Slay your Student Loan Debt | MAKERS Money
MAKERS Money host Sallie Krawcheck, CEO and Co-Founder of Ellevest, breaks down how to pay off your student debt in four steps (yes, really). Special guest appearance by Tiffany Aliche of The Budgetnista. Produced by MAKERS and Yahoo Finance in partnership with Ellevest.
SALLIE KRAWCHECK: Money is power. And ladies, it's time to level the playing field.
Hi, everyone. Welcome to Makers Money. I'm Sallie Krawcheck, CEO of Ellevest, the top-rated investing platform for women. Today we're back at happy hour in New York City, and we're talking about student loan debt.
OK, I know, I know. You are not allowed to turn off this video. Because I know it's not a topic that thrills, but it's so important. In case you missed it, graduates in the United States oh an effing fortune in student loan debt, more than $1.3 trillion. And we women, we women hold nearly 2/3 of it, averaging more than $20,000 each for a bachelor's degree. And that's $30,000 if you're a woman of color. Ugh.
And here's a double ugh, yuck. The research tells us that paying back student loan debt is slower going for us women than it is for the guys, due in large part to that frustrating gender pay gap. And so you know I'm bringing some tips. And I've got four tips to help you pay down your student loans faster and without pain.
Number one, put your student loan payments on Auto Pay. Now this will typically save you 0.25% in interest expenses, and it's going to ensure you're never going to pay a late fee, not to mention taking one more thing off your to do list.
Number two, not all student loan debt is created equal. If you've got multiple loans, they're likely to have different interest rates. So you want to pay off the loans with the highest interest rate first. If you can pay more than the minimum, which is terrific, always make sure you specify which loans you want the additional payment to go towards.
We're on to number three, and number three is, pick up the phone. Have you been paying on time? If so, then make a call to your lender, and ask for a lower interest rate. This is where a boring task and the speaker phone are your friends. It doesn't always work, but no one's going to penalize you for calling every quarter and asking, so ask.
And finally, number four, don't let student loan debt make you put everything else on hold. I've heard from some of you that it can be tempting to pour all of your extra money into chipping away at the debt. And if it's keeping you up at night, I totally get it. But your student loans should not keep you from contributing to your 401(k), or starting an emergency fund, or living your life.
For more on this, I'm delighted to be joined by Tiffany Aliche, the Budgetnista. I love that name.
TIFFANY ALICHE: Thank you.
SALLIE KRAWCHECK: Tiffany has been called America's favorite financial educator, and her Budgetnista blog is one of the top personal finance blogs in the nation. Welcome, Tiffany, and cheers.
TIFFANY ALICHE: Thank you, Sallie.
SALLIE KRAWCHECK: So happy to have you here.
TIFFANY ALICHE: Thank you.
SALLIE KRAWCHECK: So Tiffany, a lot of women tell me they want to make progress on their student loan debt, but they just don't know how to go to it. What are you advising them?
TIFFANY ALICHE: Well, I say don't avoid it. Call your loan provider. There are two specific programs you're going to ask about. There's a Forgiveness program. And there's something called the IBR program, and that is the Income Based Repayment program. And so, if you don't make much, you might qualify for the IBR program. And what that means is that, based upon what you do make, that's what your payment's going to be.
SALLIE KRAWCHECK: Forgiveness and IBR programs, important to remember. But what do you think about college these days. I mean, it's awfully expensive. Is it right for everyone?
TIFFANY ALICHE: Well, I say this: knowledge for all, college for some. So college should be an investment, so you want to have a return on your investment. And so you might find that you want to be a plumber, or you want to be an actor.
SALLIE KRAWCHECK: My son, my son, an actor. Should he go to college?
TIFFANY ALICHE: So you want to invest in training and trade school versus college, because it might not be a fit.
SALLIE KRAWCHECK: Right, too late. Now, this situation comes up again and again. You are so in love, and you are ready to be married. And he or she is swimming in student loan debt. What do you do?
