Is it time we broaden the conversation on Student Loans to include all the costs associated with attending post-secondary? Tim Ulbrich, CEO of Your Financial Pharmacist discusses all the associated costs for post-secondary education that more students should be aware of.
Is High Income Enough to Repay Student Debt?
When Tim Ulbrich graduated in 2008, he was surprised by the total student debt he had incurred in 6 years. Tim describes the way he thought about his loans in school as monopoly money. It was not until after finishing residency that he understood it was a real $200k he had to pay back.
Still, Tim was optimistic he could repay it because his income was stable.
Turns out, earning more does not prepare you for the other kinks of student loans. If you lack financial literacy, you would not know:
- The difference between a subsidized and unsubsidized loan
- Loan reduction and repayment options
- The rate at which interest grows or how it breeds more interest.
Tim’s breakthrough was when he read up on personal finance. It made him look into the total income in regard to the assets and liabilities in his name. He realized earning more has not had any impact on his total financial condition.
What got him out of the situation was when Tim and his wife started taking ownership of their financial planning. Enough for him to repay $100k in a short time.
Long-Term Planning: How to change your financial habits?
Financial habits are hard to change when it has developed over a lifetime. By the time you are 18, you get used to a certain lifestyle. For Tim, part of his plan was to pay his loan at an aggressive rate.
- Write down your financial goals
- Strategize how you will go about achieving it.
- Check in how far along are you every month.
- Automate deposits and any other forms of income.
You might not see any differences in your finances when you start, but it will accumulate into larger numbers later. The key is to keep at it.
How Can Governments Address the Student Loan Crisis?
For Tim, it is important to not only focus on reducing tuition costs, but also on addressing the other factors that contribute to the problem. This may include increasing financial aid and scholarship opportunities, providing more affordable housing options for students, and promoting high-paying job opportunities for recent graduates. Only by addressing the full scope of the problem can we hope to find a solution to the student debt crisis.
The government is the largest provider of financial aid for higher education in the United States, and provides over $120 billion in aid each year through various programs such as the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant (FSEOG), and Federal Work-Study (FWS).
There are also private organizations, such as charities, foundations, and corporations, that offer financial aid to students in the form of scholarships and grants.
In addition to financial aid, there are also several policies that the government could implement to help alleviate the burden of student loan debt. These could include expanding income-driven repayment plans, which base loan payments on a borrower’s income, and forgiveness programs for borrowers who work in certain public service fields.
One option could be to expand financial aid programs to include housing assistance. Currently, the federal government offers several financial aid programs that can help students pay for the cost of college, including loans, grants, and work-study programs. Some of these programs, such as the Federal Pell Grant and Federal Supplemental Educational Opportunity Grant (FSEOG), can be used to help pay for housing costs in addition to tuition and other expenses.
Another option could be to increase funding for affordable housing programs specifically designed for college students. These programs could provide low-cost or free housing options for students, reducing the need for students to take out loans to cover the cost of housing.
The government could also work with colleges and universities to increase the availability of on-campus housing options, which are often more affordable than off-campus housing options.
Overall, providing housing cost relief to students is one potential way to help address the student loan debt crisis, but it is not the only solution. Other approaches, such as reducing the cost of college and promoting high-paying job opportunities for recent graduates, may also be necessary to address the full scope of the problem.
Tim Ulbrich’s company has free resources to help you with financial planning. He also encourages you to opt for financial advisors who demand a basic fee for their services instead of choosing someone who only gets paid when you subscribe to a financial plan.
You can also get more tidbits about his program in the podcast as we discuss financial habits and student debt.