lost in all these discussions around student loan, forgiveness. 

[00:36:49] Ashley: Mm-hmm

[00:36:50] Ann: So many people who might be eligible for student loan forgiveness have paid back their loans more than twice.

[00:37:00] Ashley: Mm-hmm . Yep. 

[00:37:01] Ann: And it's just that they're in, you know, these loan programs where the interest rates are very high and, and that they're been, they've been in an income based payment plan, which caused their loan balance to go up and, you know, and, and they, they can't get out from under that. So I have a client, for example, who borrowed $70,000 to go to graduate school. After 15 years, she had paid a hundred thousand dollars on those loans. and her balance was $85,000. 

[00:37:31] Ashley: Oh, see, that's ridiculous. 

[00:37:33] Ann: Which is ridiculous. It's absurd. And people go, oh, you know, she took out those loans. She should have to pay them back. Well, she did. She paid them back and then some, yeah, 

[00:37:41] Ashley: Exactly, exactly. Like that's what, I don't think a lot of people understand in the conversation is that the interest rates are crazy. Like for mine, it took, I paid on it for 10 years and, and it only paid off $3,000 in 10 years. What's like that's ridiculous.

[00:37:59] Ann: yeah. And how much did you pay in those 10 years to only pay off $3,000? 

[00:38:03] Ashley: Oh gosh. I, you know, I haven't done that math cuz I was just sitting here thinking about it as you were talking, 

[00:38:08] Ann: It would make you crazy. 

[00:38:08] Ashley: Yeah, exactly. But it was occurring. Like I figured out what it was occurring every day in interest, it was like almost $5 a day that it was occurring.

[00:38:18] Ann: Mm-hmm 

[00:38:18] Ashley: Like, that's ridiculous. Like yeah. That's why people can't get it paid off. Like. Insanity. So, 

[00:38:26] Ann: Yeah. And you know, and meanwhile, we keep increasing the degree requirements for so many professions. I mean, teachers need a master's, nurses. It's no longer RN. It's BSN, physical therapists need a doctorate, veterinarians need a doctorate. There are all kinds of career paths that now require graduate school and graduate school, number one, isn't cheap. And number two, the loans have very high interest. And you know, and then these graduates go, you know, go to work and make payments for a very long time and pay substantial sums of money more than they ever borrow. And, you know, and, and then there's, you know, all this grief being, given that, oh, they borrowed the money. They're responsible for it. Well, they have, more often than not. They have more than repaid their BA the balance of their loans, but the programs are such that they can never get out from under, from under them.

[00:39:18] Ashley: Yeah. And certain jobs that require a degree now that never did like for my mom, for example, like the job that she does, it was on the job training, like 20 years ago. She has all her certifications, registries, like all the things. But now it requires a degree. And she doesn't have a degree. So she automatically gets kicked out of like the online applications because of that one little box, even though she has like 20, 25 years of experience, plus all those certifications that you have to have in the first place to do the job, like it makes no sense.

[00:39:54] Ann: When we keep talking about this nursing shortage, but we're not talking about the fact that so many nurses have been forced out of the profession in the last five or 10 years, because the degree requirements have changed. And I mean, I didn't know that if you're a 55 year old nurse and somebody tells you, oh, in order to keep doing the same job that you've been doing for 30 years, you need to go back to college.

[00:40:19] Ashley: That's so stupid. Yeah. I, I did not know that, that the, that it had changed for nursing and that, that was the issue. I had no idea. 

[00:40:27] Ann: Yeah. Well, I mean, it's state by state, so different states have different requirements, but it has become much more common that that you need a BSN now to, to be, to be a nurse.

[00:40:38] Ashley: It's so irritating. Yeah. 

[00:40:40] Ann: And getting into nursing school is like getting into Harvard. 

[00:40:43] Ashley: Yes, I did know. So we're not exactly producing new nursing. Yes, . Yeah, exactly though. It was really hard to get and there's like a, at least several years ago when I was in college and people were talking about there's, there was like a two year wait list to even get into nursing school. So you gotta figure out something else to do in the meantime this is so. Oh, but I'm sure we could talk about this all day. And I know you have, you know, you have a whole book on the subject, so what can people do to just learn more about you or check out your book? 

[00:41:14] Ann: Yeah, absolutely. So my book is coming out on July 19th. It's called How To Pay For College. And I have a website as well, howtopayforcollege.com, where I have a ton of information about college planning you know, lots and lots of information, everything from the FAFSA to scholarships, to researching colleges . And then I also, there have an online course called the College Financial Plan Master Class, which is a great resource for families who are really close to college and and need to need to really explore the process in in, in depth. But my, my book, How To Pay for College, like I said, comes out in July and and one of the things that, that I would like to see families doing is starting earlier in thinking about college. You know, senior year is almost too late to start having, you know, to start having a thoughtful approach to it.

[00:42:09] You know, all of your financial aid planning is, is out the window. And you know, and you're really limiting your process. So, so my book, How To Pay For College really walks you through age appropriate tasks from newborn to high school senior to get your, to get your child a great education at a price that works for your family.

[00:42:29] Ashley: That's great. I can't wait to read it. And I did forget to ask you, was there anything else that maybe I forgot to mention, or that last words of wisdom that you want people to take from this episode. 

[00:42:40] Ann: Yeah. So, you know, to me, the biggest thing is, whoever your child is and whatever your budget is, you have great college choices available to you, if you're willing to put in the time and energy to find them. The unfortunate thing I think is our system is really Is really focused on giving giving airtime to the Stanfords and Harvards of the world. And most of the college world operates really differently from, from those specific from those specific cases. So do your homework, know your kid find the best solutions for them, and you will have great options available to you. 

[00:43:21] Ashley: Yes. And thank you for all the tips and advice that you've given today. And I always like to ask people at the end with their favorite nonfiction book is now besides yours, cuz I'm sure that's what , that's your favorite? I'm sure it took you a lot of time 

[00:43:37] Ann: And I'm at a point where it's my favorite and my least favorite.

[00:43:40] Ashley: Yeah, I bet. I can't even imagine like. Don't even wanna write a book. But another, and it doesn't have to be related to college or finances, even just a nonfiction personal development. Do you have a favorite book?

[00:43:52] Ann: Oh my gosh. You know what I'm gonna, I'm gonna stick with finance since that's been the source of the basis of our conversation. And, and I know that's something that your listeners are really interested in. A book I love is The Psychology Of Money by Morgan Household. It is a it's, it's an easy read and a really engaging read. And what he does is, is just talks through a lot of different money situations, decisions. We make thoughts that we have and, and explains really well how those play out over the long term and how, how to get over our behavioral and psychological biases, to be able to live our best financial lives.

[00:44:36] Ashley: Awesome. Thank you. Sorry. I had to I got a little distracted there. My kids are home and barking and Ugh. So yeah, I had, 'em late to record and then they came back just, just like a minute too soon. But I really appreciate your time and thank you for sharing all this valuable information with us. 

[00:44:55] Ann: oh, it's my pleasure, Ashley. Thank you for having me. Thanks. 

[00:44:58] Ashley: Wasn't that some great information on paying for college. Now, if you found this episode helpful, please share it. Please share it on Instagram or with any families that you think might need it. And as always, if you really love this podcast, please leave me a five star review. I would so much appreciate it. And I will talk to you guys next week.