TIFFANY ALICHE: Well here's the thing, I'd be more concerned if they had a really bad money mindset. Because debt is something that you can work toward. You can call that loan provider. You can even really adjust where you work and say, you know what, I'm actually going to work for the state or for the federal government so I can get that loan forgiven. But if this is someone who's consistently making bad and poor financial choices, that's what you want to be worried about.
SALLIE KRAWCHECK: And so what do you do, sit down with them and have the money talk?
TIFFANY ALICHE: Yes, certainly. I mean, I asked my husband date three, what's your credit score.
SALLIE KRAWCHECK: And you got to date four?
TIFFANY ALICHE: Yes.
SALLIE KRAWCHECK: Yeah, but it's all about being mindful, right?
TIFFANY ALICHE: Yes.
SALLIE KRAWCHECK: OK. All right. We love to ask this question of everybody who joins us. What's the stupidest thing you've ever done with your money?
TIFFANY ALICHE: I can top anybody's stupidest thing with, I invested with an-- air quotes-- friend of mine. And I said that I wanted to learn how to invest, so he said to open up two credit cards. And I did.
SALLIE KRAWCHECK: What, I'm sorry. You took money out on your credit cards to invest?
TIFFANY ALICHE: Yes.
SALLIE KRAWCHECK: OK, we are headed towards the stupidest move ever, right now. And it turned out super well, right?
TIFFANY ALICHE: No. It ended up, I took out $20,000, and, based upon what he said I'd be making, I spent another $15,000. Ended up with $35,000 in credit card debt, and he was gone.
SALLIE KRAWCHECK: OK. I also love to ask, what's the smartest thing you've done with your money?
TIFFANY ALICHE: So, smartest thing for sure, I learned the lesson. And I said I'm going to invest in education. So, just taking courses and lessons and reading books. And just investing in knowing better so I could do better.
SALLIE KRAWCHECK: Well, you rock. Thank you so much for being here with us today.
TIFFANY ALICHE: Thank you for having me. [GLASSES CLINKING]
SALLIE KRAWCHECK: And now it's time for my favorite part of the show, which is questions from all of you. And we received a lot of great questions from you on student loans. So clearly this is a challenge that hits home for many of you. So let's go ahead and tackle them question.
Question number one, I have to choose between paying down my student loan debt and starting to save for my own kids to go to college. What should I prioritize? This one hurts me a little bit, because as a parent, we all want to give our kids everything. And we want to do as much for them as we can. But in most cases, you should pay off your own debt first. Because if you prioritize your child's finances at the expenses of your own, what you're really doing is creating a position in which they may need to take care of you financially down the road. As a rule of thumb, as they say on airplanes, put on your own oxygen mask before assisting others. It'll be better for both of you in the long run.
The next one, question number two, asked, I'm making big monthly payments on my student loans, but it doesn't feel like I'm making a dent in my balances. Should I refinance? If it's going to take down your interest rate, you certainly should. Now to do so, you're generally going to need a credit score of 700 or higher. And from there, it's best to take that and take the application and shop a few different vendors, whether it's your traditional bank or one of the online student loan lenders like CommonBond or Earnest. Scope out several, and compare the options.
Question number three, I'm a senior in college and plan to attend graduate school this fall. I'm worried because I already have student loans from college and likely will take on more during grad school. Any advice? Depending on your intended grad program, you might consider working for a year or two before going back to school. Here's why. It's going to give you some time to get some financial stability, and you'll also get valuable work experience that may make what you learned during your studies even more valuable. I know it did for me when I went back to grad school. Another thought, if you find a job you love, someone employers will provide assistance by paying for part-time graduate school programs as long as they're related to your work.
OK, look. I know it may sometimes feel like your student loan debt is going to leave future you eating the same Ramen noodles you did in college. But I'm telling you now, if you take it one step at a time and you are dogged in your pursuit, you can be on your way to slaying that debt once and for all.
Ladies, we want to hear from you. So tweet at @MAKERSWOMEN and use #MAKERSMONEY. Or send in your questions to me at makers.com. Thanks to Tiffany Aliche for joining us. And until next time, remember, more money, more power.
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