You Don’t Need a Billionaire Bailout to Pay Your Student Loans. You Need a Plan.
Written by adminMay 30, 2019 Last week, we saw the incredible story of Robert F. Smith, a billionaire technology investor who owns Vista Equity Partners. After being asked to make the commencement speech at Morehouse College in Atlanta, he gave them the best graduation gift anyone could ask for. He agreed to pay the entire class’s student loans.
“God has smiled on me,” said one Morehouse Student. He had over $100,000 in student loans just vanish into thin air. The student most likely would’ve spent the next 10-20 years paying that debt off if it wasn’t for Smith’s generous gift. But billionaires aren’t the only one stepping in to help.
Yesterday, we wrote a story about Burger King offering to help by creating their own giveaway program using the BK App. Not to mention, truTV’s game show “Paid Off”, hosted by Michael Torpey, has made its return for another season. “Paid Off” allows people with student debt to compete against other grads with trivia. The winner gets enough money to pay off their debt.
We can easily consider how generous and special it is to be able to pay off someone’s debt. Yet, while it’s special when billionaires or TV shows or companies do it, many just expect it. There’s a whole movement sparking where students demand we raise the taxes on billionaires just to make college free for everyone. While it’s a nice dream, it probably won’t happen.
Generosity and Student Loans
While any comprehensive student loan bill will probably never be enacted into law, we have to think of ways to help graduates who are drowning. When you leave school, you don’t have a job. You’re a low man or woman on the totem pole. Yet, your first student loan bill is due within a few months, whether you’re ready for it or not.
Having a lot of student debt is burdensome. It prevents students from making major life decisions once they graduate. In many ways, they become a slave to it for the next 10-20 years. One way companies are starting to help is by offering generous repayment options. Rather than a 401(k) for retirement, companies offer benefits where they’ll match contributions dollar-for-dollar.
One company that does is Carhartt. They’re based in Dearborn, Michigan and work to help their employees pay their student loans. Gifts from billionaires and company CEOs are a major investment in their lives and helps them out more than anything else. Even a small gift will bring down the principal payment and cut the amount of interest paid over time.
“Instead of devoting thousands of dollars a month to student loan payments or being in an income-driven repayment plan for decades, they will now be able to invest in themselves,” said Mark Kantrowitz, publisher and vice president of research for Savingforcollege.com
“My first thought when I heard the news is what an amazing graduation gift!” said Lynita Taylor, diversity and inclusion program manager at the Mike Ilitch School of Business at Wayne State University. “College can certainly be seen as a worthy investment, but the staggering amount of debt you can accrue while pursuing that investment is heartbreaking.”
We Need More than Gifts
If gifts are the only way to end this problem, we aren’t going to see the end of the crisis anytime soon. The total amount of student loan debt out there currently sits at $1.53 trillion. That’s even before this most recent year has been tabulated yet. Those numbers are set to be released this fall. It’s going to be nearly impossible to raise a trillion dollars by gift alone.
It may help several individuals, but is Smith going to do the same next year if he’s invited back? And the year after? You can’t count on a gift or the government stepping in to help. They may provide some assistance, but they won’t just forgive over a trillion dollars’ worth of debt. You took out the loan, so you have to take responsibility for that.
If you’re a recent graduate, there are three ways you can make the situation easier on yourself.
1) Don’t wait out the grace period. You have about six months until you’re expected to start making your first payment. But during that six months, interest will accumulate. If you start paying off a $25,000 loan right away, you’ll save yourself $795.
2) Get a handle on what you owe. It can be frustrating once you leave college and see that bill for the first time. Don’t wait. Take the bull by the horns. Create an account on the Federal Student Aid website at studentloans.gov. Once you do that, be proactive. Track your payments. See how long it will take to pay it off.
3) Don’t make minimum payments. Kevin O’Leary of Shark Tank says the best thing to do is to devote nearly every dollar you have into your loans. When you graduate isn’t the right time to start buying fancy stuff, getting a car loan, or wasting money. Live frugally. Move back home for a year. Put all that extra money towards your loan to pay it off much quicker and get it out of your life.